Oriental Land profit f'cast up on Disney park boom

[Tannerman]

Adding even more fuel to to the "build it cheap or not" fire....

Oriental Land profit f'cast up on Disney park boom

Tuesday April 23, 5:07 am Eastern Time
Reuters Business

TOKYO, April 23 (Reuters) - Disney amusement park operator Oriental Land Co Ltd (4661.T) of Japan more than doubled its 2001/02 group net profit forecast on Tuesday, buoyed by the popularity of the new DisneySea theme park.

Oriental Land, which operates Tokyo Disneyland and the adjacent Tokyo DisneySea, said it now expects group net profit of 12.7 billion yen ($97.60 million) for the year ended March 31, up from a November estimate of 5.9 billion yen.

The company said the number of visitors to the two theme parks on the outskirts of Tokyo totalled just over 22 million in 2001/02, which was 447,000 more than it forecast.

A reduction in fixed costs also prompted the upward revision, it said.

Oriental Land operates the two parks through a licensing agreement with Walt Disney Co (NYSE:DIS - news). Tokyo Disneyland drew more than 17 million people in 2000/01, top among amusement parks worldwide.

Revenue estimates rose 2.3 percent to 281 billion yen, compared with its earlier forecast for 274.7 billion yen and 200.2 billion yen a year ago.

Oriental Land, which charges adults 5,500 yen ($42) for admission, pays about seven percent in royalties to Disney on ticket, merchandise and restaurant sales.

The new aquatic-themed playground DisneySea, which opened in September, is the first of its kind for Disney, with a giant volcano serving as the centrepiece to the park.

The allure of the Disney theme parks in Japan has defied the downturn in consumer spending, which has crippled other parts of the Japanese economy, and the overall slump in amusement parks worldwide.

On a recurring basis, which is pre-tax and minus extraordinary items, Oriental Land raised its profit forecast to 23.7 billion yen from its earlier 13.1 billion yen.

Also boosting sales and profits was strong demand for the luxury Hotel MiraCosta, a new 500-room hotel built inside the park, which is solidly booked, often two months in advance.

Shares in Oriental Land closed down 0.12 percent at 8,080 yen on Tuesday, in line with the broader market and down over 10 percent on the year to date. ($1=130.12 yen)

Click for source (http://biz.yahoo.com/rb/020423/leisure_japan_orientalland_1.html)

[Bstanley]

If you build IT,

They will come...and they will bring their pocketbooks.

[Captain Crook]

Good for Disney (7%). But relating what happens in Japan is of little intrinsic value in forcasting what would or could happen here in the US.

The Japanese are a lot different culturally from us. They do not mind crowds or standing in lines, something we have fits about. To further emphasize the differences, look at what the Japanese pay to play golf. It is absurd and I'm sure course profits in Japan and neighboring countries are way greater than those in America. Does that mean their courses are just that much better? Well, of course not, but they are willing to patronize them at any price in order to play golf.

Disney has much the same affect on the Japanese and I don't mean to downplay the TDS for it truly looks like an amazing place but putting it in Orlando would not create the same result in my opinion. First there would be the crowd factor, how many Americans would be happy taking 2 or 3 days to see one amusment park and still feel they weren't being 'gouged' by big bad Disney? How many people would like to pay rack rates at all of the Disney resorts for their trips, which would be almost a certainty based on any type of similar success?

Before we cannonize OLC as the new entrtainment good guy lets wait and see what they have next in store. If it isn't a full course gourmet meal I'm sure some DIS loyalists will have something to say about their decline as well. But for now, for Japan, OLC certanly made a very good move...
:smooth: :smooth: :bounce: :smooth: :smooth:

[Another Voice]

Actually, Tokyo Disneyland and DisneySea have the lowest ticket price for any Disney theme on the planet. It’s currently $42 at the present exchange rate. Not only that, but somehow they’ve figured out how to make money even when they lose 7% off the top.

As for the crowds, they’re actually no worse than the crowds at Disneyland on the weekends. Wait times are very, very close. I have yet to see all these impatient Americans fleeing Anaheim. Nor were their huge cries of “gouge” when Disney advertised that EPCOT Center was a two-day park from the very start. In fact, the cries of gouging seem to come from the other end of the spectrum – no one has ever complained about not being able to see everything at Animal Kingdom or California Adventure in a day.

As for the rack rates – well if you can only sell rooms when you offer a discount, PERHAPS THE RACK RATES ARE TOO HIGH. A novel concept for Disney, especially when they used to pull in a 96% occupancy rate with no discounts at all.

The simple fact of the matter is that the Oriental Land Company wants to run world class theme parks. They are interested in making the investments and know full well that quality products will produce substantial financial returns.

On this side of the Pacific, we have a management that is interested in running a network and managing their stock options. Theme parks are nothing but a side business useful for generating cash which will be used to purchase ‘The Mighty Morphing Power Rangers’. In their minds quality is unimportant because the public’s perception can be molded through carpet bombing marketing.

They’re wrong. And the extra 7% they’re receiving from Tokyo doesn’t even begin to fill-in that massive money-pit The Company has built in Disneyland’s parking lot.

[Bob O]

I would agree with AV !!!! What do you think the attendance would be for DCA if they actually built a new and complete park with new attractions rather than a park with re-treads based on a state that most live in and can see for themselves??? One company did their research and built a excellant park and attendance shows how succesful it is, the other company again did things on the cheap andattaendance suffers because of it. They again tried to force people to pay full price for a half day park and it has blwon up in their face.

[kenjean]

OLC makes money the old fashioned way.

They earn it.

Paying attention, Eisner?

