Kevin Yee Worried about affect of Six Flags troubles on Disney

[AlanH]

Six Flags Crisis

And finally, a down note to end today’s update. A few weeks ago, I was cautious to see that Six Flags put itself up for sale. Apparently the economics of building roller-coasters and targeting teens doesn’t quite pan out! (well duh... Walt Disney knew this fifty years ago). Dare I repeat my oft-stated desire to see Disney target whole families rather than thrill-seekers?

Then, when Hurricane Katrina wiped out most of Six Flags New Orleans, I was beginning to become alarmed. The coasters are there, but there has apparently been so much damage to everything else, I have my doubts this park will ever re-open. A body blow to Six Flags.

And finally, on September 12, Six Flags announced it would close its AstroWorld park in Houston after 2005 and sell off the land, which has apparently become quite valuable real estate. The park is worth more dead than alive.

Six Flags is now definitively on the ropes. A pessimist might doubt that the company will even survive this. If one park is worth more dead than alive, might others be next? Magic Mountain in Valencia was once out in the middle of nowhere, but the city has basically grown out to meet it. Granted, this isn’t located at the center of Los Angeles the way that Houston’s park is, but the point remains that an eventual Six Flags buyer may desire to make a quick buck by selling off properties rather than running them, and Six Flags would then be dead.



Why do I care about all this? Because it matters dramatically for Disney and its direction. Think about it. Remember that infamous PowerPoint presentation for DCA, in which the new regime said "if it’s good enough for Six Flags"? The point was that Six Flags was always seen as the bottom-feeder in the industry, collecting teenagers by building low-cost, bare-frills coasters. If Six Flags is gone, doesn’t that increase the temptation for the remaining players (namely Disney) to just do the same thing? Chase the teen audience and spend far less money in doing so?

It doesn’t take a Ph.D. in economics to see that competition favors the customer. When parks compete, we the public wins. When there are fewer competitors, there is much less incentive to try hard to win the public’s money.

What makes me extra pessimistic here is the news trickling out of WDI. If these layoffs continue, or if they are capped by a bloodbath in the coming weeks as is increasingly rumored, then the new direction is obvious: Disney is going to outsource everything.

The math is quite simple: (Lack of Competitors) + (Desire to Outsource Everything) = cheap "off-the-shelf" rides in the future.

Depressingly, Expedition Everest may be one of the last Disney-type experiences ever to come from Disney. It was greenlit before Iger took over, and when Jay Rasulo was new to the job as parks chief. I fear Iger is behind the desire to outsource, and that may be the worst part of all.

As great as the Disneyland touch-ups mentioned in this article were, that may be the kind of newness we are looking at for the foreseeable future. I certainly hope that isn’t the case, but I’m starting to gird for the worst.

The bottom line is that Kevin is worried that Disney may be tempted to do "cheap 'off-the-shelf' rides in the future" and his fear that Iger is behind the move to outsource.

I certainly hope that this is not the case. IMHO Disney can not outsource WDI and remain Disney.

I look forward to your comments.

 

[DoxaRich]

Isn't Cedar Point the kiing of thrill coasters ? I haven't heard where they're ready to throw in the towel.

I don't think ride selection is what is killing SF. I've been to the Jersey park. It was dirty. Food was bad & expensive - even by Disney standards. About the only task the employees showed any interest in was inhaling & exhaling. Bus loads of kids from where-ever were running around like they owned the place. Line jumping was absolutely ignored.

But at least the rides were kewl.

 

[daber]

Disney only competes with SF in one area....LA.
Their main competitor is Universal. Now if Universal were to stop making themed attractions like the Mummy's Revenge...then Disney could probably relax.
Let's hope the trend of cheap new stuff (Aladdins Carpets, Triceratops Spin, Primeval Whirl) are behind us and Mickey's Philharmagic, Soarin', and EE is the start of a new era of top notch attractions.

 

[BRERALEX]

Let's hope the trend of cheap new stuff (Aladdins Carpets, Triceratops Spin, Primeval Whirl) are behind us and Mickey's Philharmagic, Soarin', and EE is the start of a new era of top notch attractions.

