Disney's $1 billion dollar bet on magical wristband - Wired

[rteetz]

I think this is a great comparison. Would people buy a theme park ticket if it was terrible? Nope. So using that logic Disney remains a value for many visitors. We also have to look at the big picture with spending. Disney looks at WDW as part of a much broader picture. Disney looked at each dollar they were willing to spend on theme park improvements over a period, and then asked where it would be best spent. Would this dollar be best spent at DCA and HKDL, or at DHS? The park that had almost as many visitors as the other two combined fell to the bottom of the totem pole

I don't think disney parks are terrible, if I did I wouldn't be on this board. Something a person consumes like food or beverage is different than having an experience at a theme park. There are bad things in each park but there are also good things. I think Disney takes their US parks for granted. Overseas may be a large market but except for Paris there is no other park that they are majority owners of. I think Disney should look at OLC, they invest 100s of millions into new park experiences on a yearly basis and those parks are packed all the time and are in the top 5 for world theme park attendance. Investing in new rides, shows, parades, etc. do bring people in the door. That also offers more capacity for attendance growth unless of course you continue to get rid of attractions.

 

[lockedoutlogic]

Why not? The Disney brand is ultimately just an asset like any other company holds. If guests feel like they should continue to buy something, based on either the brand or something else, it doesn't matter in the end. As long as they're buying.

The draw of the Disney "brand"...at least in themeparks...is the nostalgia/appeal/reputation that was built long ago...

They know this and have used it for marketing for decades.

The question is this...and most threads...is are they now exploiting it?

 

[wallrock]

The draw of the Disney "brand"...at least in themeparks...is the nostalgia/appeal/reputation that was built long ago...

They know this and have used it for marketing for decades.

The question is this...and most threads...is are they now exploiting it?

Given that their flagship attraction in the Fantasyland expansion is based on a movie that is 78 years old I'd respond with a resounding yes.

 

[clsteve]

They're not even a fourth of Disney's size in Revenue. In the last reported attendance figures Disney actually outgrew Universal in volume.

I'm talking specifically Walt Disney Parks and Resorts. According to this terrible SEC website Walt Disney Parks and Resorts reported 1,620,000,000 in the year 2000 Operating Income. If I'm reading it right. It's possible I'm not because the format is awful. After several turbulent years by 2007 operating income had hit 1,700,000,000. In the most recent FY Disney reported 2,663,000,000 operating income for Parks and Resorts. Considering the Revenue split for domestic to international is something like 5 to 1 I think it's not unreasonable to assume they've reported record profits in the period. Especially in light of continued softness at DLP.

Ah, volume.

By that measure, GM is a better, more profitable, well run enterprise with higher quality product than Honda. Same for McDonalds compared to Five Guys, or Carnival Cruise Lines to Holland America, or Holiday Inn to Hampton Inn.

Doesn't work that way.

I'd suggest staying away from the volume argument.

Also Operating Income and Operating Margin are 2 different things, one derived from the other, one a better indication of a company's position in regards to profit than the other. And no, you can't surmise last year was a year of record profits for domestic P&R off of what you are looking at....

 

[Yellowstonetim]

Guests scour the web to seek the biggest cost savings, book the value hotels, consistently inquire about when the dining plans show up and scrimp and save all year long to suddenly change their behavior to that extreme at the front door? Agreed that some do, but I've heard quite a few 'we're not getting that' statements, which is immediately followed with tantrums to the Nth degree and no yielding from the parent. And no, I haven't been living under a rock for the past 20 years. I know impulse buying takes place. And as far as being easy…The guest has to walk into the gift shop, they have to pick up the item and they have to walk to the checkout counter. The 'easy' part you claim is using the band on your wrist instead of the card in your pocket. I wouldn't call that a leap to being so much easier than before.

While I certainly won't shy away from much of what you said around Disney doing whatever possible to bring folks into the gift shops to spend, the band itself doesn't coax them into those shops. I'm sorry that you can't control your spending impulses, but again don't dump the whole world into the same category.

You bet they change their habits at the front door!!!! Many people plan and scrimp and make budgets. And then they relax, have fun, and spend. This isn't my habits versus your habits, this is real marketing and consumer habits. Of course they say no to the kids, after they said yes twice, or before they give in the next time. This is simple psychology. Especially vacation psychology. "What the heck, we are on vacation!" Just Google spending habits, credit spending, impulse buying, etc. and read how big a problem this is. Merchants of all types know this. And every little bit they do to make it easier helps the impulse. When you are fighting impulse, every little bit of ease helps you give in to the impulse. I don't have to pull out my wallet and choose a card, or even take out my KTTW. I don't even need to put down my drink. Boop. Done. And that makes a BIG DIFFERENCE psychologically. Add the cool factor of using your nifty bands and people definitely spend more.