[Captain Crook]

Well Voice, you're understanding of the crowds at TDS & mine are vastly different. I have not heard that it takes anyone two or three days to see DL lately. If you're right, fine, but I've read that lines are unbelievable, reservations were needed for the initial months...Oh, and what are they charging for hotel rooms at Mira Costa? Discount rates, you think?

Bob, would you go to a Disney Park & pay 40-50 bucks per person for three days in order to see it all?...Not because it is so big, but because it is so crowded?:confused:

Lastly I used a very good analogy with the golfing scenerio to show just how different the Japenese view their recreational expenditures, highlighting why there is a distinct difference between the Japanese and US market and yet this goes ignored? Masses who will gladly spend 500-750 for a round of golf are not found in the US.
:smooth: :smooth: :bounce: :smooth: :smooth:

[space42]

Yeah.. but...


Disney USA used to build parks that took more than a day to see!! This half day park is a recent thing with MGM in '89

What about when EPCOT center opened?? Heck, they even built a monorail expansion before the park was finished so that you could watch the construction :D

You mean to tell me that Disney USA has less money now than they had in the late 70's and early 80's??? They actually have more but would rather spend it (5 billion) on a cable network and a worthless dot com.

It makes me sad to see Tokyo get such a park and in USA we get DCA and a 1/2 of AK. I just wish Disney would think big with the parks again like they did in the 70's and 80's. It was profitable then and it would be now!


ps... Scoop.. My take on IOA is that it is just not that great of a park. I mean sure it looks good and has two or three good rides but one 1/2 day trip was enough for me and don't forsee myself going back anytime soon. If other people feel this way, perhaps that is why it is not that well attended? This is just speculation on my part :)

[airlarry!]

Mssrs. Scoop & Cap'n:

I must beg to differ. It is both further of an analogy and closer of an analogy than you say.

#1 The Japanese recession is much deeper than anything we are facing. Massive job cuts (mentioned in the article) have been hitting the Japanese labor force in huge waves over the last two years, yet the parks are DOUBLE THEIR FORECAST! Not 20%. Not 50%. Double! Yes, I know the Japanese spend more in the parks, and they love Mickey a lot, but come on! DOUBLE?

#2 The Golf thing is a red herring, just as in comparing gas prices or anything else. Land prices are at a premium, hence their golf fees are higher. In the USA, development costs for a comparable golf course are much less than in Japan or Europe (see the NGF for comparisons if the articles are still on-line).

#3 Monsieur Voice exposes a revelation. Mr. Eisner's recent actions (even within the parks) do seem to be in the vein of someone who sees himself as CEO of a Television Network and not the head of a Creative Company:

Cheap Reality Shows making lots of money with little capital investment? Tell the Imagineers to cancel the Venetian, let's get the Hotelineers to design the cheapest Reality hotel and buy more wheelbarrows to cart off the money.

Other networks have a hit show? Our network has a new hip, hit show? Don't reward creativity with more free hands and find another one...it is easier just to clone it! Clone Dumbo twice in Orlando alone! Wilderness Lodge is getting rave reviews! Clone it! AKL! AKL! We don't need no stinkin' Buffalo Junction...we've already paid an architect, and we can maximize profits by modifying his original design into AKL...

I could go on...

[Bstanley]

So let me see if I understand this...the reason the new DisneySea Theme Park is so extraordinarily successful is because the Japanese are culturally willing to overpay? And the proof of this is the high prices that the 'masses' pay for golf?

Sorry, wrong answer. I've been to Japan many times, spending months there and the masses simply do NOT play golf in Japan - for the reason you noted - that it costs more than they can afford. Some have golf clubs and hit at driving ranges, but will literally never play a round in their lives. Using golf as an example of anything effectively discards more than 85% of the population (17M people claim to 'play' golf in Japan out of a population of 130M) - who will never touch a golf club in their lives... Golf doesn't even make it into the top 10 leisure activities according to the government...

This myth of the Japanese overpaying for things is a leftover from the 'Japan bashing' days of the late Eighties/early Nineties. People like to talk about the high cost of a beef. Well sorry but a Big Mac costs about the same here and there. However it's true that a Kobi beef filet will cost $50 a pound (and a Matsusaka filet - which is even better - will cost $75). Or they point out that a hotel room at the New Otani runs $300 a night - true, but my room was huge and had a panoramic view of the Imperial grounds, with fantastic service, and the best of everything AND oh by the way, have you ever tried staying at the Waldorf Astoria in New York City - it's also $300 a night...

Have we spotted the trend here? The Japanese - who are somewhat careful with their money - can be induced to spend great wads of it - For QUALITY.

From what I can see the DisneySea Theme Park is a GREAT Theme Park, period. If it had been built in California or Orlando does anyone seriously believe that it would not have been successful? Bushwah I say! Bushwah!

For once I am actually regretting that my traveling days are in the past - I for one would LOVE to wait in line at Tokyo DisneySea...

[Captain Crook]

Who said the Japanese "overpay"? Scoop, did you say that? I sure didn't mean to infer that...But it is true that they pay way more than their counterparts in the US for certain things and golf is a good example. Not that many Americans (percentage wise) play golf either yet it is a lot less expensive here...Again, is it because our courses are inferior? No it's cultural and many Japenense buy into that pattern even if their sole foray into the sport is at a driving range. How many Americans go to driving ranges that don't play golf? You further strengthened my golf analogy with this tidbit, I'd say.

