News Round Up

[clsteve]

I read the same thing today...

It's coming. The price of oil is in free fall which could crush the global banking system into another recession.

In the 20th century, low fuel costs caused booms of productivity and investment in the Western Hemisphere...
Now...since fossil fuel trading and speculation pollutes the whole system...it could cause market free fall and currency instability.

I'm beginning to see the US and globalized partners in terms of Rome 350 CE

At least it's better than 410 CE - a very bad year to be in Rome....

 

[lockedoutlogic]

At least it's better than 410 CE - a very bad year to be in Rome....

The game was already decided at that point...prevent defense was on the field

 

[wallrock]

Almost out of nowhere...what you just said is perhaps the biggest thing to impact DIS in its history...it affects all wdw and DL customers...

Most just haven't realized it yet...nor ever will.

A failing longterm struggle in France completely on Disney's dime (almost a guarantee at this point) will put huge strain on the parks division...

It would be like 3 of the 4 cruise ships disappearing into the Bermuda Triangle on the same day...
Along with castaway key

Agreed.

The big question now is how long corporate will continue to pour money into it? Only so much pumping can be done before you have to let the ship sink.

 

[OnSpaceshipEarth]

Fully agree...

Not only is wdw in the "post expansion" phase...

All Disney parks are being focused on as "profit maximization" and moves are only for that goal.

They will continue to operate and praise themselves in the parks only to the point where that money expands...

If it levels, contracts, or travel changes altogether -which will come someday - then all park and resort operations are then leased to a third party operator

This is the most ominous of all theories, imo. Disney almost looking at WDW as a *burden* it would like to shed.

Those that believe that Disney will eventually lease it's park operations to a third party...who would take this responsibility?

Also...just what is it that Comcast sees in the potential for the theme park business in the future that Disney does not?

 

[wallrock]

This is the most ominous of all theories, imo. Disney almost looking at WDW as a *burden* it would like to shed.

Those that believe that Disney will eventually lease it's park operations to a third party...who would take this responsibility?

Also...just what is it that Comcast sees in the potential for the theme park business in the future that Disney does not?

I don't think Disney is looking at the parks as a 'burden' yet, but definitely as a house guest that is slowly wearing out their welcome. They still generate profit, but the investment back in is more around repackaging items and minimizing the risk by building products that generate money directly (i.e. gift shops, restaurants and the revamping of Downtown Disney and basically anything with merchandising capability) instead of the 'free' (included in the cost of park admission) items like attractions. When they can't squeeze any more revenue out then you may see the ominous changes spoken about.

As to who would pick up the baton is anyone's guess. It could even be Comcast.


These are two different companies with different philosophies. As time marches forward I firmly believe Disney is driving towards content ownership (Iger has stated several times that they want to buy more) while Comcast is more or less new to the theme park business - perhaps just eager to see what they can do with it. Disney pretty much owns everything in their parks - a big difference over Comcast. On Comcast's side they have to cut Disney a check for the Marvel material, and I'm sure that Burbank is more than happy with that arrangement. Disney doesn't have to worry about construction costs, labor issues and park maintenance. All they do is sit back and get paid. They do 'invest' by making movies, and a whole bunch of them. Marvel is paying dividends for the company. Next they buy LucasArts and what's the first thing they do? Announce a new trilogy and I believe two spin-offs. It's been two years since that acquisition and the most we've heard is a 'significant presence' in the parks for Star Wars. Nothing else but rumors and speculation.

Media is the biggest slice of the Disney company and I expect that will remain so for a long time.

 

[clsteve]

This is the most ominous of all theories, imo. Disney almost looking at WDW as a *burden* it would like to shed.

Those that believe that Disney will eventually lease it's park operations to a third party...who would take this responsibility?

Also...just what is it that Comcast sees in the potential for the theme park business in the future that Disney does not?

It seems that Comcast sees it for exactly what it is - a Theme Park Business - which can be very successful and profitable if run that way.

