Walt Disney on Capital Allocation

By 1947 Walt Disney Productions was over four million dollars in debt and, having lost its European markets to the war and absorbed the commercial failures of Pinocchio, Fantasia, and Bambi, stood on the verge of bankruptcy. Disney and his animators returned to feature production in 1948 after a string of inexpensive package films, choosing Charles Perrault's Cinderella as the comeback vehicle. Released February 15, 1950, the film drew critical acclaim, became the studio's biggest hit since Snow White, and helped reverse its fortunes. It received three Academy Award nominations, among them its score, its sound recording, and its original song Bibbidi-Bobbidi-Boo, and it was followed by two direct-to-video sequels and a 2015 live-action remake; the Library of Congress selected it for the National Film Registry in 2018. The rescue established the pattern of the studio's decade: one animated tentpole whose theatrical, music, and merchandising returns underwrote the riskier ventures in television and theme parks that Walt increasingly favored.

Roy Oliver Disney, eight years older than Walt, co-founded the Disney Brothers Studio in October 1923 and ran the business side of the enterprise for the rest of his life. He was convalescing from tuberculosis at the Sawtelle Veterans Home in Los Angeles when Walt visited late at night to ask for help launching the cartoon studio after securing the Winkler distribution deal; Roy agreed, left the hospital the next morning, and never suffered a relapse. While Walt led the creative side, Roy guided business and finances as an equal partner in all facets of the production company, became the company's first chief executive officer in 1929, and shared the chairmanship with Walt from 1945 until Walt dropped the title in 1960 to concentrate on creative work. After Walt's death from lung cancer in December 1966, Roy postponed retirement to oversee construction of Disney World, renamed it Walt Disney World in tribute to his brother, and opened the resort five years later at a cost of about four hundred million dollars without additional debt, before dying weeks after the dedication.

The Disney television anthology grew out of Walt Disney's hunt for Disneyland funding, with his brother Roy approaching all of the big-three networks and American Broadcasting-Paramount Theatres, which had merged with United Paramount Theatres in 1953, taking the deal. After rejections from CBS and NBC, Disney signed with ABC on March 29, 1954, and the resulting series, Walt Disney's Disneyland, contained teasers for the park alongside episodes representing life in each of its four lands: Adventureland, Tomorrowland, Fantasyland, and Frontierland. Walt Disney was the first major film producer to venture into television, a calculated risk for a studio built on theatrical exclusivity. The program moved among the Big Three networks in its first four decades, running as Walt Disney's Wonderful World of Color on NBC from 1961 before settling on ABC, and across its entire history it has had only two hosts: Walt Disney himself and later Michael Eisner. It remains the second longest-running prime-time program in American television, behind only Hallmark Hall of Fame.

To avoid a burst of land speculation, Walt Disney Productions used dummy corporations to acquire 27,443 acres beginning in April 1964, with tongue-in-cheek names like the Ayefour Corporation, Latin-American Development and Management Corporation, and Reedy Creek Ranch Corporation, later merged into the Compass East Corporation; some of the original names are now memorialized on windows above Main Street, U.S.A. Real estate agents unaware of their client's identity negotiated large tracts for as little as one hundred dollars an acre, much of it swamp whose owners were happy to sell, and Disney's team paid Tufts University fifteen thousand dollars for the mineral rights to prevent any sub-surface development. Recording of deeds was delayed until a large portion of the land was under contract. Rumors credited NASA, Ford, the Rockefellers, and Howard Hughes until Orlando Sentinel editor Emily Bavar, struck by Disney's stunned reaction when asked about the purchases, correctly predicted the project in October 1965. Governor Haydon Burns confirmed it days later, calling it the greatest attraction in Florida's history.

Snow White's final production cost was $1,488,422.74, a massive sum for a 1937 feature and three times the planned budget. Disney mortgaged his own house to help finance production, and midway through he needed a further $250,000 loan to finish the film. He screened a rough cut for Bank of America's Joseph Rosenberg, who sat impassively through the showing before telling the anxious producer that the picture would make a hatful of money and approving the loan. The gamble repaid beyond every projection. The film premiered at the Carthay Circle Theatre in Los Angeles on December 21, 1937, to a standing ovation from an audience that included Judy Garland and Marlene Dietrich, went into general release February 4, 1938, and earned more than eight million dollars internationally in its initial release against its cost, becoming the highest-grossing film of 1938 and briefly the highest-grossing sound film made to that date. It remained the highest-grossing animated film for fifty-five years.

Difficulties obtaining funding for Disneyland prompted Disney to investigate new fundraising methods, and he decided to create a television show named after the park, broadcast on the then-fledgling ABC network, which in return agreed to help finance construction. For its first five years the park was owned by Disneyland, Inc., a joint venture of Walt Disney Productions, Walt Disney personally, Western Publishing, and ABC, with many shops along Main Street, U.S.A. rented to outside companies. The structure gave the studio outside capital without conventional bank debt and gave ABC guaranteed family programming, and by 1960 Walt Disney Productions had bought out all other shareholders. The partnership seeded a lasting relationship that culminated in the Walt Disney Company's acquisition of ABC in the mid-1990s. For Disney the arrangement solved the recurring problem of his career: financiers who controlled his projects also controlled their risks, and since Oswald he had understood that ownership, not participation, determined who collected the value.

When Laugh-O-Gram collapsed, Disney moved to Hollywood in July 1923 at twenty-one, drawn less by the cartoon industry, then centered in New York, than by his brother Roy's convalescence from tuberculosis and his own hope of directing live-action films. His efforts to sell Alice's Wonderland were in vain until New York distributor Margaret Winkler, who was about to lose both the Out of the Inkwell and Felix the Cat series and needed replacement product, answered his letter and signed a contract in October 1923 for six Alice comedies. Disney and Roy formed the Disney Brothers Studio to produce them, moved child actress Virginia Davis and her family west on a contract of one hundred dollars a month, and persuaded Iwerks to relocate from Kansas City in 1924. The first official Walt Disney Studio opened at 2725 Hyperion Avenue in 1926, the physical origin of the company that still bears his name.

Pinocchio and Fantasia both lost money after their 1940 releases, partly because European revenues collapsed when war broke out in 1939, and by the end of February 1941 the studio carried dangerous debts. Disney and Roy answered the crisis by starting the company's first public stock offering in 1940, making Walt Disney Productions publicly held years before most studios, and by implementing heavy salary cuts across the payroll. The cuts, combined with what staff experienced as Disney's high-handed and insensitive manner, precipitated the 1941 animators' strike. The strike and the company's financial state drove several animators to leave and found United Productions of America, and Disney's relationships with much of his staff were permanently strained. The crisis marked the moment the founder's perfectionism collided with the arithmetic of a public company, a tension he never fully resolved across the remaining twenty-five years of his life.

In 1964 Disney produced Mary Poppins, the rights to which he had pursued since the 1940s; it became the studio's most successful film of the 1960s, although author P. L. Travers disliked the adaptation intensely and regretted selling the rights. The same year he delivered four exhibits for the 1964 New York World's Fair, funded by selected corporate sponsors: It's a Small World, a boat ride of audio-animatronic children built for PepsiCo's tribute to UNICEF; Great Moments with Mr. Lincoln, an animatronic Abraham Lincoln delivering excerpts from his speeches; the electricity-themed Carousel of Progress; and Ford's Magic Skyway portraying the progress of mankind. The fair functioned as a proving ground for audio-animatronics and ride systems, and elements of all four exhibits were reinstalled at Disneyland, with It's a Small World closest to its original form. Disney had effectively converted other companies' marketing budgets into research and development for his own park.