Scoops Universal scenerio is another good one. I'm with scoop that OLC probably could have built a DCA in Japan and done very well with it. It is to thir credit that they forged ahead and built TDS. TDS stands as a current day Disney achievmnt and while Disney didn't actually go out on any limbs financially they proved that they still can do it. Do you think Eisner etal are not aware of the great success of this venture? Do you believe that if they were reasonably assured of this kind of success for a TDS like park in the US that they wouldn't do it? Why wouldn't they? They know something we don't and that something has to do with (1) saturation and (2) American economics. As great as TDS is can you imagine the heart tremors Disney would have had had they been sitting on a just opened TDS investment at the time of 9/11 & the economy slowdown?

Now, I don't suggest that Disney has to run scared from events out of their control but realistically do they really need to roll the dice either?

[wdwguide]

AV,

the Parisian parks are the cheaptest ones on the planet, with admission fees in the low to mid $30s, depending on the exchange rate.

[JeffJewell]

The mere fact that TDS was great is likely just gravy to the fact that it was Disney. The brand has not been nearly as diluted in that market as here in the states ...because it sure sounds like you're saying "Americans aren't buying the diluted Disney (of DCA, for instance) because Disney diluted it," and "Japanese are buying the undiluted Disney (of TDS, for instance) because OLC did not dilute it."

I mean, I agree with both of those assessments... they're pretty much "Well, Duh" moments. But I fail to see how either supports your position on this argument.comparing Japanese and American park-visiting habits is kumquats I can let you have this point, but it seems to me that you make the statement then extrapolate what it means to be "Americans do not appreciate and will not pay for quality," or even "it is fiscally irresponsible for a company to put quality into an American theme park." It is that kind of interpretation of "comparing Japanese and American park-visiting habits is kumquats" that I believe to be faulty.

Jeff

[airlarry!]

I reread my post. I don't mean to deride the beauty of AKL, and I'm not crying about the addition of the spinners in Adventureland and Dinoland. I'm just saying that it fits the M.O. of a television network agenda.

I'm not saying that Japanese golf is not more expensive (although go check out the latest prices on 18 at the Pebble Beach complex, or at Pinehurst....how 'bout $125, the going rate for Tour 18 in Houston or Dallas?) AV's point that ticket prices are the same makes the argument of golf more expensive a red herring.

[Bstanley]

Well Capt. I would have to agree that if M.E. had invested a couple of Billion in a TDS park in Anaheim just a few days before 911, I can indeed imagine he might have needed more bypass surgery on the 12th... (Although he seemed OK after writing off $1.5 Billion in losses on internet related foolishness last year...).

You know WDW had to survive an oil embargo in '73 that basically shut the door to vacation traveling for months, and the later hyper-inflation of that decade, etc. and yet today it still makes much of the profit (40% of Net according to the 2001 Annual report) that the rest of the company manages to consume.

No - I don't think Disney command central ARE aware of the success of TDS. M.E. is not focused on the parks and has not been for years. He always wanted to be head of ABC, now he is and it appears to be keeping him busy - or perhaps it's the other ten company divisions that are clamoring for his attention... It's OK though because he's got sombody else in charge of the parks right?... Unfortunately the guy who IS responsible for the parks is also not focused on the parks...he didn't understand the difference between a Six Flags and a Disneyland when they promoted him to the Park Boss position and it's abundantly clear that he hasn't picked it up 'on the job'. In fact he's probably the strongest supporter of the 'it's not the same here' argument...

I continue to believe that if TDS had been built in Anaheim it would be drawing sufficient crowds to be paying for itself, unlike CA.

[Another Voice]

Over the past two years I’ve heard a lot of “foolish Japanese, smart Americans” spin coming from Team Disney, but this golf excuse really takes it to another level. I’m assuming the nut of the agreement is that since a few Japanese executives have their companies pay high green fees that they are now entitled to a first class theme park. Too bad out here in Hollywood we’re merely left with paying $8.50 for bottled water at a restaurant. I guess we must only deserve California Adventure. Actually, we do have our share of $300+ golf course too. Maybe Disney wasn’t aware…

Universal Studio’s success is very easy to explain. It was the first studio themed park to open in Japan. And Japan is the largest overseas market for American movies. I guess the secret is to open up a unique park with a topic that’s widely popular. It’s not an issue of “cultural tastes” at all. And yes, California Adventure might have worked well in Asia too only because it would that “unique” angle covered. But how “unique” is a park filled with knocks-off of the real sites that are just up the freeway? Something tells me that Disney’s Tokyo Adventure as TDL’s second gate would have met a similar fate as DCA.

As for the Captain’s complaint that DisneySea is horrible because it’s filed with paying crowds – and his implication that this is a reason why DisneySea would flop in the US – it seems that Disney has built the answer to your concerns, sir. Come to California Adventure, a Disney park filled with vast open spaces, empty queues and free of all those annoying tourists. And it doesn’t take two days to see it! Wait – perhaps building a half-sized, poorly themed, uninteresting park that’s lost money each and every day it’s been opened isn’t the best way to increase shareholder value. But if someone likes it, it must be good.

Which brings me to the last point – DisneySea was designed as an American park. Had Euro Disney not tanked, all of us would be visiting the Mount Prometheus right now out in Long Beach Harbor. Or jitterbugging in the USO nightclub on ‘Queen Mary’. Or enjoying a cappuccino in our room at Hotel Mira Costa. Or waiting for our cruise ship to dock at Port Disney. Funny, there were never any concerns at WDI that the place wasn’t going to be popular (there were plenty for DCA).

Trying to explain away DisneySea as some sort of fluke of the Japanese mind set is nothing but sour grapes. Vent your frustration at the people who deserve it – the guys with the offices right behind Dopey.


P.S. "It's just that Mickey is still relatively new over there." You've got to be kidding with this one Mr. Scoop! The films have been over there since the 1930's, television since the early 1950's and even Tokyo Disneyland is 25 years old!