While Disney is/has been in the Resort/lock guests in Vacation Business which creates a huge infrastructure beast that has to be fed - solely owned resort hotels, transportation, restaurants, golf courses, roads, infrastructure, land, etc., Parks and 70,000+ employees.

Contrast that with Comcast at UOR and their relationship with Lowes, for example.

Comcast seems to know exactly what they want to be and is playing it very smart. Being the smaller more nimble #2 is often a very good place to be since you get to benefit from observing what the more mature #1 did well and what they did poorly.

They seem to embrace the fact that guests probably want to do other things in Orlando, and that the 7+ day vacation is fading into the past. They're structured for the 3-4 day stay.

Understanding that, they have the Park experience as their main driver incl revenue. Cutting edge technology, immersion and rides.

No nostalgia in play here. Would Disney have thrown a park icon like Jaws to the side to enhance the guest experience? (looking at you Tomorrowland Speedway....).

Each enhancement they do is to see a specific increase in gate attendance.

Keep it fresh, keep it new, keep'em coming.....

Even the 2 new Resorts reflect their strategy: Cabana Bay - affordable family Orlando hub, Sapphire Falls Convention hotel with expanded convention space within walking distance of CityWalk and the Parks for those lucrative "rent the whole Park" corporate events.

The Theme Park business can be very successful, as long as that's the business you're actually in.....

 

[lockedoutlogic]

I don't think Disney is looking at the parks as a 'burden' yet, but definitely as a house guest that is slowly wearing out their welcome. They still generate profit, but the investment back in is more around repackaging items and minimizing the risk by building products that generate money directly (i.e. gift shops, restaurants and the revamping of Downtown Disney and basically anything with merchandising capability) instead of the 'free' (included in the cost of park admission) items like attractions. When they can't squeeze any more revenue out then you may see the ominous changes spoken about.

As to who would pick up the baton is anyone's guess. It could even be Comcast.

These are two different companies with different philosophies. As time marches forward I firmly believe Disney is driving towards content ownership (Iger has stated several times that they want to buy more) while Comcast is more or less new to the theme park business - perhaps just eager to see what they can do with it. Disney pretty much owns everything in their parks - a big difference over Comcast. On Comcast's side they have to cut Disney a check for the Marvel material, and I'm sure that Burbank is more than happy with that arrangement. Disney doesn't have to worry about construction costs, labor issues and park maintenance. All they do is sit back and get paid. They do 'invest' by making movies, and a whole bunch of them. Marvel is paying dividends for the company. Next they buy LucasArts and what's the first thing they do? Announce a new trilogy and I believe two spin-offs. It's been two years since that acquisition and the most we've heard is a 'significant presence' in the parks for Star Wars. Nothing else but rumors and speculation.

Media is the biggest slice of the Disney company and I expect that will remain so for a long time.

I agree:..

Comcast's goal appears to be to cut into Disney's piggybank in Orlando.

And it has been a very long, successful piggy bank.

Think about it - where else in the US since the 60's has a money making enterprise of that magnitude been built and established? I'm talking About Orlando as a whole.
Maybe Vegas...but central Florida is a unique, longterm phenomenon.

Comcast bought a fairly solid foundation at its low point that had nowhere to go but up. Long story short - they can both gain enjoyment and make new profit doing what they're doing.

Wdw is not in that position. They make the lions share of the cash... But in many ways they're at the limit of expansion. It's become clear that wdw will never attract enough daily visitors to support 6+ themeparks and 40 internally run on property hotels. Even a place so successful/interesting would inevitably hit its glass ceiling.

So now it's in "maintenance mode". It's become an "old faithful" far more than what it was when a gushing Mikey Eisner gave his "Disney decade" speech.
In many ways... Comcast is Disney circa 1988 with way more capital.
Comcast also HAS to divest its portfolio... As cable won't last forever. They need new ways to make money. That is content and Disney is already there. Comcast will follow.

And as a aside regarding Star Wars - several of the articles about the euro bailout casually mentioned a major Star Wars addition was confirmed for paris for 2017. Just casually in the text.

