Man Without Qualities

Thursday, December 04, 2003

Corporate Governance In Disneyland: A Sad Chapter II

Some of the odder comments that have emerged from the recent and ongoing Eisner/Disney kerfluffle are those suggesting that Roy Disney is off base because Disney stock and results have improved. Of course they've improved - the whole stock market and economy have improved. Disney's improvement proves very little.

Without getting into the specifics of the internal dispute, it is worth noting that Disney has slightly underperformed the NASDAQ and modestly outperformed the S&P.

Whether such performance is acceptable to a given institutional investor is a matter of investing style. But Disney's recent stock performance would be considered exceptional by very few fund managers.

But Disney is not the only large media company with serious stock performance issues. Viacom has been such a dud over the past twelve months that it makes Disney look positively inspired, although Viacom's performance over the past five years (a better indication of management's abiity to create value) has been much better than Disney's. Even the dreadful Time Warner has done far better than Viacom over the past twelve months. Disney has done just about as well as News Corp on a twelve month basis, although News Corp has also done far better than Disney on a five year basis. News Corp has also outperformed the major indicies on a five year basis.

Disney's problems seem an awful lot like big media's problems generally. A concentrated, too-regulated industry. Management more entrenched than WWI battlelines. Strategic patterns of monopolistic competition - but long term sluggish results.


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