[Captain Crook]

Voice, I'm not sure what to make of your post...You're a smart guy, with a lot to say but you constantly misrepresent what I've said ...I know you realize this, I just don't know how to respond...:confused:

The golf analogy couldn't be better suited and your dillusional statement attributed to me that "Disney Sea is horrible because it is filled with paying crowds" is a patently unfair statment. I believe TDS looks great (not horrible) nor do find it repulsive that it is filled with paying customers, but I am saying American's wouldn't be so thrilled. I for one would probably not continue being an AP'er if the crowds, hotels & prices were so successful that elbow room could never be found. Perhaps I'm being selfsh but I like room to breathe and the opportunity to actually enjoy the park. So if TDS brings these crowds I'm unhappy and I think many Americans would be as well, so it becomes a double edged sword...Damned if you damned if you don't...Besides how long before the investment soured and the big picture muddied? Sure the first 5 years or so would be great, but what could they do for an encore? How can they keep all of these hotels filled once the majority has made their pilgramage to the 'new park'? No, my friend the future needs to be looked at very closely and as I (and scoop) have harped, the word is saturation.

DCA will end up just fine. In a few years after the 'quick fixes' fail, some new, ground breaking attractions will appear and it will find its own niche, AK will be fine (BK will eventually appear). I reiterate that America will never get a new, groundbreaking park unless they decide to tap a new area (i.e Texas). Does his make me happy? Well, no but it's a moot point, this is the way it is and no amount whining on my part wil change it...

[larworth]

All these inherent advantages (higher latent demand, higher spend per guest, lower cost of capital, etc) should give OLC a more favorable business situation. One that would allow them to invest more (build higher quality parks like TDS) than elsewhere, or earn greater returns on the same investment. However, when I look at actual results the latter hasn’t seem to been the case (even after adding back royalties).

Operating Income / Sales (+ Royalty?) =

OLC…......……13% (+ 7%) = 20% before TDS
EuroDisney...18% (+ 5%) = 23%
Disney…….....23%

Unless TDL was built to much higher quality standards than the other Magic Kingdoms it doesn’t look like some of these advantages make much difference.

I can understand why you would be slow to expand if you believe the market is saturated. I don’t see anything here that says the relationship between returns and quality are different anywhere.

What are I missing other than knowing how to spell kumquat in Japanese??

[Bstanley]

The attendance figures for IoA are:

2001 : 5.5 Million (~15K people a day)
2000 : 6.0 Million (~16K people a day)
1999 : 3.4 million (9 months ~ 13K people a day)

Universal Studios Florida was running at about 8 Million folks a year. So basically Universal increased the number of people visiting their 'destination' by 70% or so.

I don't know what Universal's average daily $ amount spent per person is, but if it's $100 (the average visitor to Orlando spends $275 a day supposedly) they basically added $600 Million Gross to the corporate coffers and unless they are badly managed they added $50-$60 Million Net to the bottom line.

Here's an interesting comparison:

Open IoA next to USF - pull in 60%-70% of the customers that the original park attracts.

Open DCA next to DL - pull in 30%-35% of the customers that the original park attracts.

OK what about Japan? Also a saturated market for Theme Parks by the way - they've got 29 major parks (Greater than a million visitors a year) and we have 40 in the US - but we have a population of over 260 Million to their 130 Million.

Open DisneySeas next to TDL and you get what? Well nobody knows just yet but according to Michael Eisner "Since the park opened, both Tokyo parks have achieved attendance levels that have greatly exceeded our projections" (Jan. 3, 2002 letter to shareholders in the Annual report).

[Bstanley]

I extracted the # of Theme Parks from an Israeli (?!) Market Research document on the web at:

Theme Parks - Market Analysis (http://www.1planetcenter.co.il/theme%20parks%20market%20analysis2.htm)

The document defines a "large-scale park" as one having attendance higher than 1 Million people a year and says there are 29 in Japan and 40 in the US. They don't give details on individual parks, but they do say that US and Japanese spend about the same amount of money per visitor.

I guess we'll just have to agree to disagree because I still believe that building a TDS instead of a DCA next to DL would have resulted in MUCH higher attendance/revenue - and people would have begun to view DL as a destination rather than a park. I don't think "people were tired of parks" - I think "people were tired of the same old parks". I mean really, DCA is basically nothing more than a Six Flags sitting next to DL...

It's 1955 all over again. If Walt had built just another amusement park how could it ever have turned into anything special?

[Bob O]

Now if disney would actually build a complete park from day one(with new attractions/shows and not their attack of the clones strategy) rather than insist on making people in the US pay full price for a half day at best maybe we could compare the results of TDS and DCA/AK.But the disney company has been unwilling to build a complete park in the US anymore. They perfer to make money by building it half way with promises of finishing it some day in the future. Im just glad that DCA is flopping to send the disney co. a message that hopefully they will learn from.

[raidermatt]

I still believe that building a TDS instead of a DCA next to DL would have resulted in MUCH higher attendance/revenue

No doubt. But would it have been enough to make up for the additional cost? Given how poorly DCA has performed, I'd say the answer is probably yes, but its a huge gamble. Universal threw money at IoA and struggled. What if the assumptions we make are wrong and Disney built TDS next to DL, only to find it drew no better than DCA? I'm not saying it would have happened, but it would have to be a concern.

Scoop/Captain- Here's where I'm a little confused. If the American market truly is saturated, or at least more mature, and they won't turn out for just anything, wouldn't it make sense that IF you are going to build a park, you had better build a park that stands out in some way, or at least gives your guests more of what they expect from you? Not just an big-budget park, but a park that will truly be a hit with your intended audience.

