Industry Life Cycle

The movie and entertainment industry life cycle have for describing purposes been separated into two different life cycle descriptions, for better displaying where the animated film industry is (to compare with the business unit of Walt Disney Pictures), and the general industry (to compare with the Studio Entertainment segment of The Walt Disney Company).

The general movie and entertainment industry have in a large degree been the stage for large mergers and acquisition in the last twenty years. Furthermore the growth of the industry has been generally carried out by increased sales of DVD’s where consumers were changing their VHS collections in their home. But the Figur 2 shows that the growth of the industry will be slowing down, and this combined with the large number of mergers and acquisitions in the industry signals a maturing market, where normal organic growth no longer is delivering the necessary development in revenues.

The animation industry on the other hand is signified by a large number of new entrants, due to the reinvention of the animation market that derived from the entrance of 3D animation. The industry attractiveness have been increasing and the competitive pressures have been decreasing, due to technological advances and a general larger technological know-how in the industry. As a result of this, then a lot of new entrants from the larger industry have been focusing on getting some extra revenues through investing in 3D animation productions. Furthermore the consumers have loved the 3D animation films. With blockbuster hits like Finding Nemo, Shrek 1+2, Toy Story, and Monsters Inc., then the hit successes amongst 3D animation films have been much higher than on the regular 2D animation films, since the new technology first entered the market.

Industry attractiveness

The high competitive pressure surrounding this industry gives an immediate impression of being not worth entering. But with a market of above $130 billion, then even a little share of these revenues would be interesting to many companies. To truly become successful, then it is evident that you have to large scale operations, that gives great bargaining power and controls most of the value chain. This makes the industry ideal for Disney; they have both economy of scale and scope, own much of the whole value chain, and have a large positive cash flow and diversified operations that makes them able to withstand tough times or poor performance in several industries.