I hadn't heard that...but it true it means what I thought...that Disney is using Star Wars attractions as more of a " break the glass" emergency tool...not as a "reward" to the profitable parks....cough cough.

So Iger saying "strong presence in the parks" and WDI building a mockup of crates with Blue Harvest written on them is worth...
...roughly ten words a couple of crates at this point.

The can feel free to prove me wrong. But I only trust the shovels and accountants on this subject...no offense to all the TWDC board members posting in secret over on wdwmagic.

I was worried...and still am...that real Star Wars additions will be prioritized to china and Paris...the Japanese will pay for theirs... Then Anaheim for direct suit access...then...

Hmmm.. Which one did I leave out?

 

[lockedoutlogic]

This is the most ominous of all theories, imo. Disney almost looking at WDW as a *burden* it would like to shed.

Those that believe that Disney will eventually lease it's park operations to a third party...who would take this responsibility?

Also...just what is it that Comcast sees in the potential for the theme park business in the future that Disney does not?

They have 60,000 employees and have already maxed out the labor pool....

Even with billions of annual profit...what Fortune 500 public company would not view that as a huge burden/potential powderkeg?

Remember...the reason that the old men of Disney bought that much land was to build some sort of city/community of REAL people...not a gigantic Candyland that would be fully staffed by Disney employees.
You think Madame leota's crystal ball could tell them how much benefits would cost 40 years later?
Or that no discernible middle class would develop in central Florida that could support Disney employees families - because nationally the middle class has been dismantled rivet by river?

Card walker and Eisner/wells decided to build a mega amusement complex. And that is a risky vulnerable proposition because it had to assume that time/recreational priorities will never change. That's incredibly risky.

Is wdw a "burden"? In a Paradoxical way - absolutely.

If you asked bob Iger if he'd take less profit from wdw in exchange for pure royalties/fees with no overhead....he's sign it in his own blood in a second.

 

[lockedoutlogic]

It seems that Comcast sees it for exactly what it is - a Theme Park Business - which can be very successful and profitable if run that way.

While Disney is/has been in the Resort/lock guests in Vacation Business which creates a huge infrastructure beast that has to be fed - solely owned resort hotels, transportation, restaurants, golf courses, roads, infrastructure, land, etc., Parks and 70,000+ employees.

Contrast that with Comcast at UOR and their relationship with Lowes, for example.

Comcast seems to know exactly what they want to be and is playing it very smart. Being the smaller more nimble #2 is often a very good place to be since you get to benefit from observing what the more mature #1 did well and what they did poorly.

They seem to embrace the fact that guests probably want to do other things in Orlando, and that the 7+ day vacation is fading into the past. They're structured for the 3-4 day stay.

Understanding that, they have the Park experience as their main driver incl revenue. Cutting edge technology, immersion and rides.

No nostalgia in play here. Would Disney have thrown a park icon like Jaws to the side to enhance the guest experience? (looking at you Tomorrowland Speedway....).

Each enhancement they do is to see a specific increase in gate attendance.

Keep it fresh, keep it new, keep'em coming.....

Even the 2 new Resorts reflect their strategy: Cabana Bay - affordable family Orlando hub, Sapphire Falls Convention hotel with expanded convention space within walking distance of CityWalk and the Parks for those lucrative "rent the whole Park" corporate events.

The Theme Park business can be very successful, as long as that's the business you're actually in.....

Excellent...

The thing I would add as far as "positioning" themselves as a 3-4 days attraction is that they are basically using the KISS (keep it simple stupid) method there...
They know that they're getting very few vacationers who aren't gonna go anywhere near Disney - so they are operating using big brother to their advantage.

But by doing what they're doing - they are kinda embarassing Disney with their technology and hotel expansions.
That 3-4% market share loss that showed up last year for LBV is a big deal. And Comcast can siphon more if they keep it up and they know it.

Disney is building almost nothing to attract real, living, excitement craving humans at this point - and doing it on ridiculously measured/exploited timelines. Universal is getting immersive things open in 2 years and producing high quality hotels with as many/ more amenities for half the rack rates of aging wdw properties on many nights.