How can I be incorrect? I'm quoting the CEO directly. Don't believe me? Feel free to look up the transcript and read for yourself. While it isn't proof positive that the data isn't available, it doesn't default to the data is definitely present.

Multi-billion has been the theoretical consensus from various sources, some reputable and others simple speculators like all of us.

And you contradict yourself within your comments here. You assume (meaning you have no proof) that the data is solid and present, yet you state that it's leadership's job to speak in - your words - not clearly definable terms. So is it a matter of personal preference that some statements are an absolute while others are vague?

Everything you said (maybe I completely misunderstood) was saying that this statement meant they did not have the data. The statement says nothing about what data they have or don't have. The way the sentence is worded only says they don't have data they can show you. That is all he says. According to his quote they could have all the detailed data in the world, they just can't share it with you now. And they specifically stated there was a direct correlation between MBs and increased spending. No guess work there.

I am not contradicting myself. I never said anything about two statements. You are mixing up two different subjects. Disney absolutely has all the data they can get, and they can get the data in question. That is my point. Anyone who works in the industry knows they can get the data. If they can get it, we all know they would get it. They said they know and a number here said they are lying it is impossible to know. It is not impossible to know. It is impossible for people who don't work with data like this to understand how they can know. But they can. It takes a great deal of number crunching and analysis and statistical theory, but they can adjust for EVERY SINGLE VARIABLE people have brought up. In fact, the huge sample size helps them. It is a separate issue that they speak in general terms. They also specifically made a correlation between the magic bands and increased spending. And they can.

How do you resolve the additional spending that results from a travel boom?

This is exactly what I am talking about. This is where the statistician and analyst will make their high salaries. There are ways to examine spending behavior connected with a number of variables including travel costs and how they affect spending, gas prices, income levels, economic changes, weather, ages of children, and a hundred other possible factors. Past spending is compared while the differences between the past and current visits are analyzed. Survey's and further investigation will both help the analysis and test their preliminary conclusions. It all sounds to the layman like very unscientific guess work but, like polling, it is a science that can be very accurate within ranges and they can know how accurate their numbers are. Large samples help very much. And Disney has huge numbers of spenders every year. There is not a single variable that cannot be accounted for to get good information. Again, they cannot give you a dollar amount, but they can absolutely know if the MB's themselves had any appreciable effect on spending. Not only can they, they said they did! And there is NO REASON to doubt them. Unless you hate them, think they are nothing but liars, and don't want it to be true.

 

[lockedoutlogic]

I guess my Disney experience is giving me the red flag.

Because though they play the numbers game...Disney is an odd duck when it comes to perception, spin, and the numbers game.

So you really can't take ambiguous quips about revenue and take it as hard math. That is just a component and it's never above 49% of the story.

I know...I know..."all companies do that"...

To an extent...but Disney is not really able to be categorized. There are some companies that have an extra plane/angle that makes a huge difference and sets them above generalization...

So I suggest we step back from the calculator a little.

I'm not diminishing the merits of stats...of
Course they are always present/key...
But...you have to go "through the looking glass" a little when it comes to the D.


And again...I've have nothing to "doubt"

They've said nothing.

"Spending is up due to my
Magic plus..."

"I'm the Queen of Sheba"

At the end of the day...they can only make statistical inferences...an educated guess.

I can claim that my genealogical history was destroyed when the library of Alexandria burned and that I'm heir.

I'm exaggerating...but just how different is it when it's semantics.

And Disney has provided semantics.

Again...wdw attendance, spending, and Profits have increase consistently over time...and accelerate during good economic times. That is not debatable.
So how do their statements or hidden statistics prove a new reality?

They don't...and the proof is in the ambiguity. Do you think Iger or Staggs would not pump the tires in a grand fashion if they could?

If you do...again...your not taking into account what Disney is...

 

[DDLand]

Ah, volume.

By that measure, GM is a better, more profitable, well run enterprise with higher quality product than Honda. Same for McDonalds compared to Five Guys, or Carnival Cruise Lines to Holland America, or Holiday Inn to Hampton Inn.

Doesn't work that way.

I'd suggest staying away from the volume argument.

Also Operating Income and Operating Margin are 2 different things, one derived from the other, one a better indication of a company's position in regards to profit than the other. And no, you can't surmise last year was a year of record profits for domestic P&R off of what you are looking at....