IoA had a lot of money thrown at it, but it's hard to figure out exactly who they are targeting. In the US, its the families that are the high margin guests, yet IoA has too many height restricted rides, and lacks the parades and shows that families love. They have enough thrill rides to bring in some day-trippers and thrill seekers, but they can't even match most Six Flags parks for pure thrills, and these are lower margin guests anyway. So they've got an expensive park that generally speaking is more suited to lower margin guests, but doesn't even go after them very well.

Disney on the other hand, is known as the premier family destination in the country. They have an in with this high margin segment, which is a part of the overall more discerning American market. So wouldn't it make sense that Disney's Anaheim strategy should be to build a high quality family park? Instead, they built a mid-quality park that is confused about who its trying to target. Not enough thrills to pull people away from Magic Mountain, but not enough Family Magic to get families to stay an extra day or two. But a TDS, or a similar type park is much more in line with what Disney guests want and expect. I'm not sure what the height restrictions are on its rides, but certainly the look and detail in the park are what would attract the families that Disney is looking for.

I'm not saying that just transplanting TDS in Anaheim would bring equal results, but I do believe it is much more in-line with what would work for Disney as a complement to DL in Anaheim. Yes, this would cost more money than DCA, but IF it were done with your target audience in mind, it really should work.

[Captain Crook]

I can't really speak for California, but WDW will never see a huge, new state of the art park because of the total lack of necessity. They have AK (a work in progress), they have Epcot (which needs updating) and they still are not feeling the pinch from competetion. To build an expensive, state of the art park, hope the economy stays healthy, hope there is no tourism downturn just doesn't make sense...They don't have to 'make it' because they've already made it. They simply have to maintain...AND should Disney ever feel the pinch of local competition it would take relatively little to drown it out. Building BK when necessity calls will thwart the local competetion and ends up being less costly overall. If that's not enough it's still easier to add another thrill to MGM & another to MK and viola the competetion stays at arms length.

While I believe the market is mature I do agree that the public would go crazy for a super park, but there is no long term incentive for Disney to give it to us (at WDW) because they are having some problems maintaining the growth they've achieved now. How could they ever maintain that growth after a new super park with 3 or 4 new hotels to fill?

No, I think WDW growth will be slow and only when faced with necessity. DL, I don't know. I'm sure DCA will eventually be a fine park and compliment DL nicely, but it will never make DL the destnation resort they were hoping for...So CA is a big question mark in my eyes...
:smooth: :smooth: :bounce: :smooth: :smooth:

[raidermatt]

I agree, DL and WDW are very different. My comments were more directed at the DCA/TDS strategy as opposed to a 5th gate at WDW.

DL could be a destination resort, but certainly not on the scale of WDW. DCA could have been the 1st big step in that direction, but instead its hardly contributed at all. They did a good job with the Grand Californian, and Downtown Disney, but the meat was supposed to be DCA and it turned out to be nothing more than a table scrap.

Disney already has preliminary plans for a 3rd gate at DL. (though I'm sure those have been pushed back). Make DCA a success, expand DD, add another resort and build a great 3rd gate and maybe you have a week long destination for the masses. (I'd only need a strong DCA to do this, but I realize I'm not the average). A park with the quality of TDS would have put them well on their way. Even if it were opened "early" in order to get the revenue stream going and mitigate risk, it could have worked as long as plans moved forward to complete it.

As for WDW, it is already a viable week-long destination for the masses. Opening an expensive, "completed" 5th gate would be very risky. I think it should be considered, but only as plans move forward to expand AK, and continuously update the other three parks. I don't mean they each need a new E-ticket every year, but they shouldn't be left largely untouched for several years at a time either.

If a 5th gate is built, it would need to be an elaborate park that probably costs a lot. But money alone isn't the solution. It would need to keep its target audience in mind and live up to Disney standards. Since WDW already has 4 parks and 2 water parks, it would be more prudent to open the park "incomplete". I know this strategy angered many with AK, but its the smart thing to do. Its just that some of the expansions have been a little too slow in coming for AK.

[Bob O]

Regarding IOA i dont know what type of attendance Universal was expecting when the park was built and if they achieved their goal or not. I think it is a excellant park and did help Universal increase their attendance if a earlier posters number are correct.
I think the last thing disney needs is a 5th gate!!! People are limited by how many days they can stay on a vacation and i think a 5th gate would end up taking people out of disney's other parks and not increase their overall attendance. They wouldnt get the bang for the buck.
The 5th gate raidermatt talked about is what DCA should have been, but because the park was done on the cheap with a clone mentality and based on faulty logic that people from Ca will want to go to a park based on their own state the park has had awful attendance and had to use steep discounts to get alot of the attendance they have. Disney knew that DL attendance is alot of locals as compared to wdw so whoever approved the concept of the park wasnt too bright!!! Im from Wis. and why would i want to go to a park based on my own state when i can see the real Wisc, and not a made up one???

[Bstanley]

Actually I chased the data a bit further and discovered that the Israeli's had 'plagerized' a research document published in '98 by a company called "Economics Research Associates" from San Francisco - which actually makes a LOT more sense - somehow the concept that Theme Park Market Research was headquartered in Israel just made my eyes cross...

...Warning - Topic shifts ahead at every paragraph...

As to whether TDS would have made sense to build at WDW - I also agree that building it in California makes EVER so much more sense. You really aren't going to get that many more people to go to Orando by adding any more parks. There are more than enough there for the (typical) 1 week family vacation.

TDS should have been the next gate at DL. Perhaps it would have needed to be done in stages, but it should have been done, period. The audience is there - hey, people fly from there to WDW all the time - hmmm, now that would be an interesting statistic - how many people a year who live within 100 miles of DL visit WDW?... All Disney had to do was announce the long term plans and then build whatever they could afford to build. With 2 solid gates a fair number of people would have stayed a week (the real goal) - visit Universal Hollywood one day, a day at the 'Goose' or whatever and 3 - 4 days at the 'DL Resort'.