Now the one question is whether Comcast will bore/tire of investing billions on kirkman.

The difference there is that Comcast had far more dynamic corporate leadership (even if they peddle terrible product to make their fortunes) and they actually have more capital/less burdens than Disney to spend.

 

[OnSpaceshipEarth]

Thanks for the excellent responses, guys!

Wow...this is all very depressing for those of us that are lifetime WDW fans.

 

[clsteve]

Excellent...

The thing I would add as far as "positioning" themselves as a 3-4 days attraction is that they are basically using the KISS (keep it simple stupid) method there...
They know that they're getting very few vacationers who aren't gonna go anywhere near Disney - so they are operating using big brother to their advantage.

But by doing what they're doing - they are kinda embarassing Disney with their technology and hotel expansions.
That 3-4% market share loss that showed up last year for LBV is a big deal. And Comcast can siphon more if they keep it up and they know it.

Disney is building almost nothing to attract real, living, excitement craving humans at this point - and doing it on ridiculously measured/exploited timelines. Universal is getting immersive things open in 2 years and producing high quality hotels with as many/ more amenities for half the rack rates of aging wdw properties on many nights.

Now the one question is whether Comcast will bore/tire of investing billions on kirkman.

The difference there is that Comcast had far more dynamic corporate leadership (even if they peddle terrible product to make their fortunes) and they actually have more capital/less burdens than Disney to spend.

And the funny thing is, UOR is structured to benefit from all of the other entertainment options going up around them like that monster ferris wheel, that vertical roller coaster etc - without dropping a dime.

"Come stay at Cabana Bay in an affordable family suite with kitchen, give us our 3 Park Days and go have fun...!!! We're happy to be your Hub for Orlando entertainment!!! By the way, have you seen how awesome our pool complex is for a value resort...??? Sure! we can easily extend you for another day"

or

"Why wouldn't you want your convention here - you can walk to CityWalk and the Parks and have you seen everything else there is to do around here..?"

Disney, on the other hand, sees each new thing as a net loss. They can't afford to have too many more percentage points just doing their 4 Park days and heading out.

They have to feed that infrastructure beast and very much need families dropping $250 at Splittsville on their off days, or at BB or playing golf at Magnolia --- not touring the rest of Orlando

Funny how that DVC conversion thing keeps making more and more sense, from their perspective anyway......

 

[OnSpaceshipEarth]

Interesting quote from someone on wdwmagic this person is famous there for the statistics they point out

"Iger's failure to properly invest in P&R in general and WDW in particular has resulted in 7 or the company's 10 worst years of P&R gross margin."

@rteetz...could you provide a link to this please? I'm very interested in reading this but I went to the wdwmagic site and couldn't find this article.

Thank you in advance!

 

[OnSpaceshipEarth]

Almost out of nowhere...what you just said is perhaps the biggest thing to impact DIS in its history...it affects all wdw and DL customers...

Most just haven't realized it yet...nor ever will.

A failing longterm struggle in France completely on Disney's dime (almost a guarantee at this point) will put huge strain on the parks division...

It would be like 3 of the 4 cruise ships disappearing into the Bermuda Triangle on the same day...
Along with castaway key

Is there anything that Disney can do to turn the tide at DLP? Any strategy that you can think of or is it hopelessly doomed no matter what Disney does simply because the market isn't there...it's location is horrible...etc.?

 

[clsteve]

Is there anything that Disney can do to turn the tide at DLP? Any strategy that you can think of or is it hopelessly doomed no matter what Disney does simply because the market isn't there...it's location is horrible...etc.?

Lockedoutlogic hit that nail with the hammer a few days ago: it was flawed from the beginning by Corporate American Arrogance

He was spot on when he said anywhere but France - like Spain, Italy.....

Take French corporate and labor nuances out of it: just from a weather perspective - anybody who's been around Paris in February, and then been around, for example, Madrid in Feb --- where would you have put it?