We're talking strictly two similar businesses, that have operations in the Orlando Theme Park Arena, charging essentially the same price for a good. Each one of those goods sold counts as one admission. Is it more impressive for a business to grow 1,052,000 units or is it more impressive to grow 867,000 units for essentially (here's the key) the same price of sale. Those two numbers are from the fastest two growing theme parks in Orlando by volume. I think logic would tell you the 1 million+ is the better of the two. So which one do you think had the faster percentage growth? Hint, it wasn't the 1 million+ growth. That's right, despite having the better of the two total growth numbers making millions more in the process the Magic Kingdom still trails Universal Studios Orlando by percentage growth. Why? Because they're several times larger then them. Does that mean that any new theme park upstart would choose to have the 867,000 over the 1 million+? Nope. Disney had greater total growth by volume.

Now your examples? Those are unrelated. What is the difference between Holland America and Carnival Cruises? Price and target audience. No such discrepancy exists between Universal and Disney. Instead of comparing Apples to Oranges my usage is Apples to Apples. Volume is absolutely relevant when talking about these players.

Yeah, I know what operating margins are. However, if we're talking record profits the two aren't inseparably connected. If Revenue has grown over a period, a company can still report record profits even while not having record operating margins. The numbers I shared clearly show that pre tax profit has grown to record heights @clsteve. That's what the vast majority of people mean when they say "record profits." (Or the flip side post tax profit, sadly I'm not finding P&R net income break down). It's incorrect to say that 1,620,000,000 is a greater profit then 2,663,000,000 even if the operating margin was down. You brought the Operating Margins into the equation. All I said was record profit, and P&R clearly has had record profit.

Revenue growth for Domestic to international was 8% to 3%. With the major headwinds I mentioned above, the additional $443,000,000 Operating Income growth came from somewhere, and it wasn't from international. Domestic almost undoubtably had record profit for the period.

My favorite quote is:
"Segment operating income increased 20%, or $443 million, to $2,663 million due to growth at our domestic operations partially offset by a decrease at Disneyland Paris."

Yeah, I'm pretty sure they had record profits. This makes me even more confident that they came from the Happiest Place on Earth and the Place Where Dreams Come True.

 

[DDLand]

I don't think disney parks are terrible, if I did I wouldn't be on this board. Something a person consumes like food or beverage is different than having an experience at a theme park. There are bad things in each park but there are also good things. I think Disney takes their US parks for granted. Overseas may be a large market but except for Paris there is no other park that they are majority owners of. I think Disney should look at OLC, they invest 100s of millions into new park experiences on a yearly basis and those parks are packed all the time and are in the top 5 for world theme park attendance. Investing in new rides, shows, parades, etc. do bring people in the door. That also offers more capacity for attendance growth unless of course you continue to get rid of attractions.

Bingo. You don't think they're terrible and keep on buying their product. Does that cause Disney to:
A) Reconsider their strategy
B) Keep on doing what they're doing

If you answered B, you got it!

Why should they build more if they're getting all this positive feedback?

Disney has had no shortage of new guests on either coast. Furthermore each one is charging twice as much as TDL. That's incredible. Though I'm uninspired by TDL's recent enhancements, which mainly consist of clones of Domestic properties: http://www.olc.co.jp/en/news/olcgroup/20150129_e.pdf

 

[DDLand]

The draw of the Disney "brand"...at least in themeparks...is the nostalgia/appeal/reputation that was built long ago...

They know this and have used it for marketing for decades.

The question is this...and most threads...is are they now exploiting it?

Who cares if they're exploiting it? Of course they're exploiting it. That's what companies do. They exploit their niche, their specialty, and their assets. If these recent price hikes tell us anything, they actually were under exploiting their operations.

With that said it does seem to me as if they're still building that reputation. I don't think Disney is just coasting on past glory. New guests are still going to Disney World, and having a great time. That's why there's loyalty. I don't think that's changed.

 

[clsteve]

Again...wdw attendance, spending, and Profits have increase consistently over time...and accelerate during good economic times. That is not debatable.
So how do their statements or hidden statistics prove a new reality?

They don't...and the proof is in the ambiguity. Do you think Iger or Staggs would not pump the tires in a grand fashion if they could?

If you do...again...your not taking into account what Disney is...

There will be streamers flying and planes writing smoke messages over Burbank that said: "See, it was worth the investment!" at the first quantifiable evidence that NextGen was returning on the investment.

That's for any company who's Exec Team goes out on a limb and dumps that amount of investment into something outside of their core business - like a ladder in the Chutes and Ladders Game.

Once and if it does, there won't be any ambiguity. Because, we'll all be tired of seeing them touting it during CNBC interviews, plus the write-ups in the rags.

