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

DDLand · Mar 29, 2015

rteetz said:
Well of course he has, that's more money for him, but what about the consumer they want new stuff as well. Dessert parties and hard ticket events can only go so far.

Record profit and attendance suggests that the consumer doesn't really want new stuff

Cormoran · Mar 29, 2015

rteetz said:
Well of course he has, that's more money for him, but what about the consumer they want new stuff as well. Dessert parties and hard ticket events can only go so far.

This is my issue. I look at what Comcast is doing with Universal and what Iger is doing to WDW and I think it's pathetic. I don't think the company cares about the theme parks. It's just like someone else said, the executives did not grow up visiting WDW. Maybe Iger is planning to sell the theme park branch of the company, who knows?

rteetz · Mar 29, 2015

DDLand said:
Record profit and attendance suggests that the consumer doesn't really want new stuff

But when prices keep going up of course you're going to have record profits.

rteetz · Mar 29, 2015

Cormoran said:
This is my issue. I look at what Comcast is doing with Universal and what Iger is doing to WDW and I think it's pathetic. I don't think the company cares about the theme parks. It's just like someone else said, the executives did not grow up visiting WDW. Maybe Iger is planning to sell the theme park branch of the company, who knows?

I don't think Iger is planning to sell. I do think he is trying to milk everything out of it tho.

clsteve · Mar 29, 2015

DDLand said:
Record profit and attendance suggests that the consumer doesn't really want new stuff

A 29.9% revenue increase and a cashflow increase of 37.6% seems to point out that many do want new stuff....

Also, I think you're mixing things a bit - are you referencing record profit for DIS as a corporation maybe? I haven't seen an announcement for Domestic P&R record profit. I saw somewhere that their domestic operating margin is back near 2002 levels (Rteetz, maybe? or maybe one of the excellent Parentsof4 posts) but nothing about a profit record for domestic P&R, to my knowledge

midaroco · Mar 29, 2015

lockedoutlogic said:
And you simply don't understand how Disney - specifically wdw - works. So whatever you're selling with your data...it is not discretionary vacation spending - the most frivolous of frivolity that a large percentage of the population engages in.

Disney knows that as well as anyone because they have used research to bear results so effectively.

Not this time. There is simply no statistical realities to tie into the bands. So they quote raw number and draw "reasonable" conclusions. That is ok. But the truth behind the bands would be impossible to ascertain...even for Disney.

Travel dollars are the last to be spent in bad times, some of the first to be allocated in good times, and bloats in perceived economic "good times"...

And that is where we are with the bands. In an era of drunken largesse.

Even Disney cannot fundamentally control that.

Again...there is no way to directly attribute sales to bands - on a scale of statistical significance - as it currently stands. Mainly because you can't isolate the per guest spending from other legitimate causes.

Unless...again...I'm missing something huge.

And I ask...please...no "but,
But, in my job building frack
Drill bits..."

I got it...different strokes for different folks

Yelowstonetim is correct. I'm a statistician, Disney can absolutely tie statistical realities and draw monetary inferences from the bands.

Especially since it was late 2013 that guests could use the bands for purchases. They would simply query repeat visiting guests spending, year over year.

Having that information, along with the percentage that a "once in a lifetime" guest spends over repeat guests - which I would venture to say may be as high as 30% for souvenirs and such - would give them their numbers.

Spending does increase when you are not using a credit card and are "spending" from your room key or magic band.

One year, I decided to use my room key and spent 20% more than I had anticipated, and had spent the year prior - adjusted for inflation.

The following year, when using my credit card, I was back in line with my budget.

wallrock · Mar 29, 2015

Yellowstonetim said:
So you think most guests spend wisely? For the last 20 years you must not have been involved in business or read a great deal about how business, advertising, and credit are affecting the average US consumer. Your average American doesn't save properly, are impulse buyers, and overspend on vacation.

Businesses place a cardboard stand with junk on it in the middle of an aisle people walk down and the item increases sales by a huge margin just because it is there. Look at your local grocery store checkout lines. Notice all the absolute junk you are surrounded by? That is because those products sell like hotcakes there because people and their children see them and buy them. Why because it is there and easy to get. Amazon added and promotes "One click shopping". Why, because people WILL buy more if it is easier to do so! This is a pretty basic principle of business. Make it visible, make it easy. Sure, some people don't buy that junk, and some people resist easy. But not your average consumer. And especially not on vacation.

And there has been much written on vacation spending habits. Vacationers are notorious for loosening the purse strings, being less controlled, and doing more impulse buying. Yes, "many" people arrive at Disney with a budget and stick to it. But most do not. Most relax and worry about the tab later. This is well known. There have been many articles about trying to help people resist overspending while on vacation. Why? Most do it. There really isn't any question about this in business and marketing. It is why every vacation destination fills itself with souvenir stores that sell junk. Why? Because on vacation people will buy junk and lots of it that they normally wouldn't.

It boggles my mind that anyone is even doubting this absolute marketing truth that is well know. Just Google "Vacation overspending" and you will get 293,000 hits, the leading ones all about how to help you avoid the COMMON PROBLEM OF VACATION OVERSPENDING. And Disney is the expert at both making you feel fantastic and relaxed, making it easy, and giving you lots of opportunities to spend.

A little side point: It is easier (And kind of cool and fun) to use a band rather than the card. Also more people are attaching credit cards to the bands.

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.

wallrock · Mar 29, 2015

Yellowstonetim said:
You are completely incorrect about his first statement. Note he didn't say they don't have the information. Just that they don't have data THAT WE CAN SHARE WITH YOU RIGHT NOW. They know. They have the data. They can't share it with you now. Why? Because they don't want to, it isn't good business. BTW, I think you read his statement how he hoped you would read it. He misled you to a certain degree, but he didn't lie.