I don't doubt that Disney will end up turning DCA into something more interesting (ToT being added, etc indicate the commitment). But it is always MUCH more expensive to go back in and redo something rather than doing it right the first time - and you lose the mythical 'mindshare' when you come out with something that misses the target at first. It might have cost more to start with building 1/2 of a TDS (say 4 lands with 3 'real' attractions per island, plus 1 or 2 minor ones per) instead of DCA, but it sure would have been cheaper than it is going to end up costing to tear up chunks of DCA to add some 'real' Disney attractions. And more importantly the time and money that will be spent on 'converting' DCA into an exciting destination will basically turn into delays and lack of funding for the third gate that would have cemented DL's position as one of those 7 day destinations that generate great, greasy, gobs of money like WDW does.

[larworth]

Scoop

I was not trying to make a point about IOA, which I think is more related to saturation and brand identification issues. It was just to see if the data (versus speculation) supports our many lists of why the Japanese market is so different and so much more lucrative than everywhere else.

If making money was so much easier for OLC (with all their local advantages) than why have they not earned the highest returns with the same kind of assets everyone else has. In fact it appears they don’t do quite as well. Why doesn’t their higher spend per guest (probably 20% higher than here) not automatically translate into a bottom line advantage? Maybe, we overrate these advantages, or maybe OLC are really bad managers?

TDS has two dimensions (scale and quality). I guess before I’m willing to concede that the only place one can afford to build high quality parks is in Japan I need to understand the above conundrum. Please someone help me out here.

***

On the scale issue I think most of us agree it would be tough to justify adding a large quantity of new attractions in Orlando today. Over a short time span 1.75 new parks (how about .75 for DAK, .75 for IOA, and .25 Sworld) were added and probably did saturate the market.

Is the West Coast a differet dynamic? Universal did spend more on IOA (maybe 30%) than DCA to try to provide a higher quality park. They both have about the same attendance. One in a very saturated marked with a big consumer awareness disadvantage and less give-aways. Was the market saturated in CA, or was the execution just bad.

***

Universal assumed it would be impossible to outdo Disney in the family market, so they looked for their niche. It appears to be big and profitable enough to sustain them, but sure they are a little disappointed with their results as well.

[Another Voice]

The guest dynamics at Disneyland and Tokyo Disneyland are very similar – reliance on locals, near major metropolitan centers that are tourist draws themselves, limited space, and a total lack of “resort” surroundings. Most visitors to either place do not go to Anaheim or Tokyo just to see Disney parks – those are simply part of a larger vacation.

It’s a completely different situation in Orlando where the parks are the destination. And I do agree that Orlando has hit the limit on the number of theme parks that any area can handle. Both Disney and Universal seriously misjudged the public’s desire by simply turning out theme parks. As good as Islands of Adventure and Animal Kingdom are, there’s nothing genuinely unique about either one of them. Sea World, on the other hand, has had amazing success with Discovery Cove because they developed a different product that’s of interest to a large number of guests.

And that same philosophy guided the early development of Port Disney and Westcot in Anaheim. It was always known that “just another theme park” would not succeed as Disneyland’s second gate or as a second Disney resort area. DisneySea Park in Port Disney would have been an immensely interactive experience with fully realized environments and participation. The rest of the resort would have been a truly unique harbor development that really doesn’t exist in California. And Westcot would have been an intensely urban, high energy place to contrast with Disneyland’s rural, nostalgic nature. As with any project, it’s not enough just to be good, you have to be interesting as well.

But creativity is risky, especially for a management team that lacks much imagination. All of the financial justification and per captia guest spending numbers are really nothing but a smoke screen to cover the fear of failure in The Company these days.

Would DisneySea Anaheim have been a hit? Probably, certainly much more so than California Adventure. Would have been a sure thing? No – and that’s the rub.


P.S. - "Was the market saturated in CA, or was the execution just bad. "

Well, the first year that DCA was opened, attendance at both Knott's Berry Farm and Sea World San Diego increased. I'd say that's evidence that DCA's problem were in the park itself rather than in the market conditions.

[DisDuck]

Raidermatt you should introduce everyone here to our debate mate Edina. That poster might have an interesting spin to these proceedings. Certainly, in terms of crowds and lines as related to enjoyability.

For you uninitiated folks, there is a poster on the Debate Board who claims that Disney is not doing enough to alleviate long lines and crowds. Thinks it is terrible that the parks are crowded. On a recent vacation, left MK at noon without riding anything that the poster wanted to (operative word is 'wanted'). Stayed at Portofino for several days and loved FOTL passes for onsite guests and the smaller crowds but refuses to acknowledge that WDW has more onsite rooms thereby making FOTL difficult to implement. Even went so far as to state that lesser is better (crowd wise). I wonder if this poster would like or even venture to visit Tokyo DL and/or TDS.

So maybe Disney has it all wrong. TDS will eventually fail because crowds and long lines will turn people off and have them go somewhere else while DCA has it right. Keep crowds small and lines short.

By the way as a point of history, DL opened as a incomplete park and Walt himself (landbaron can verify from his quote book) stated that it will always be 'incomplete' (a work in progress). 1/2 day are only 1/2 day if you rush through them. I find enough at AK to spend from opening to almost closing. Do not find IOA that enticing, takes me from 9 to 3 without rushing.

[Bstanley]

I don't think so. Sounds like the old "a weak dollar is the best thing that could happen to the US economy" crud-ola. You know "if the dollar is weak then our exports will sell well and our economy will grow", yeah right - that must be why the Mexican economy is doing so well....