Those are the best and truest signs in the world, just take the numbers out of it - No exec ever doesn't beat their chest and show how much smarter they are after bet like that

 

[lockedoutlogic]

Who cares if they're exploiting it? Of course they're exploiting it. That's what companies do. They exploit their niche, their specialty, and their assets. If these recent price hikes tell us anything, they actually were under exploiting their operations.

With that said it does seem to me as if they're still building that reputation. I don't think Disney is just coasting on past glory. New guests are still going to Disney World, and having a great time. That's why there's loyalty. I don't think that's changed.

The armor plating is as thick as a wwII battleship, isn't it?

It all keeps boiling down to "the free market is always right" and "Disney is doing great because the accountants say so..."

There's just nothing else to consider...i suppose...

I see the Disney/universal comparison Has also made a guest appearance...which had been talked about, researched, and written about by those far more dedicated (and paid) than me for 20 years...

There is actually no way to make that assessment because of the difference in histories of the developments.
It's never been very "oranges to oranges"

Good for Disney...but not proof that they are doing what they need to do for the longrun.

This back and forth is resembling the wwi trench line that euro Disney was built on top of... At this point.

 

[Monykalyn]

I believe 1, 10, & 48 from the Ferengi Rules of Acquisition could explain it to you. There are a few other ones that I think Disney is living by now:
1. Once you have their money, never give it back.
10. Greed is eternal.
48. The bigger the smile, the sharper the knife.
74. Knowledge equals profit
194. It's always good to know about new customers before they walk in your door.


That said, there are a few they seem to have either forgotten or just disregard:
57. Good customers are as rare as latinum. Treasure them.
95. "Expand or die".

Worth 22 pages of (interesting) debate just for this. And it sums up MM+ rather well (the top part) and the frustrations with TWDC at present at (seemingly ignoring #57&95) 'Course we could derail the whole this whole variation on "FP+/MM+ love it/hate it" variation by discussing what was the best version of Star Trek...

 

[DDLand]

The armor plating is as thick as a wwII battleship, isn't it?

It all keeps boiling down to "the free market is always right" and "Disney is doing great because the accountants say so..."

There's just nothing else to consider...i suppose...

I see the Disney/universal comparison Has also made a guest appearance...which had been talked about, researched, and written about by those far more dedicated (and paid) than me for 20 years...

There is actually no way to make that assessment because of the difference in histories of the developments.
It's never been very "oranges to oranges"

Good for Disney...but not proof that they are doing what they need to do for the longrun.

This back and forth is resembling the wwi trench line that euro Disney was built on top of... At this point.

This is where you lose me. The buck stops with profit. Period. That's what matters in the end. If profit has been moving in the right direction that's what matters. Does this mean that WDW is a fully profit maximized entity? Nope. Would increased capital improvement help increase profit? Yep.

Disney decided that the benefit gained from building in Orlando was outweighed by the benefit of building in California and Hong Kong. By most everyone's judgement, they made the right call.

Comparing attendance at two similar entities, operating in the same market, and with essentially the same prices makes them an excellent comparison.

 

[rteetz]

Bingo. You don't think they're terrible and keep on buying their product. Does that cause Disney to:
A) Reconsider their strategy
B) Keep on doing what they're doing

If you answered B, you got it!

Why should they build more if they're getting all this positive feedback?

Disney has had no shortage of new guests on either coast. Furthermore each one is charging twice as much as TDL. That's incredible. Though I'm uninspired by TDL's recent enhancements, which mainly consist of clones of Domestic properties: http://www.olc.co.jp/en/news/olcgroup/20150129_e.pdf

I don't buy their product my parents do I can't buy a disney vacation. They need to slightly change their strategy for the return guests. Their current strategy for once in a life time guests works no problem but if they want guests to return they need to add to the parks. And where is all this positive feedback you speak of? TDL is spending 500 million on NFL, going above and beyond wht they did in Orlando. They are also adding a new frozen port to TDS which is another 450-500 million.

 

[DDLand]

I don't buy their product my parents do I can't buy a disney vacation. They need to slightly change their strategy for the return guests. Their current strategy for once in a life time guests works no problem but if they want guests to return they need to add to the parks. And where is all this positive feedback you speak of? TDL is spending 500 million on NFL, going above and beyond wht they did in Orlando. They are also adding a new frozen port to TDS which is another 450-500 million.

When I say you I mean you and your family. Though from what I've gleamed you have great sway. If repeaters are the the minority why cater to them? Their money is better spent on ventures overseas. The positive feedback is from the record attendance, and profit.

As for Tokyo Disney, I'll believe it when I see the shovels.

