Over a billion for Magic Bands, that is awesome!!!!!!!

[ChipnDale79]

I've heard rumors, again these are flat our rumors, that the number is closer to 2 billion.

 

[mikek]

Just wondering here.................is it reported anywhere from Disney that the FP+ system cost $1 billion to develop????

AKK

I believe they have to disclose such large investments to the shareholders and that they have been doing so on their quarterly earnings conference calls (or whenever they do them) which are public information.

I believe I've read they are admitting to 1.0 billion but that the speculation is, the number is slightly more than that at 1.1.

edit: and as explained so well above it's not ONLY MB's but the whole infrastructure that can be leveraged for much more

 

[Spacedog1975]

I am definitely going to try the magic band experience before I decide what it means for me. And as they adapt and change it, I'll keep these changes in mind as well.

My world is not going to end because of something I haven't even experienced.

 

[Tonka's Skipper]

I believe they have to disclose such large investments to the shareholders and that they have been doing so on their quarterly earnings conference calls (or whenever they do them) which are public information.

I believe I've read they are admitting to 1.0 billion but that the speculation is, the number is slightly more than that at 1.1.

edit: and as explained so well above it's not ONLY MB's but the whole infrastructure that can be leveraged for much more

Hello Mike,


Thanks and a few others have mentioned similar believable reports from Disney since my question.

The point is that some here(and other threads) seem to think/believe its a $1 billion for just the FP+, only the parks, which made the billion figure to me rather high. They also are condemning it before even all the facts are out and like to deal in opinion and rumors and what *so and so* said!

Even if some of the facts released so far and as its being operated now stay, there will be considerable changes as time and experience with the system goes along.

Now that its been explained as a company and world wide techno advancement, the billion figure is more believable and it could very well prove a major improvement to the guests vacations.

Time will tell after the tests period and after the kinks are worked out.

The part I find funny is years ago when FP was 1st introduced, some folks were also attacking it and knocking it apart, condemning Disney, but it worked out pretty good in the end.


AKK

 

[lockedoutlogic]

Do a Google search for "Orlando Sentinel disney nextgen" and you'll get quite a few hits that cite the billion dollar figure. The oldest reference appears to be a story dating back to 2010 which mentions unnamed sources. However it's been repeated ad nauseum in subsequent coverage.

I'm not going to claim the Sentinel's reputation is beyond reproach, but I doubt that info would make it through repeated story reviews by editors and fact checkers if they weren't confident in its accuracy.

Also I'm pretty sure that Iger/Staggs/Rasulo have been questioned on the billion dollar figure during their quarterly earnings calls with investors, and they validated the number.

probably 95% of the sentinel's "coverage" is fed directly from Team Disney...

occasionally..they'll break something a little early or write something that deals with the impact on Central Florida that disney doesn't want (typically that the wages are non-livable)...but that is rare.

They want everyone thinking it costs a billion - that much is clear. Whether that is truth or am agenda...it doesn't really matter.

They have taken up the pattern of painfully slow construction (embarassing in my opinion) and overblown budget figures...
gee...cant see the angle to that one.

 

[mikek]

was curious so i scanned the quarterly conference calls for the past year to see what they've said about cost.

q4-2012:
http://www.morningstar.com/earnings/44910484-walt-disney-co-q4-2012.aspx?pindex=6&qindex=7

there's a question about the cost of "all these initiatives" which is the whole MB/FP+/nextgen AND some other "parks" spending. Sounds like they said that previous spending on park stuff would yield 500m in new revenue and that there would be another 500m spent on them in 2013.

Q1-2013:
http://www.morningstar.com/earnings/48101329-walt-disney-co-q1-2013.aspx?pindex=6&qindex=3

there's another question where the analyst gets to the point:

Can you just clarify on the technology spend or MyMagic+, however you want to refer to it, how much more to go? In the press you reported something like $800 million to $1 billion of spend on that effort. How much more is there to go?

Iger replies its basically all been spent. he doesn't at all dispute the " "something like $800 million to $1 billion". That's important as these conference calls are akin to legal proceedings for investors subject to all sorts of SEC regulations. They can not do anything to mislead investors. So if that statement was much too low or much too high someone from Disney would need to correct it I believe. (however the questioner said "LIKE" and not 'exactly' or anything so there is some wiggle).

another interesting aside (to me at least)- and pretty obvious if you think about it- after Iger replies- the CFO, Jay Rasulo, feels it's important that he jump in to warn everyone to remmber that investments in tenchology are short lived compared to new building or the like.

One thing I just wanted to add for all of you, Jessica as well, is that part of the expenses that Bob talked about, of course, will be depreciation of the capital investment. And compared to what we usually invest in, the life of these assets, particularly on the system side, is very short, and that will impact us going forward.

So it's not just a billion up front- it's going to cost them money in an ongoing manner to keep it all running.
The fact that he says "impact," i believe is a key term here- i think it means that there will be something noticeable in their financials in the coming years for upkeep of all these new toys.

