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Operating Segments
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Brian Givens, Katherine Cranston,
Kristina Coggin, Marshawn Pettes,
Melissa DiPlacido, Shady Moussa-Youakim
ACC/541
Dec 22, 2014
Kenneth Burton

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Introduction

Under international financial reporting standards, an operating segment is a component

of an entity that is a profit center, that has discrete financial information available, and whose
results are reviewed regularly by the entity's chief operating decision maker for purposes of
performance assessment and resource allocation (Schroeder, Clark, & Cathey, 2011). A goal of
the guidance contained at FASB ASC 280 is to use the enterprises internal organization in such a
way that reportable operating segments will be readily evident to the financial statement
preparer. The resulting management approach to identifying operating segments is based on
the manner in which management organizes the segments for making operating decisions and
assessing performance (Schroeder, Clark, & Cathey, 2011).
Many of the bigger companies we know about contain these very operating segments.
One such company, that we can all recognize, is the Walt Disney Company. Even though some
of us may have grown up thinking Disney was all theme parks and cartoons, there is much more
to its business operations than that. Disney is a massive entertainment and media empire that
stretches across the globe and touches on many areas of business. The Walt Disney Company
divides its operations into five business segments: Media Networks, Parks & Resorts, Studio
Entertainment, Consumer Products, and Disney Interactive. We will go over each operating
segment below.
Media Networks
Median networks includes Disney ABC TV Group, ESPN, ABC
entertainment Group, ABC news and TV stations, ABC Family, and Disney
Channels the segment includes Cable Networks which operating income
increased by 7% on September 27, 2014 in comparison with 2013 and

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revenue increased by 5% in a addition Quarter Ended September 27, 2014

Cable Networks decreased $10 million to $1.3 billion for the quarter. Lower
operating income was driven by a decrease at ESPN and the international
Disney Channels, partially offset by an increase at the domestic Disney
Channels (Walt Disney Company, 2014) and Broadcasting which operating
income increased by 11% on Sept 27 2014 in comparison with 2013 and
revenue increased by 2% in a addition Quarter Ended Sep 27 2014 Operating
income at Broadcasting increased $5 million to $163 million The increase in
operating income was due to affiliate revenue growth and higher income
from program sales, partially offset by higher primetime programming costs
and lower advertising revenue. Higher affiliate revenues were driven by
contractual rate increases and new contractual provisions. Increased
operating income from program sales was due to current year sales of Shark
Tank, America's Funniest Home Videos, My Wife and Kids, and lower costs
due to the cancellation of Katie, partially offset by higher sales of Home
Improvement and Grey's Anatomy in the prior-year quarter. The increase in
primetime programming costs was driven by higher programming write-offs
and higher cost programming including a contractual rate increase for
Modern Family. Lower advertising revenue was due to fewer units sold at the
ABC Television Network. (Walt Disney Company, 2014)

Parks and Resorts

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In 2013, Parks and Resorts revenues increased 9%, to $14.1 billion,

and segment operating income increased 17%, to $2.2 billion. The growth
reflected increases at the companys domestic parks and resorts, Disney
Vacation Club, and Hong Kong Disneyland Resort, partially offset by a
decrease at Disneyland Paris and higher pre-opening costs at Shanghai
Disney Resort.
Under the parks and resorts segment, Disney owns and operates the
Walt Disney World Resort in Florida, the Disneyland Resort in California,
Aulani (a Disney Resort & Spa in Hawaii), the Disney Vacation Club, the
Disney Cruise Line, and Adventures by Disney. The company manages and
has effective ownership interests of 51% in Disneyland Paris and 48% in
Hong Kong Disneyland Resort. The company also licenses the operations of
the Tokyo Disney Resort in Japan. The companys Walt Disney Imagineering
unit designs and develops new theme park concepts and attractions as well
as resort properties.
The businesses in the Parks and Resorts segment generate revenues
predominately from the sale of admissions to theme parks, sales of food,
beverage, and merchandise, charges for room nights at hotels, sales of
cruise vacation packages, and sales and rentals of vacation club properties.
Significant costs include labor, depreciation, costs of merchandise, food and
beverage sold, marketing and sales expenses, repairs and maintenance,
utilities, information technology, and cost of vacation club units (Nielson,
2014).
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Studio Entertainment
Walt Disney Studios is the operating segment responsible for Disneys
movies, music and plays. There are multiple banners under which these are
released; Walt Disney Animation Studios and Pixar Animation Studios;
Disneynature; Marvel Studios; Lucasfilm; Touchstone Pictures; DreamWorks
Studios; Walt Disney Records; Hollywood Records; Disney Music Publishing;
Disney on Broadway, Disney On Ice and Disney Live (Walt Disney Company,
2014). In the fourth quarter of 2014 Studio Entertainment revenues rose
18% to $1,778 million, while operating income of $254 million increased over
twofold. Walt Disney Studios recent success is due to Frozen. It brought in
over $1.2 billion in box office sales and related merchandise is also having
great success. Another successful venture of Studios was the acquisition of
Marvel studios in 2009. They have had numerous hits since the acquisition
(Zacks.com, 2014).
Consumer Products
DisneyConsumerProducts(DCP)isthebusinesssegmentofTheWaltDisney
Companyanditsaffiliatesthatdeliversinnovativeandengagingproductexperiencesacross
thousandsofcategoriesfromtoysandappareltobooksandfineart.(DisneyConsumer
Products,2014).DCPbroughtin8.16percentofthetotalcompanyrevenueinfiscalyear2014
andendedupwith$3,985billioninrevenueforitssegment.Thiswasa12percentincreasefrom
the2013fiscalyear.AlotoftheincreasewasduetothepopularityofFrozenandSpiderMan
products.