You forgot Mission:Space.

 

[AlanH]

When I started this thread I had not read Jim Hill's article at http://www.jimhillmedia.com/mb/articles/showarticle.php?id=1634
It appears that Disney is indeed making deep cuts in staff at WDI including some veteran talent. They have done it very quietly by terminating a few people each week over the last nine months. Now I realize that after the opening of Hong Kong Disneyland some staff had to go but it appears to be more than that. According to Jim Hill just about all the creative talent is being let go. I do not believe that WDI is a "non-core" function for Disney like payroll. So I'm very concerned.

 

[Uncleromulus]

Well--$$ is always the bottomline. If WDW feels teens are their future, what Yee fears may very well happen.
I hope not.
Heck-- even a themed "thrill ride" like Everest is off my ride list, not to mention just a plain old thrill coaster.

 

[peter11435]

The bottom line is that Kevin is worried that Disney may be tempted to do "cheap 'off-the-shelf' rides in the future" and his fear that Iger is behind the move to outsource.

I certainly hope that this is not the case. IMHO Disney can not outsource WDI and remain Disney.

I look forward to your comments.

I wouldn't get to upset about this. For one thing at this time it is pure speculation. Just because Mice Age (or anywhere else) says it, doesn't mean it is fact. Additionally just because an attraction may be outsourced in the future doesn't mean it won't be up to Disney standards. Even if Disney disbands Imagineering and contracts out for future attractions, if Disney pays enough and contracts qualified creative people the attractions of the future could be just as good if not better. Again I ask you to follow this link. http://www.kirkdesigninc.com. My point is there are companies out there who are perfectly capable of doing "Disney" attractions better than Disney can. Many of them such as Kirk design were founded by Imagineers. Trust me when I tell you that while this plan could backfire, there are many good things that could come from it.

 

[AlanH]

Peter11435: There are a lot of "ifs" in your post. And if Disney follows through on them, I'm not sure how they save much money. I don't know if you read Jim Hill's article. The Kirk's where Imagineers who were given the pink slip. In Hill's article he used them as an example of why he thinks not many former Imagineers have said much about the layoff. Many of them like the Kirks have formed consulting firms Hill speculated that they are not saying much because they hope to get contracts from Disney.

 

[MOmousefan]

I agree with doxarich that 6 flags is a dirty, poorly run park. We no longer go to 6 flags St. Louis as it does not feel like a "family" atmosphere and instead go to Silver Dollar City in Branson.

 

[peter11435]

Peter11435: There are a lot of "ifs" in your post. And if Disney follows through on them, I'm not sure how they save much money. I don't know if you read Jim Hill's article. The Kirk's where Imagineers who were given the pink slip. In Hill's article he used them as an example of why he thinks not many former Imagineers have said much about the layoff. Many of them like the Kirks have formed consulting firms Hill speculated that they are not saying much because they hope to get contracts from Disney.

I won't say anything about Jim Hill other than you can trust everything he tells you. That said I am well aware of the fact the Kirks were Imagineers who were given the pink slip. As for saving money it would certainly save Disney money. Why should they pay high saleries to full time creative workers, when they hire the same people (such as the kirks) only for what they need them for and get the same great results. If Disney hires the Kirks to work on a new project it will end up just as good as if the Kirks had remained on the payroll. However it would be better for both parties as the Kirks will make more money than they were working for Disney (when you include non Disney projects also) and at the same time it will decrease the costs to Disney.

One of the most misleading things about Jim Hills articles is that he writes both sides of every story in one article. That is why he is always right, even though from the other point of view he is always wrong.

 

[DoxaRich]

One of the problems, Peter, with having the Kirks on the outside is that there is no guarentee that their great ideas will go to Disney. The Kirks have direct knowledge of what works and what doesn't with Disney attractions. Don't you think that the competition is chomping at the bit to bid on their next E-ride ?

