Q3: Direct Sales Down, Contribute to Lower Operating Income at WDW

[reddog21]

No company would change anything on a YOY downswing of 3%. My company barely looks at YOY trends, 3 year/5 year trends make way more sense. Then with basically 2 years of covid mixed in I see no reason they change anything. Wishful thinking.

 

[pkrieger2287]

https://twitter.com/x/status/1689688715361153031

 

[AstroBlasters]

It would give Disney some cash but maybe not that many.

A resale owner would ensure only to convert 150 points that way just to ensure he got the benefits. If he owns 300 points why make them all direct that wouldn't benefit him at all.

You could make a category of points that can be used at any resort, but that does not qualify for membership magic.

The goal would be to be able to use the points at any property.

 

[Jwaire]

No company would change anything on a YOY downswing of 3%.

Most companies wouldn't increase production of a product that had YOY shrinkage. They'd either maintain production or adjust downward.

DVC doesn't have that luxury. Despite sluggish RIV and GFV sales (with VDLH still yet to be determined), they're about to gain a lot more inventory for FY 24 whether they need it or not.

I'm not saying it's the end of the world—they get to rent these room out for buckets of cash. However, it wouldn't be surprising to see a more aggressive sales strategy (incentives, etc.) incoming.

 

[Epcot Forever Forever]

I've been listening in to Disney earnings calls for a long time and calling out DVC just seems so messed up. It's like the manager of a crappy team on a losing streak calling out the one All Star player because he had one bad game. Yeesh talk about the old adage of "What have you done for me lately"!

I have too and it seemed to me he got more into the weeds of DPEP performance than they have in years. Not just DVC.

If they’re really planning to jettison their linear stuff, that makes sense, because it will reduce the size of the company considerably, demanding more detail from each remaining segment.

 

[crisi]

If there were no restricted resorts would that have made the difference?

My guess - inflation plus higher interest rates. The first means people have less disposable cash - if you are looking at the price of hamburger and bread, you may be saying "I'm not doing a big timeshare purchase until I have some idea whether this will continue and if my salary will adjust." And higher interest rates discourage those who are financing - the payments go up, making it less affordable for people that are fitting it into a budget (plus anyone with an adjustable mortgage has less disposable income right now). Combine the two and you easily have a 3% drop.

This is without going into the political mudfight happening, or the issue of climate change, or the reality that Millennials and Gen Z are having fewer children and living different lives than the previous generations (my kids friends - if they can afford travel, which few can - choose more ambitious and exotic travel - or they go cheaper) or all the other externalities that may make people rethink a DVC purchase.

 

[Genie+]

DVC needs to buy a booth in the metaverse. An AI agent has long conversations with potential buyers and figures out how to best sell them on the direct lifestyle. What data and social media have done for commerce over the last decade, data and AI will do in the next. Psychological capitalist warfare on a level we’ve yet come anywhere close.

 

[jason423]

Looking at the data from DVCnews where they track point sold it certainly was not a good run though I think it is fair to say that 2022's early numbers were probably inflated due to covid ending and the initial sales of VGF. Avg Jan-June points sold changes were as follows:

RIv: -38%
VGF: -51%
Other: -43.2%
Other (taking out AKV incentive period): -63%

 

[TheDailyMoo]

I have too and it seemed to me he got more into the weeds of DPEP performance than they have in years. Not just DVC.

If they’re really planning to jettison their linear stuff, that makes sense, because it will reduce the size of the company considerably, demanding more detail from each remaining segment.

This isn't the board for it but I feel like that's the only way they'll get back to profitability. Like the Roman Empire at it's end, they just spread themselves too thin.

 

[AstroBlasters]

This isn't the board for it but I feel like that's the only way they'll get back to profitability. Like the Roman Empire at it's end, they just spread themselves too thin.

What I heard on the call: (listened while driving, so this may contain errors)

1) Raise the add-free D+ price to push people to the add supported model. Combine with Hulu to make it easier to sell to advertisers.
2) Hold off going to DTC for longer post theatrical run to sell more digital movies.
3) Reduce the cost structure of movies and DTC content.
4) Make strategic partnerships to monetize ESPN. (e.g. ESPN Bet)

 

[Epcot Forever Forever]

What I heard on the call: (listened while driving, so this may contain errors)

1) Raise the add-free D+ price to push people to the add supported model. Combine with Hulu to make it easier to sell to advertisers.
2) Hold off going to DTC for longer post theatrical run to sell more digital movies.
3) Reduce the cost structure of movies and DTC content.
4) Make strategic partnerships to monetize ESPN. (e.g. ESPN Bet)

Yes, and he mentioned explicitly something Wall Street has known for years - that Hulu - with its very mature ad supported model - is profitable.