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Thissegmentofthecompanyhas3businessunitsofitsown.TheyconsistofDisney
Licensing,DisneyPublishingWorldwide,andtheDisneyStore.DCPistheworldslargest
licenserofconsumerproducts.Thisisduetothepopularityoftheirbrandsandthefactthattheir
brandsaremadeavailableforpurchasing.DCPisalsothelargestpublisherofchildrensbooks,
magazines,andapplications.Theypublishtheirbooksin75differentlanguagesandin85
countries.
TheDisneyStorewascreatedin1987.Itsgoalisfortheproductlinesthataresoldto
supportmediainitiatives.Today,therearemorethan200DisneystoresinNorthAmerica.They
alsohaveover40inJapanand80inothermultiplecountries.Thereonlinesitestobuy
merchandisehastakenoffaswell.TheyhavecreatedtheirmainsitefortheUnitedStatesplus
additionalsitesforcountriesworldwide.

Disney Interactive
In 1988, Disney created the operating segment called, Disney
Interactive Studios. Disney Interactive Studios represents Disneys smallest
segment accounting for 3% of Disneys total revenue and .64% of net
income, last year (Businesswire, 2014). This segment is a Worldwide
American video game company. It self-publishes and distributes multiplatform video games and interactive entertainment worldwide. The
Interactive Media develops branded online services in the United States and
Internationally. Products and content released and operated by Disney
Interactive include blockbuster mobile, and console games, online virtual
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worlds, and #1 ranked web destinations Disney.com and the Moms and
Family network websites. Disney Interactive also develops, publishes and
distributes interactive family content through a portfolio of platforms, outside
of Disney.com, in which includes Disney on YouTube and Babble.com. The
Interactive Media also provides website maintenance and design for other
Company businesses (Walt Disney Company, 2014).
Conclusion
As you can see, the Walt Disney Company is much more than roller
coasters and Its a Small World. The companys business spans across
many continents across the globe as it strives to be one of the worlds leader
in entertainment and media. Currently, Disney only contains the five
operating segments discusses above. But it wouldnt surprise anyone if they
continued to expand their brand to cover more industries and thus add more
operating segments somewhere in the future.

References
Businesswire. (2014). The Walt Disney Company Reports Fourth Quarter and Full Year
Earnings for Fiscal 2013. Retrieved December 20, 2014, from Businesswire:
http://www.businesswire.com/news/home/20131107006810/en/Walt-Disney-Company-ReportsFourth-Quarter-Full#.VJYx6F6AA

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Nielson, S. (2014). Market Realist. Retrieved from http://marketrealist.com/2014/01/walt-disneycompany/

Walt Disney Company. (2014). Company Overview. Retrieved December 20, 2014, from Walt
Disney Company: http://thewaltdisneycompany.com/about-disney/company-overview
Zacks.com. (2014, November 7). Disney's Q4 Earnings Beat on Studio Entertainment and Parks
- Analyst Blog. Retrieved December 20, 2014, from Nasdaq:
http://www.nasdaq.com/article/disneys-q4-earnings-beat-on-studio-entertainment-andparks-analyst-blog-cm411608#/ixzz3MJmSJe4O
The Walt Disney Company Reports Fourth Quarter and Full Year Earnings For Fiscal 2014.
(2014, November 6). Retrieved December 21, 2014, from
http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy14-earnings.pdf
Disney Consumer Products. (2014). Retrieved December 21, 2014, from
https://www.disneyconsumerproducts.com/Home/display.jsp?
contentId=dcp_home_ourbusinesses_company_overview_us&forPrint=false&language=
en&preview=false&imageShow=0&pressRoom=US&translationOf=null&region=0
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial accounting theory and
analysis: Text readings and cases (10th ed.). Hoboken, NJ: Wiley.