I just scanned the things, but a few times (over the past 4-5 calls) the analysts try to get them to discuss what they might do with all this new tech besides just FP+. Disney folks just speak in general terms- nothing much specific at all.

One last interesting tidbit is one guy gets to the point about if they will use the new system to force people to be onsite guests for better park treatment. The Disney folks reply that in the past they have given onsite people better park experiences (I think they mean EMH?) so that's not off the table. And also they talk about how they think it WILL get more people to be resort guests but they don't explain why really. Could just be that people will get exicited over "free magic bands" and shceduling on the web in advance. Could also mean they'll give more FP+ or earlier access to FP+ . Will be interesting to see what pans out.

 

[Tonka's Skipper]

probably 95% of the sentinel's "coverage" is fed directly from Team Disney...

occasionally..they'll break something a little early or write something that deals with the impact on Central Florida that disney doesn't want (typically that the wages are non-livable)...but that is rare.

They want everyone thinking it costs a billion - that much is clear. Whether that is truth or am agenda...it doesn't really matter.

They have taken up the pattern of painfully slow construction (embarassing in my opinion) and overblown budget figures...
gee...cant see the angle to that one.

Lockedout, I could not agree more!

AKK

 

[LB1122]

Anyone else thinking about it this way -

about 3000 for a week in early April (value resort with basic dining - from a TA)

That means about 333,333 trips to makes this much back. In 2008 there were about 17 million visits??? HMMM???

I think this technology as with any technology is new and has kinks. BUT it seems to be working and making some parts of the trip easier and better and as pointed out above - will be tech many other companies are using years to come. If it fails this way they will work it out and retry - I guess I might feel different after wearing one - will it be a pain - room key, charges, photo pass, fast pass all in one place ready to go?? I am thinking the only thing that will bug me is wearing it as I hate watches normally!!! BUT I am sure I can think of a plan for that as well.

 

[mikek]

Anyone else thinking about it this way -

about 3000 for a week in early April (value resort with basic dining - from a TA)

That means about 333,333 trips to makes this much back. In 2008 there were about 17 million visits??? HMMM???

I think this technology as with any technology is new and has kinks. BUT it seems to be working and making some parts of the trip easier and better and as pointed out above - will be tech many other companies are using years to come. If it fails this way they will work it out and retry - I guess I might feel different after wearing one - will it be a pain - room key, charges, photo pass, fast pass all in one place ready to go?? I am thinking the only thing that will bug me is wearing it as I hate watches normally!!! BUT I am sure I can think of a plan for that as well.

you are NEVER required to wear a magic band. Any guest who wants can ask for an RFID equipped KTTW card.

A guest with an RFID card will get all the basic features of the card. So far about the only difference i can think is that some princess won't great you by name and will still call you "honey".

even the card only guests are likely to benefit some from the rest of the herd having bands (if they get to the point of tracking crowds they'll see all the MB wearing guests in your area and be able to figure out what to do based on them.

back to the finances- I suppose the $64k question (Or 1 billion dollar question- lol) is will this in fact prompt another 333,333 trips a year? Honestly I haven't used it yet but i dont think I'm going to get so amazed by FP+ that it makes me travel any more often. Alternatively they can get each of the 17million visitors to spend 58 dollars more each visit. If you can get a bunch of offsite folks to move on site they'll spend alot more than 58 bucks on disney lodging.

But the funny bit is if you read the conference call transcripts they really dont have an answer themselves about it.

from q2 2013 call:
http://www.morningstar.com/earnings/51920384-walt-disney-co-q2-2013.aspx?qindex=2

an analyst asks:

Bob, if you could talk about the timing of the rollout of MyMagic+ and is there any way to give us a sense of the potential impact from that initiative? It's not the easiest thing for us to model.

iger replies:

In terms of what we can expect from it return-wise, I mean, you're right, it's somewhat  although we've modeled it, it's somewhat difficult to be specific about. You can expect that it will create a better experience and with that we believe people will spend more time at our parks and ultimately deliver more business per guest. We also know that it will deliver some upsell opportunities in terms of array of products that basically digital technology will allow and we also think it's going to give us somewhat of a competitive advantage. I think you have to look at all of those things, basically new products to sell, better experience that should obviously keep people coming for more or staying longer. And then the competitive advantage would be the way to do it. But I can't get specific with you, Doug, in terms of how to model that.

so they almost are putting it in the 'warm and fuzzy' pile that people will have a better time so they'll come more and spend more. So then the argument comes could you spend the billion on other 'warm and fuzzy things' that make people want to spend more and stay longer.

he also throws in digital upsells. I wonder if he's saying things like it's just easier to sell ride photos now- they could for instance put a MB distance reader in at Space Mountain at the photo turn and then automatically link the photo to your MB and send you an email later that day or even when you get home "hey did you stop and see this picture? go ahead and download and buy it today". Or is he saying they are going to sell additional FP+?

