A few MyMagic+ tidbits from the quarterly earnings call

[ucfknight]

He said he can't quantify the impact of MyMagic+ from a financial perspective yet. It sounded like not even Disney was sure what the impact has been.

"What has been rolled out has been a big success" both for the company and guests.

He also said the "parks people at Walt Disney World" told him they were "able to accommodate 3,000 more guests per day in Magic Kingdom simply by using MyMagic+". (whatever that means)

He specifically mentioned FP+ is 3 per day and said "in advance if a resort guest" and "same day" if "offsite or single day guest". (doesn't sound like they are announcing any changes to the way it currently works)

He said MyMagic+ was leading to higher guest satisfaction.

Also said FP+ is being utilized by guests more than the old FP system "by a wide margin".

 

[lugnut33]

All very interesting, thanks for posting.

Just goes to show you that us Dis'ers are the minority visitor to WDW. Those who hadn't experienced past trips to WDW will think FP+ is the greatest thing on earth. Little do they know.

3K more guests at the MK. I wonder how that is directly related to FP+. Maybe it's because they get more guest turnover in the park?

 

[bcrook]

He said he can't quantify the impact of MyMagic+ from a financial perspective yet. It sounded like not even Disney was sure what the impact has been.

"What has been rolled out has been a big success" both for the company and guests.

He also said the "parks people at Walt Disney World" told him they were "able to accommodate 3,000 more guests per day in Magic Kingdom simply by using MyMagic+". (whatever that means)

He specifically mentioned FP+ is 3 per day and said "in advance if a resort guest" and "same day" if "offsite or single day guest". (doesn't sound like they are announcing any changes to the way it currently works)

He said MyMagic+ was leading to higher guest satisfaction.

Also said FP+ is being utilized by guests more than the old FP system "by a wide margin".

That bolded part is key. And publicity hasn't started yet. High participation rate during peak times will lead to more tiers and more challenges for same day acquisition and flexibility.

Can't wait to see this in full blown mode.

 

[Pooksie]

I believe that Bob was just referring to the current state of FP+, and they have previously stated that adjustments will be made. I recently received an AP holder newsletter that states at the bottom to keep my eyes open for future updates which will explain, amongst other things, when and how AP holders will be able to make FP+ reservations in advance. So based on that I still think that AP holders will be allowed to make FP+ in advance.


I came in to the call late (5:25pm) and heard the response from Bob Iger concerning a MM+ question.

Here's the notes that I took starting with Bob's comments at 5:25 onward....

He stated that MM+ has been a "real success".

He stated that MM+ allowed them to accommodate more than 3 thousand more guests than normal in the MK during the busiest holiday season.(Christmas)

He spoke of FP+ specifically and stated that FP+ has had a higher customer usage than FP- by a wide margin.

He listed the benefits of MM+ as:

1. Accommodate more people in the parks
2. Provide a better guest experience

He stated that they are not even close to being able to quantify the results of MM+ as it is still being rolled out. But that the additional capacity in the parks is a sign of success.

 

[mom2rtk]

So I'm curious just how MM+ allows them to "accommodate" 3K more guests in the MK? Will we all be standing in so many lines we clear up room on the sidewalks? Or will so many people do their 3 rides and leave that they can have 3K more admissions over the course of the day?

 

[Laketravis]

So I'm curious just how MM+ allows them to "accommodate" 3K more guests in the MK? Will we all be standing in so many lines we clear up room on the sidewalks? Or will so many people do their 3 rides and leave that they can have 3K more admissions over the course of the day?

Here's how I explained it yesterday for someone who wondered the same thing:

MM+ Increases Guest Turnover

 

[Laketravis]

He specifically mentioned FP+ is 3 per day and said "in advance if a resort guest" and "same day" if "offsite or single day guest". (doesn't sound like they are announcing any changes to the way it currently works).

I know some off-site guests were getting excited because they saw a message on their MDE app about making FP+ reservations beginning sometime in April, and that many are assuming that means the same 60 day window will open for them, but so far I don't think any non-AP offsite guest who does not have a MB has actually been able to make an FP reservation 60 days in advance?

 

[redrosesix]

I think they have to get the AP holders online soon -- people don't say it but the AP holders are their bread and butter, the people who will be in the parks no matter what the weather outside Florida is, no matter what international incident keeps people from traveling.

