mickeys#1fan
Mouseketeer
- Joined
- Jun 9, 2001
- Messages
- 295
Technically it's not. DVC is still in the growth stage. Cash cows have reached maturity, where there is very little growth. Yet they throw off a tremendous amount of cash because costs are low. The key is, what stage of its life cycle is the product or service in.
That said, here's why DVC works for Disney Corp. Disney can earn revenue from loyal Disney vacationers $2,000 at a time over the next 40 years, or it can have that money, discounted to its present value, all at once. Through DVC, it gets the money all at once. This works for them in a couple of different ways.
First, they can show higher quarterly revenues in at least one division of the company. This pleases all the short-term, myopic Wall-Streeters who can't see beyond three months. Stock value goes up (somewhat debatable lately, but in a perfect world, that's how it would work). Second, Disney Corp. has a lump sum to invest in many different ways. Whatever method it chooses is irrelevant for this explanation; suffice it to say, that Disney finds that its return on that investment is much greater than getting 40 years of vacations, $2,000 at a time. That's even if you factor in a 5% annual price increase.
When you add in financing at 10.5%, it gets even better for them. Now one division has an immediate lump sum another has a stream of finance revenue over the next 10 years.
Now fast forward 40 years. Disney has several resort properties on which the mortgages have been satisfied. Maintenance has been covered by members for the last 40 years. So have taxes. Besides construction, sales & marketing are the only real expenses. Disney has fattened their balance sheet, and we've paid for most of it. They've had a "captive audience" for that time, too. Why wouldn't they want to do this?
That said, here's why DVC works for Disney Corp. Disney can earn revenue from loyal Disney vacationers $2,000 at a time over the next 40 years, or it can have that money, discounted to its present value, all at once. Through DVC, it gets the money all at once. This works for them in a couple of different ways.
First, they can show higher quarterly revenues in at least one division of the company. This pleases all the short-term, myopic Wall-Streeters who can't see beyond three months. Stock value goes up (somewhat debatable lately, but in a perfect world, that's how it would work). Second, Disney Corp. has a lump sum to invest in many different ways. Whatever method it chooses is irrelevant for this explanation; suffice it to say, that Disney finds that its return on that investment is much greater than getting 40 years of vacations, $2,000 at a time. That's even if you factor in a 5% annual price increase.
When you add in financing at 10.5%, it gets even better for them. Now one division has an immediate lump sum another has a stream of finance revenue over the next 10 years.
Now fast forward 40 years. Disney has several resort properties on which the mortgages have been satisfied. Maintenance has been covered by members for the last 40 years. So have taxes. Besides construction, sales & marketing are the only real expenses. Disney has fattened their balance sheet, and we've paid for most of it. They've had a "captive audience" for that time, too. Why wouldn't they want to do this?
) inside the parks & purchasing tickets on a regular basis. We've had AP's before, & it was nice to feel like we could go to the park in the a.m. & then leave for the day to do other things. When we're using a "day" off a ticket, I feel the need to do the "marathon day" to make best use of it. Ah, well, it's only money, right? Hakuna-Matata 