If it were true that long lines indicate failure there wouldn't be anybody at The MK on July 4th or Jan. 1st, or most of the summer, or etc. One of the differences between an amusement park and The MK is that the attractions are all the amusement park has going for it and The MK has 'other' things. And I don't just mean parades or fireworks or people dressed up in velour costumes...

I personally won't visit the MK when it's crazy busy - once was more than enough. But there are many people who do it year after year (personally I think they're all from New York City :-).

Worst case if a park stays crowded is that some people will choose not to visit and the crowds will moderate. This is also one area where the cultural differences really are a factor. If you haven't actually been to Japan you really don't have a point of reference concerning the crowds there - the Japanese will put up with crowds WAY beyond anything that an American can possibly imagine.

Big crowds = Big Dollars (sorry Big Yen :-) = New attractions or New Parks or New Hotels or...


Another Voice,

I don't think it's the risk associated with creativity that has made for the less than stellar management decisions lately - frankly they appear to be taking substantial risks in almost all the other arenas that the company plays in. It just looks as if the management uses up all it's 'risk tolerance' before they get to the decisions affecting the parks.


larworth,

I don't know that it's easier for OLC to make money. There may be higher latent demand, but the average spend is actually a modest amount lower in Japan than it is in the US, and historically the cost of capital is significantly higher in Japan than it is in the US because Japanese companies borrow money rather than fund through issuing equity - although in all honesty I don't know how OLC funded TDS. My personal opinion is that the reason OLC built a park like TDS rather than one like DCA is simply because they are focused on the business of managing a Theme Park and they know their customers. The people who chose to build DCA next to DL rather than something like TDS were being distracted by buying Television Networks, trying to create an Internet Media Giant (whatever the [bleep] that is), and 12 other things at the same time.

[raidermatt]

Doing the ditto thing...

Would DisneySea Anaheim have been a hit? Probably, certainly much more so than California Adventure. Would have been a sure thing? No – and that’s the rub.

I absolutely agree with this statement. I just think that the increased probability of having a "hit" park would have outweighed the extra risk involved with the higher capital expenditures (thought about just using cost, but wanted to impress you guys with bigger words...:D )

DisDuck- As I'm sure you know, I reject our friend's conclusions on a macro level. Each individual has the right to do what's best for them, of course. But in the big picture, the company needs to find a balance by using something similar to the old marginal cost / marginal revenue thing. Certainly there are some who don't spend their money at WDW or DL because the lines are too long. But what would it cost Disney to decrease those lines, and could they increase their revenue enough to justfy that cost? Certainly there is a point where that answer is no. That point may vary depending on location (Tokyo vs. Orlando for example), but it nonetheless exists. For those whose tolerance falls below this point, well, they are just part of the "accepteable losses".

I don't think it's the risk associated with creativity that has made for the less than stellar management decisions lately - frankly they appear to be taking substantial risks in almost all the other arenas that the company plays in.

Good point. Eisner's reported "lust for a big budget hit" out of the live-action studio is certainly an example of taking risks. Perhaps they lack the same "stones" when it comes to the parks because they know the parks are their one almost guaranteed profit machine? If they mess it up, they won't be able to weather storms like the ABC situation.

[Bstanley]

Good point. Eisner's reported "lust for a big budget hit" out of the live-action studio is certainly an example of taking risks. Perhaps they lack the same "stones" when it comes to the parks because they know the parks are their one almost guaranteed profit machine? If they mess it up, they won't be able to weather storms like the ABC situation.

Well I certainly can't predict the future, but the reason these characters make the 'big bucks' is because supposedly they can...we'll see.

My concern is that by not taking 'risks' with their 'Golden Goose' they may end up killing it. It seems inconceivable ("you keep using that word - I don't think you know what it means" Mandy Potemkin, The Princess Bride) today, but in 1971 when WDW opened nobody imagined that in 30 years it would be what it is today and that many of the amusement parks then popular would be gone today.

The parks are 'Magical' places - I don't know what that is exactly, but it's clear from attendance that DCA doesn't have it...and I still contend that TDS does...

[d-r]

Originally posted by Bstanley
I mean really, DCA is basically nothing more than a Six Flags sitting next to DL...



I'm going to disagree with that. I've been to six flags and I've been to dca, and I think they are pretty different. The paradise pier section of dca is sort of "six flag-gish" in that it has thrill rides and games of chance, but it is way more themed and better looking than six flags. That said, six flags kicks dca's but in terms of rides. To me, DCA has basically three e-tickets, california screamin', which is fun enough to ride but it is a pretty mediocre, gentle coaster (the take off is fun), sourin' - which kicks six flags butts, and grizzly river, which is much, much better than Kali river in terms of the quality of the thrill, and much much better than six flags river rides in terms of quality of the theming. Grizzly is one of the things that they got right at dca. So, dca still really whoops six flags in theming, six flags still really whoops dca in terms of thrills.

Now, if you said that dca wasn't exciting and new because it was basically 1 part disney/mgm studios (muppets, animation tour), 1 part epcot (tortilla factory and vinyard etc), 1 part animal kingdom (tough to be a bug, grizzly river) and 1 part six-flag-gish (paradise pier) I'd pretty much agree with you. Sourin is the only new feeling thing. Well, besides the lame whoopie movie about how hard californians have it.

DR

[lrodk]

Originally posted by BobO:
Now if disney would actually build a complete park from day one(with new attractions/shows and not their attack of the clones strategy) rather than insist on making people in the US pay full price for a half day at best maybe we could compare the results of TDS and DCA/AK.But the disney company has been unwilling to build a complete park in the US anymore.