But the line about FP+ being used more than FP- is so simple it's stupid. Of course it is -- everyone gets 3 per day, no matter what. I can't tell you how many times I had a park day with no fp's at all... because I didn't need them. But you think I'll at least try to use my 3 per day -- you betcha

Still don't get the 3k more per day. But they're the ones who control how many people are allowed in the parks during busy times. I suppose they could have just let 3k more in one day instead of turning them away. It really is not a huge number considering how many people MK holds.

Seriously though, I trade gold and oil stocks. These reports are as much funny as informative most of the time. It's not just Disney.

 

[bcrook]

I think they have to get the AP holders online soon -- people don't say it but the AP holders are their bread and butter, the people who will be in the parks no matter what the weather outside Florida is, no matter what international incident keeps people from traveling.

But the line about FP+ being used more than FP- is so simple it's stupid. Of course it is -- everyone gets 3 per day, no matter what. I can't tell you how many times I had a park day with no fp's at all... because I didn't need them. But you think I'll at least try to use my 3 per day -- you betcha

absolutely.

 

[Laketravis]

At mark 26:00 - Rasulo makes the comment that "those new initiatives are a drag on our margins, almost to the tune of 190 basis points".

He is speaking specifically to the previous comments made by Iger at mark 25:30 about the implementation and roll-out of MDE/FP+

So there you go - he clearly identified the costs of MDE/FP+ for just one quarter, and it represented more than 55% of net operating income (170 basis points reported out as net margin against 190 basis points in increased costs).

 

[Kimi313]

So I'm curious just how MM+ allows them to "accommodate" 3K more guests in the MK? Will we all be standing in so many lines we clear up room on the sidewalks? Or will so many people do their 3 rides and leave that they can have 3K more admissions over the course of the day?

We were part of the small test group last August and it was great since we also got to take advantage of FP-. Since then I have been reading all I can on these boards. Now my sister and her family, who are adults with kids, want to go to the park with us and see why we are obsessed with Disney. I would be lying if I said I am not worried this could be a big disaster with FP+ and they look at me like we are idiots, lol!

Even though I am trying to stay optimistic about FP+ with no FP- last Sunday while cleaning the garage I went into deep thought about all I had read and I looked at DH and said "I don't think they want you to ride rides over and over like we do. They want you to ride your 3 and leave but make sure you eat and shop before your leave."

 

[BuckeyeBama]

At mark 26:00 - Rasulo makes the comment that "those new initiatives are a drag on our margins, almost to the tune of 190 basis points".

He is speaking specifically to the previous comments made by Iger at mark 25:30 about the implementation and roll-out of MDE/FP+

So there you go - he clearly identified the costs of MDE/FP+ for just one quarter, and it represented more than 55% of net operating income (170 basis points reported out as net margin against 190 basis points in increased costs).

Yes, but you may be misinterpreting his point. He is not saying that the project is having a net negative impact long term, or that it is hurting their financials. He is saying that the numbers are even stronger than they look because this project's expenses are in the numbers and the full benefits have not yet been realized. The one time costs for implementation are impacting EBITA results - but once the project has been fully implemented and the associated costs accounted for, EBITA results will look much better - and they tell you how much better.

This is the way that earning calls talk about merger/acquisition costs. There are integration costs that drive down EBITA results temporarily, and those numbers need to be called out because they can make short term numbers look weak. But once the integration has been completed, those one time expenses disappear and EBITA climbs.

 

[Laketravis]

Yes, but you may be misinterpreting his point. He is not saying that the project is having a net negative impact long term, or that it is hurting their financials. He is saying that the numbers are even stronger than they look because this project's expenses are in the numbers and the full benefits have not yet been realized. The one time costs for implementation are impacting EBITA results - but once the project has been fully implemented and the associated costs accounted for, EBITA results will look much better - and they tell you how much better.

This is the way that earning calls talk about merger/acquisition costs. There are integration costs that drive down EBITA results temporarily, and those numbers need to be called out because they can make short term numbers look weak. But once the integration has been completed, those one time expenses disappear and EBITA climbs.

I'm not misinterpreting his point at all. He clearly said those costs are a drag on margins to the tune of 190 basis points.