Another theme of the recent conference calls is jacking ticket prices and how they haven't really noticed any decrease in demand by jacking the prices so hard lately. At once point there was mention that they could jack them hard again and probably feel no difference in attendance. Then they also said stuff like -making people happier allows us to "leverage" that into raising ticket prices. So just by giving us a warm and fuzzy they figure they can jack the park tickets. So For all we know they plan to take $58 bucks to every ticket next year once MB is live next year to cover this.

 

[tjkraz]

another interesting aside (to me at least)- and pretty obvious if you think about it- after Iger replies- the CFO, Jay Rasulo, feels it's important that he jump in to warn everyone to remmber that investments in tenchology are short lived compared to new building or the like.
So it's not just a billion up front- it's going to cost them money in an ongoing manner to keep it all running.

I have a different interpretation of his comments.

Rasulo was specifically referring to depreciation on the NextGen technology. When it comes to technology investments, the IRS tends to allow relatively short depreciation periods because technology can become outdated quickly. Three years for a lot of software is not uncommon.

Thing is, you have to separate that from the realities of a broad initiative like these NextGen enhancements, which I'm sure Disney expects to be leveraging for many years to come.

Rasulo compared to theme park capital improvements, which must be depreciated over much longer periods of time.

Put it this way...when they spend $1 billion on New Fantasyland and other improvements, if that's depreciated over 20 years, you're expensing about $50 million per year.

If you spend $1 billion on NextGen tech which can be expensed over just 3 years, that's $333 million per year.

My take on Rasulo's comment is:

1) Our theme park profits are going to be negatively impacted by the NextGen investment, but the bulk of that expense will be realized over a much shorter period of time than the typical park enhancement.

2) Due to the accelerated depreciation, our taxable income will be lessened in the short run which reduces the tax burden.

I'm sure many pieces of the NextGen project will have longer useful lives than 3 years, but nowhere near the period assigned to attractions and similar capital improvements. Ultimately, I don't view his words as commentary on operational expenses going forward. Rather it has more to do with how the numbers (book value) for NextGen will be different than what analysts are used to seeing on the theme park side of the business.

back to the finances- I suppose the $64k question (Or 1 billion dollar question- lol) is will this in fact prompt another 333,333 trips a year? Honestly I haven't used it yet but i dont think I'm going to get so amazed by FP+ that it makes me travel any more often. Alternatively they can get each of the 17million visitors to spend 58 dollars more each visit. If you can get a bunch of offsite folks to move on site they'll spend alot more than 58 bucks on disney lodging.

There are many ways in which Disney's bottom line will benefit from NextGen. Some of it depends on how Disney ultimately implements certain features.

There have been rumors and speculation about FP+ only being free to Disney resort guests and pass holders, with others having to pay for it. Or resort guests may get additional daily FP+ selections, which would help drive up hotel occupancy and ultimately room rates.

Impulse purchases or merchandise, photos, food and other items will undoubtedly go increase to some degree.

They're selling little baubles and add-ons for the MagicBands themselves.

Meanwhile, operational expenses will be reduced in a number of areas. Staffing at entrance gates is already down due to the touch-to-enter system. The mechanical FastPASS machines will eventually be removed, eliminating maintenance, staffing and other operational costs.

Potentially most valuable is the ability to see both advance projections and realtime trends in guest traffic so that staffing levels can be properly adjusted.

 

[Yellowstonetim]

There are many things Disney does that don't directly relate to attendance or profit, but is part of the overall experience we love. Other parks don't do these things because they don't see the overall value. (And they don't have the money.)

People are not going to make a trip to Disney for FP+ or Magicbands, but they will make trips for other reasons; new Fantasy Land, Star Wars Land, Pandora, World of Avatar, plus other changes. Disney already has increasing attendance and the highest attendance of any theme parks in the world, so the trick isn't to attract new business with this, but to help deal with all the current and increased traffic they are going to get. Better experience, better crowd handling, better CM time/location management, more shopping, less waiting in lines. It will all work together.

A few more people are a little happier, stay a little longer, spend a little more... pretty soon you've got your billion back.

 

[mikek]

There are many things Disney does that don't directly relate to attendance or profit, but is part of the overall experience we love. Other parks don't do these things because they don't see the overall value. (And they don't have the money.)

People are not going to make a trip to Disney for FP+ or Magicbands, but they will make trips for other reasons; new Fantasy Land, Star Wars Land, Pandora, World of Avatar, plus other changes. Disney already has increasing attendance and the highest attendance of any theme parks in the world, so the trick isn't to attract new business with this, but to help deal with all the current and increased traffic they are going to get. Better experience, better crowd handling, better CM time/location management, more shopping, less waiting in lines. It will all work together.

A few more people are a little happier, stay a little longer, spend a little more... pretty soon you've got your billion back.

Personally i think such logic is very wise for a business. And a way to make piles and piles more in the end.

But then i read a thread of someone asking info on resort package delivery and i remember the days when they used to deliver to your room and i wonder if sometimes disney doesn't demand a particular direct return on the any buck they spend.