As AV eluded to before, the primary reason that this is going on is because of the failures of the Euro Disney Resort in it's first years, failures that were a direct result of Burbank's miscues. Eisner essentially built a complete park in France, one with all the bells and whistles. They over-estimated the locals willingness to spend on things like merchandise/hotel/food and suffered terribly as a result. That park is the best Magic Kingdom among all of Disney's theme parks, yet it nearly went bankrupt. As a result Eisner vowed never to overbuild, or as we say "build a complete park" ever again. This is the primary reason my friends. Disneyland Paris was designed and built to represent all of the creative might and capabilities of the Eisner regime. Unfortunately the studios park built next door is following in the foot steps of AK and DCA in that they are scaled-down "half" parks. This will continue into the forseable future, or at least until new management takes over(wishful thinking). Oh, what could have been(sigh).

[kenjean]

The misjudgement made was not in building a complete park, but in where they put it. In a past company I worked for we had a French division, and Euro Disney came up at dinner one night. This was right after attendance increased and I believe the park had made its first profit (I didn't keep up with Disney as much in those days). The concensus at dinner was that the adults in France (and their neighbors in Europe) intentionally snubbed Euro Disney because it was considered American crass. It was the children that eventually made the park work as they dragged their parents there. Guess what? After the adults were forced to go, they found that they liked it. Now it is the most popular travel destination in Europe, according to the travel channel. I wonder if this all would have happened if the current park philosphy hadf been used. Euro Disney was eventually successful because guests expectations were exceeded.

If Eisner is using this example as why to start small, he is misreading the situation.

[Another Voice]

The failure of Euro Disney had NOTHING to do with a “full day park.”

The failure of Euro Disney had NOTHING to do with the amount of money spent on it.

The failure of Euro Disney had NOTHING to do with adding bells and whistles.

The failure of Euro Disney had EVERYTHING to do with Michael Eisner not understanding the business he was running.

Like a really bad comedian, he’s trying to blame the audience for not being “cool” enough to get his jokes…

There are two reasons why EDL flopped and both relate back directly to Mr. Eisner. First was his insistence on the very American feel to the place. The original plans for the park were very European in flavor and in the details. Most of Disney’s stories can from European fairy tales and books, and the park was an attempt to bring these stories “home again”. Even Main Street was turned from a recreation of a small mid-western town into a melting pot urban neighborhood in the Jazz Era (much more interesting to the French).

The entire “American cultural imperialism” problem was understood very, very early in the project. Eisner choose to ignore all of it. Instead of subtle changes and major re-themeing, he decided that the secret to success was to be more American. His reasoning – that’s what worked in Japan. Completely misunderstanding his audience, he tore out the old concepts and inserted his desires instead. The result, as Mr. Kenjean wrote, was a place that wasn’t interesting (to say the least) to an audience.

And he continued with the reason the project failed financially – the hotels. There is no tradition of a “theme park” three day weekend in Europe. Only Americans suffer with the messily five day vacation. In Europe, people take a month and they don’t stay in hotels. And they don’t go to Paris, they go to where the sun is and the city isn’t. Again, all of this was known, but Eisner choose to ignore it. He wanted the profit margins that the hotel’s generated. Most of all, he wanted to remain the Crowned King of Corporate Architecture by hiring big names to build big splashy hotels for the glitterati to fawn over. And notice how aggressively American the hotels are as well.

Euro Disney did not fail because “full day” parks are a bad business. Euro Disney failed because of specific misunderstandings of the audience. It’s not an issue about spending too much money, about building too much – it’s all about giving the audience what they want. It’s not economics, it’s artistry.

It's also about talent. And no amount of corporate spin will cover-up for its absence.

[Peter Pirate]

Yeah, but they fixed it, didn't they?
:cool: :cool: :bounce: :cool: :cool:

[lrodk]

The man who fixed Euro Disney(Frank Wells) is no longer around to make things right. And if you look at the time line where Disney started to faulter in the late 90s, it would coincide(coincidently or not) with Mr Wells' untimely death. Besides, a property that expanse should not have needed fixing in the first place. They had nearly 10 years to plan for it and do their research. If done properly it should have been a financial asset from the start, instead of the drag on earnings it was for well over 5 years.

[Bstanley]

Frank Wells' untimely death was just one part of the unravelling of argueably one of the best corporate senior management teams ever.

Between '94 and '95 Disney replaced their CFO, their Senior Planning VP and a little known guy called Jeffrey Katzenberg along with others...and I imagine all these senior characters took people with them when they moved to their new 'lives'. But they hired Michael Ovitz to make up for all the losses...

[Sarangel]

Like a really bad comedian, he’s trying to blame the audience for not being “cool” enough to get his jokes…
LOL... Oh man, AV. What a great summation of how badly Eisner fits into what we, the fans & stockholders, believe that Disney should be. Where's the club owner to boot him offstage?

Sarangel

[Bstanley]

Well according to Forbes - 4/26/2001

During the last five years, Eisner, 59, made $737 million. That's about 19 times the $38 million made by the average CEO on Forbes.com's First Annual CEO Value Survey. And while Eisner's personal income grew during that time, Disney's five-year net income shrank an average of 3.1% yearly. The average company included in the survey grew its net income by 19% over the five-year period.

And as we all know 2001 was NOT a good year for Disney financially.

It took something like 10 years of lousy financial performance before the investment community revolted and brought the ME/FW team to Disney in 1984 so my guess is we'll be seeing ME for at least 3 more years - unless he decides that one massive coronary in your lifetime is enough for anyone and retires on his $1B.

[Bob O]

Maybe Eisner could use some of his money and build BK at AK as a going away present for all of us!!