The upfront savings of out sourcing a job like housekeeping is very evident. I don't think it applies to something like Imagineering. I have no idea what an Imagineer makes each year. I'll assume $500,000. Say it takes two Kirks three years to develope an E:E. Cost to Disney is $3 mill. Now lets say those same Kirk boys develope the next great attraction & throw it out to all bidders. I've got to believe the bidding will excede $3 mil. Not only isn't Disney saving money, they're also risking losing the entire project to Knots or US.

 

[peter11435]

One of the problems, Peter, with having the Kirks on the outside is that there is no guarentee that their great ideas will go to Disney. The Kirks have direct knowledge of what works and what doesn't with Disney attractions. Don't you think that the competition is chomping at the bit to bid on their next E-ride ?

The upfront savings of out sourcing a job like housekeeping is very evident. I don't think it applies to something like Imagineering. I have no idea what an Imagineer makes each year. I'll assume $500,000. Say it takes two Kirks three years to develope an E:E. Cost to Disney is $3 mill. Now lets say those same Kirk boys develope the next great attraction & throw it out to all bidders. I've got to believe the bidding will excede $3 mil. Not only isn't Disney saving money, they're also risking losing the entire project to Knots or US.

Except Knots doesn't have nearly enough money to build to invest as Disney does. I would get in to the money issue a little more but its late, im tired, and Im going to bed. Maybe in the morning.

 

[YoHo]

More importantly, with the Kirks on staff, Disney had a fixed cost. Let's say Knott's or universal, or someone else that has cash contracts them out for a great ride and that ride does exceptionally well. The Kirk's price just went up same as with Actors and any other contract type position. Contracting out your engineering is generally a bad way to stay in business.

 

[peter11435]

More importantly, with the Kirks on staff, Disney had a fixed cost. Let's say Knott's or universal, or someone else that has cash contracts them out for a great ride and that ride does exceptionally well. The Kirk's price just went up same as with Actors and any other contract type position. Contracting out your engineering is generally a bad way to stay in business.

You seem to think everything Disney has done in the last 20 years is "a bad way to stay in business." And yet the company is still doing fine. The fact is that yes the Kirks costs will go because that is what competition will cause. However rather that Disney keeping almost 2000 people (try multiplying that by salary, benefits, and pension plans) on staff at Imagineering. They can keep a core group and then contract out to the Kirks for the actual design process. It will be cheaper in the long run as the cost to Disney will only be a contract price per project rather than the yearly costs (that are very high) to operate the entire WDI. As for saying that "Contracting out your engineering is generally a bad way to stay in business" well then why do so few companies do there own engineering. Becuase regardless of what you think it is far cheaper to hire someone to do a job for you than it is to keep them on the payroll year round, unless they would be working year round which is simply not the case with WDI.

 

[DoxaRich]

peter.... I don't mean to pick nits, but my OCD is kicking in. The word is "hire" , not "higher".

I'm a terrible speller with a limited vocabulary but for some unknown reason your fopa really irratated me.

 

[peter11435]

peter.... I don't mean to pick nits, but my OCD is kicking in. The word is "hire" , not "higher".

I'm a terrible speller with a limited vocabulary but for some unknown reason your fopa really irratated me.

Thanks, I am well aware of the correct spelling. I was in a hurry an made a few stupid mistakes. I have made the correction.

 

[All Aboard]

Just a note on Kevin Yee. He spent much of his career working at Disneyland as a lead or supervisor in food service. His perspective on Disney parks and the way they are run operationally is very insightful. I also really appreciate his comparitive analyses on the Disney parks.

However, in general, his business analysis is suspect. Particularly when it comes to making projections about the financial impact of decisions and looking at the big picture. Such as, the elimination of Fastpass, or the steepening of Annual Pass prices. To me, it seems like he's just guessing.

But, this is just one man's opinion.

 

[All Aboard]

fopa

You mean "faux pas", don't you?

 

[DoxaRich]

No, I meant "fopa".

Bleep the french.

 

[Laurajean1014]

I disagree. Disney has and is still producing better quality shows and attractions than it's competition. That will not go away. Mission Space is an excellent example of that strategy and that was not an "outsourced" project.