 

[lockedoutlogic]

Worth 22 pages of (interesting) debate just for this. And it sums up MM+ rather well (the top part) and the frustrations with TWDC at present at (seemingly ignoring #57&95) 'Course we could derail the whole this whole variation on "FP+/MM+ love it/hate it" variation by discussing what was the best version of Star Trek...

My favorites are 34 and 35

 

[lockedoutlogic]

This is where you lose me. The buck stops with profit. Period. That's what matters in the end. If profit has been moving in the right direction that's what matters. Does this mean that WDW is a fully profit maximized entity? Nope. Would increased capital improvement help increase profit? Yep.

Disney decided that the benefit gained from building in Orlando was outweighed by the benefit of building in California and Hong Kong. By most everyone's judgement, they made the right call.

Comparing attendance at two similar entities, operating in the same market, and with essentially the same prices makes them an excellent comparison.

Wow...I'm not trying to be mean...but you need to research the history of wdw...before you make a direct comparison...

They're not only on a different field...they're not in the same stadium.

And if you look at the arrangement wdw enjoys...it actually makes a stronger case for universal since Comcast bought it context.

And I'll never waiver on this:

Profit does not guarantee good management at WDW (and in many other scenarios)

 

[rteetz]

When I say you I mean you and your family. Though from what I've gleamed you have great sway. If repeaters are the the minority why cater to them? Their money is better spent on ventures overseas. The positive feedback is from the record attendance, and profit.

As for Tokyo Disney, I'll believe it when I see the shovels.

I'd believe something Tokyo announces before something TDO announces.

 

[DDLand]

Wow...I'm not trying to be mean...but you need to research the history of wdw...before you make a direct comparison...

They're not only on a different field...they're not in the same stadium.

And if you look at the arrangement wdw enjoys...it actually makes a stronger case for universal since Comcast bought it context.

And I'll never waiver on this:

Profit does not guarantee good management at WDW (and in many other scenarios)

I totally disagree on this front. We're comparing two theme parks. Not Resort hotels, not DVC, not DCL. Just two different theme parks. Theme parks operating in the same market, with essentially the same pricing, and with similar products. I'm talking specifically about comparing Magic Kingdom and Universal Studios Orlando Park. That's an Apples to Apples comparison.

 

[clsteve]

We're talking strictly two similar businesses, that have operations in the Orlando Theme Park Arena, charging essentially the same price for a good. Each one of those goods sold counts as one admission. Is it more impressive for a business to grow 1,052,000 units or is it more impressive to grow 867,000 units for essentially (here's the key) the same price of sale. Those two numbers are from the fastest two growing theme parks in Orlando by volume. I think logic would tell you the 1 million+ is the better of the two. So which one do you think had the faster percentage growth? Hint, it wasn't the 1 million+ growth. That's right, despite having the better of the two total growth numbers making millions more in the process the Magic Kingdom still trails Universal Studios Orlando by percentage growth. Why? Because they're several times larger then them. Does that mean that any new theme park upstart would choose to have the 867,000 over the 1 million+? Nope. Disney had greater total growth by volume.

Now your examples? Those are unrelated. What is the difference between Holland America and Carnival Cruises? Price and target audience. No such discrepancy exists between Universal and Disney. Instead of comparing Apples to Oranges my usage is Apples to Apples. Volume is absolutely relevant when talking about these players.

Yeah, I know what operating margins are. However, if we're talking record profits the two aren't inseparably connected. If Revenue has grown over a period, a company can still report record profits even while not having record operating margins. The numbers I shared clearly show that pre tax profit has grown to record heights @clsteve. That's what the vast majority of people mean when they say "record profits." (Or the flip side post tax profit, sadly I'm not finding P&R net income break down). It's incorrect to say that 1,620,000,000 is a greater profit then 2,663,000,000 even if the operating margin was down. You brought the Operating Margins into the equation. All I said was record profit, and D&R clearly has had record profit.

Revenue growth for Domestic to international was 8% to 3%. With the major headwinds I mentioned above, the additional $443,000,000 Operating Income growth came from somewhere, and it wasn't from international. Domestic almost undoubtably had record profit for the period.

My favorite quote is:
"Segment operating income increased 20%, or $443 million, to $2,663 million due to growth at our domestic operations partially offset by a decrease at Disneyland Paris."

Yeah, I'm pretty sure they had record profits. This makes me even more confident that they came from the Happiest Place on Earth and the Place Where Dreams Come True.

It seems we're getting close to colored font time

DDL, without going into all of the above, I'd kinda move away from this record profit thing you're holding onto.

If for no other reason then - it's kinda something they might have brought up. That's rarely something that corporations hide.

Just sayin'