That's a lot of money. We can speculate all day long how much of that might evaporate over time, but my money is on "not much" as it appears much of those implementation costs will become continued operating costs.

And since Disney includes depreciation in it's reporting, it's EBITDA.

 

[BuckeyeBama]

I'm not misinterpreting his point at all. He clearly said those costs are a drag on margins to the tune of 190 basis points.

That's a lot of money. We can speculate all day long how much of that might evaporate over time, but my money is on "not much" as it appears much of those implementation costs will become continued operating costs.

And since Disney includes depreciation in it's reporting, it's EBITDA.

Exactly - a drag on margins because of implementation expenses. I do this for a living. Investors will see this as a positive, not a negative, statement.

 

[Laketravis]

Exactly - a drag on margins because of implementation expenses. I do this for a living. Investors will see this as a positive, not a negative, statement.

You do what for a living?

Investors will only see it as a positive the first time or two it is used to explain how much higher the margins could have been. They will see it as a negative if those implementation expenses become operational expenses.

 

[BuckeyeBama]

Investors will only see it as a positive the first time or two it is used to explain how much higher the margins could have been. They will see it as a negative if those implementation expenses become operational expenses.

Agreed - but that isn't where they are. Right now Disney is explaining that their margins would be higher if not for these expenses, implying that the expenses will not be "ongoing". Disney has been pretty open about these expenses to date. But any unexpected "operational" expenses down the road that are not offset somewhere else will result in an investor "correction".

But that is not what was discussed on this call. The news on this call looks very positive for investors. Cautious investors may stay on the sidelines to see how this plays out, but no one is going to sell based on this news.

 

[Laketravis]

Agreed - but that isn't where they are.

Luckily, we'll know in three more months. I'm not shorting Disney, but the fiscal quarter ending 12/28 is historically one of their busiest and most profitable quarters for the parks. It is also going to be followed by one of the slowest, which - if your theory proves true - should see a substantial decrease in those implementation costs if they manage to avoid solidifying into operational costs.

I just thought it was worth noting that Rasulo actually threw a pretty accurate and high number out there in regards to what this was costing - something that has only been speculation so far on these boards.

 

[redrosesix]

Agreed - but that isn't where they are. Right now Disney is explaining that their margins would be higher if not for these expenses, implying that the expenses will not be "ongoing". Disney has been pretty open about these expenses to date. But any unexpected "operational" expenses down the road that are not offset somewhere else will result in an investor "correction".

But that is not what was discussed on this call. The news on this call looks very positive for investors. Cautious investors may stay on the sidelines to see how this plays out, but no one is going to sell based on this news.

I think wdw is a small part of the whole puzzle. As an investor I'd be more concerned that they're continuing to lose money at ABC than about a one time project that I don't understand and can't see. But I also think investors are pretty savvy -- this is an expensive stock and lots of analysts follow it. Obviously the only reason revenues are up is because prices went up since they admitted resort reservations were flat. Increasing revenues by increasing prices just can't go on forever.

They might give wdw a pass this time but I'd say it's a hold, not a buy. And anything I'm holding quickly becomes a sell when I see another place where my money is going to make more profit for for me. They really avoid talking about the whole price tag or what exactly these implementation costs are -- it's not even clear that all of those costs will go away when testing is done eg. the cost of MBs, the cost of the IPads, the cost of extra CMs to help with FP+. We just don't know.

 

[BuckeyeBama]

Luckily, we'll know in three more months. I'm not shorting Disney, but the fiscal quarter ending 12/28 is historically one of their busiest and most profitable quarters for the parks. It is also going to be followed by one of the slowest, which - if your theory proves true - should see a substantial decrease in those implementation costs if they manage to avoid solidifying into operational costs.

I just thought it was worth noting that Rasulo actually threw a pretty accurate and high number out there in regards to what this was costing - something that has only been speculation so far on these boards.

I agree - it was some of the most important data presented outside of their studio results.

 

[Laketravis]

I also think something that deserves emphasis is the fact that the status of MDE/FP+ was one of the first questions asked by the investor audience.

That indicates top-level interest in what some on these forums have described as a small part of the entire project just for the parks which is a small part of Disney overall.

But apparently, it's quite high on the list of concerns for investors.