Where does it say anywhere that it cost $2 Billion? I think it has been confirmed to be over a Billion. Not that I care. If it cost $5 Billion it would be a worthwhile investment.

I think we all know something big is coming with Star Wars, but you are absolutely right about his statement on Star Wars. What he said is true. It is his job to speak of such things in general but not clearly definable terms. Businesses couch announcements this way all the time for desired effect.

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?

Cormoran · Mar 29, 2015

wallrock said:
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.

I guess the MB spending is targeted at guests who have poor impulse control. But these guests are always going to overspend regardless of the method of payment used. I'm with you, the ease of using a MB for charges , in no way effects my spending.

midaroco · Mar 29, 2015

wallrock said:
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?...

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...

Have you read the article? Or any article where Staggs comments on the band? Stags says in the article in question:

"They’re doing more, which means they’re spending more..."

The band is designed to herd guests around the park, keeping them onsite and funneling them into the stores and restaurants to spend more.

Sure, some will not spend more, more than likely repeat visitors will not be bated into spending more, however I am certain that the "once in a lifetime" guests will spend more. The psychological aspect of handing a credit card over will not be there, which is a powerful deterrent against over spending - and Disney knows this all to well.

DDLand · Mar 29, 2015

clsteve said:
A 29.9% revenue increase and a cashflow increase of 37.6% seems to point out that many do want new stuff....

Also, I think you're mixing things a bit - are you referencing record profit for DIS as a corporation maybe? I haven't seen an announcement for Domestic P&R record profit. I saw somewhere that their domestic operating margin is back near 2002 levels (Rteetz, maybe? or maybe one of the excellent Parentsof4 posts) but nothing about a profit record for domestic P&R, to my knowledge

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.

DDLand · Mar 29, 2015

rteetz said:
But when prices keep going up of course you're going to have record profits.

Yeah, if people keep buying, it indicates they like what they're getting. So the consumer has voted, and they don't really want new stuff.

DDLand · Mar 29, 2015

wallrock said:
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.

I responded in greater detail before, but this should clear things up for you.

DDLand said:
That passage is specifically during the earnings call. They don't have that data to share during the call. It's actually fairly common to hear that or "I don't have that data in front of me" as a response when analysts make big requests. They're also not allowed to make stuff on the spot or guess. They've got only what's in their heads or on the paper in front of them.

rteetz · Mar 29, 2015

DDLand said:
Yeah, if people keep buying, it indicates they like what they're getting. So the consumer has voted, and they don't really want new stuff.

I would beg to differ that the repeat costumer does want new stuff while the new customer doesn't because they just don't know. Dessert parties inside hard ticket events are going to maximize profits.

DDLand · Mar 29, 2015

rteetz said:
I would beg to differ that the repeat costumer does want new stuff while the new customer doesn't because they just don't know. Dessert parties inside hard ticket events are going to maximize profits.

There just aren't enough people on your side of the fence. If everyone was buying a soda, and at the same time saying its was terrible do you think the soda manufacturer would care? Nope. If at the same time they were able to raise prices without adversely affecting the sales, would they? Yep.

rteetz · Mar 29, 2015

DDLand said:
There just aren't enough people on your side of the fence. If everyone was buying a soda, and at the same time saying its was terrible do you think the soda manufacturer would care? Nope. If at the same time they were able to raise prices without adversely affecting the sales, would they? Yep.

I don't know if that was the best comparison. People wouldn't buy soda if it was terrible. People go to Disney for the experience. I would guess that the amount of guests in the park on a given day are newbies or have only visited a couple times prior. Disney doesn't focus on the veteran park visitor. Disney is going to keep raising prices until people stop buying. Attendance would rise if disney did new things in the parks, it did after NFL, it most likely will after Avatar, and after what ever happens at DHS. For example DHS should've never gotten to this point of stagnation and non growth.

lockedoutlogic · Mar 29, 2015

midaroco said:
Yelowstonetim is correct. I'm a statistician, Disney can absolutely tie statistical realities and draw monetary inferences from the bands.

Especially since it was late 2013 that guests could use the bands for purchases. They would simply query repeat visiting guests spending, year over year.

Having that information, along with the percentage that a "once in a lifetime" guest spends over repeat guests - which I would venture to say may be as high as 30% for souvenirs and such - would give them their numbers.

Spending does increase when you are not using a credit card and are "spending" from your room key or magic band.

One year, I decided to use my room key and spent 20% more than I had anticipated, and had spent the year prior - adjusted for inflation.

The following year, when using my credit card, I was back in line with my budget.

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

DDLand · Mar 29, 2015

rteetz said:
I don't know if that was the best comparison. People wouldn't buy soda if it was terrible. People go to Disney for the experience. I would guess that the amount of guests in the park on a given day are newbies or have only visited a couple times prior. Disney doesn't focus on the veteran park visitor. Disney is going to keep raising prices until people stop buying. Attendance would rise if disney did new things in the parks, it did after NFL, it most likely will after Avatar, and after what ever happens at DHS. For example DHS should've never gotten to this point of stagnation and non growth.

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

lockedoutlogic · Mar 29, 2015

DDLand said:
Yeah, if people keep buying, it indicates they like what they're getting. So the consumer has voted, and they don't really want new stuff.

oh dear... That is not how you should view the wdw consumer, Adam smith...

This isn't like "where am I buying my drywall today...home depot or lowes?"

DDLand · Mar 29, 2015

lockedoutlogic said:
oh dear... That is not how you should view the wdw consumer, Adam smith...

This isn't like "where am I buying my drywall today...home depot or lowes?"

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.

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

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