There are a lot of significantly major differences in how Europeans view leisure time versus us Americans (maybe because they get more of it...?)

They need to get over those hurdles -- and that means real money --- and still the risk that it won't work.

When I say that, more of an issue at the level of top line rev/profitability perspective and potential to turn into a bigger, deeper money hole with success always just over the horizon

always......

 

[lockedoutlogic]

Lots of mistakes... And im not a corporate strategist so I can't even begin to think of the way out.

But the place was in big trouble from the start...and it wasnt the lack of wine or cultural insensitivity that made news.

Disney said that in 1993 that labor would be 13% of the revenue projection.
It was 24%...and rose to 40% by year two.

That was catastrophic oversight... And now here we are in huge debt and dire straights later.

Euro assumed a booming world and European economy...and a - shall we say - less discerning clientele...
Just like Walt Disney world.

And they got that wrong.

The French and German economies are in severe retreat and Italy, Spain, Greece are shot. Europe has been on the decline since 1919 and they are being racked by problems overseas...most notably los estados unidos wreckless consumption and wealth accumulation priorities.

How to fix...
Honestly I think the best case scenario is for Disney to shoot for net zero and use it as "brand strengthening"
No profit. They won't like it...but it buys time till they can figure out where to go.

The governments are holding down interest rates artificially...but euro "owes" Disney about 3 bil after this bailout. A higher interest rate on that debt alone would make it insolvent.

They also might want to address the weather as suggested. I was at euro in April and honestly...I loved the park by the weather was not comfortable.
The British mob wdw but would be turned off at the French weather outside of summer. Can't grow lobsterbacks in 40 and overcast.
They might try to enclose part of the parks similar to Tokyo...where the locals have no problem showing up in parkas but there is some relief.
Indoor entertainment venues...outdoor sporting complexes that cater to a wide range of Europeans...that all could work.

And they got to lower the price. The only way the continent will become repeat customers is if you make it a great deal.

Net zero is the only really reasonable goal I'm my opinion.

 

[OnSpaceshipEarth]

How to fix...
Honestly I think the best case scenario is for Disney to shoot for net zero and use it as "brand strengthening"
No profit. They won't like it...but it buys time till they can figure out where to go.

They might try to enclose part of the parks similar to Tokyo...where the locals have no problem showing up in parkas but there is some relief.
Indoor entertainment venues...outdoor sporting complexes that cater to a wide range of Europeans...that all could work.

And they got to lower the price. The only way the continent will become repeat customers is if you make it a great deal.

Net zero is the only really reasonable goal I'm my opinion.

Excellent.

Would shuttering the whole enterprise also be a feasible way out?

 

[wallrock]

Excellent.

Would shuttering the whole enterprise also be a feasible way out?

Actually I think closing the door right now would probably do more harm than good to the Disney brand at the moment. Yes, I think there's a long term strategy to walk away from the parks, but they don't want to quit cold turkey. I don't think Wall Street would take that very well - not on the shoulders of the recent NextGen issues.

I think Iger is willing to ride this out until the end of his tenure and leave it to the successors to determine. This of course depends on the need for more money in the near future. If they ask him for another check it may be a different story.

 

[rteetz]

@rteetz...could you provide a link to this please? I'm very interested in reading this but I went to the wdwmagic site and couldn't find this article. Thank you in advance!

It was on the forum boards under the spirited seventh heaven it wasn't in an article the poster is parentsof4 he is amazing with the numbers he provides and all the statistics that go along with the WDW parks.

 

[rteetz]

Hub construction update things are starting to come together should start to see what this will actually look like very soon.


http://www.orlandoparksnews.com/2014/10/magic-kingdom-hub-update-main-street.html

 

[OnSpaceshipEarth]

It was on the forum boards under the spirited seventh heaven it wasn't in an article the poster is parentsof4 he is amazing with the numbers he provides and all the statistics that go along with the WDW parks.

Ahhh...I remember the "spirited seventh heaven" thread and didn't think to click on it!

Thank you rteetz!