He also mentioned park investment again as a source of future growth; I mean I guess we’ll see. It seems obvious to me that they could open a new site - call it Disney Galaxy - in like Omaha tomorrow and make another bazillion dollars. I’m actually kinda stumped as to why they haven’t.

 

[TheDailyMoo]

What I heard on the call: (listened while driving, so this may contain errors)

1) Raise the add-free D+ price to push people to the add supported model. Combine with Hulu to make it easier to sell to advertisers.
2) Hold off going to DTC for longer post theatrical run to sell more digital movies.
3) Reduce the cost structure of movies and DTC content.
4) Make strategic partnerships to monetize ESPN. (e.g. ESPN Bet)

Unfortunately I've lost all faith in Iger. He seems to be flailing in all directions. Just the fact that he keeps teasing about the dividend when we know there's no way they can or should bring back any divvy while they are bleeding money and need it for so many other expenditures was a red flag for me. I'm a shareholder by the way so I have an interest in Disney getting their act together but I don't feel like they have the right game plan or vision anymore.

 

[TheDailyMoo]

I’m actually kinda stumped as to why they haven’t.

This is the crazy part. The multitude of fans know better what this company should be doing than the entirety of the C-Suite. I hate invoking the name of the owner/divested owner of this site but one thing he always had right was when he said the top brass of this company live in an echo chamber and refuse to listen to what the fans actually want. It's been infuriating as a Disney fan for decades to see the slow progression away from doing what worked. There should be a giant plaque outside corporate offices "WWED"
What would Eisner do.

I feel bad talking about stock and corporate talk in the DVC forums! Sorry to have run this tangent! Back to DVC!

 

[Epcot Forever Forever]

This is the crazy part. The multitude of fans know better what this company should be doing than the entirety of the C-Suite. I hate invoking the name of the owner/divested owner of this site but one thing he always had right was when he said the top brass of this company live in an echo chamber and refuse to listen to what the fans actually want. It's been infuriating as a Disney fan for decades to see the slow progression away from doing what worked. There should be a giant plaque outside corporate offices "WWED"
What would Eisner do.

WWED…WFWWSA

 

[AstroBlasters]

Yes, and he mentioned explicitly something Wall Street has known for years - that Hulu - with its very mature ad supported model - is profitable.

He also mentioned park investment again as a source of future growth; I mean I guess we’ll see. It seems obvious to me that they could open a new site - call it Disney Galaxy - in like Omaha tomorrow and make another bazillion dollars. I’m actually kinda stumped as to why they haven’t.

Eisner tried to do one in Virginia and the community was up in arms.

They are adding cruise ships, will sell more alcohol in the parks, and will add a new park at WDW and Disney Forward in CA. Just don’t cheap out like DCA, Disney Hong Kong, and Disney Paris 1.0!

 

[Cfabar1]

Eisner tried to do one in Virginia and the community was up in arms.

They are adding cruise ships, will sell more alcohol in the parks, and will add a new park at WDW and Disney Forward in CA. Just don’t cheap out like DCA, Disney Hong Kong, and Disney Paris 1.0!

Disney is littered with failed projects that didn't happen due to NIMBY-ism. Disney's America in VA was perhaps the best example...

The reality is DVC got too greedy... the prices are too high. That's why nobody is buying.

 

[AstroBlasters]

Disney is littered with failed projects that didn't happen due to NIMBY-ism. Disney's America in VA was perhaps the best example...

The reality is DVC got too greedy... the prices are too high. That's why nobody is buying.

Greed to me implies some level of moral implication, the job of a corporation is to maximize long term value for shareholders and that includes trying to price things at the highest price the market will bear.

I believe that you are correct that incentives are needed because the current price is too high for a saturated market. There are only so many people who will have the desire and money needed to buy into DVC (direct or resell).

 

[aceshigh73]

Greed to me implies some level of moral implication, the job of a corporation is to maximize long term value for shareholders and that includes trying to price things at the highest price the market will bear.

I believe that you are correct that incentives are needed because the current price is too high for a saturated market. There are only so many people who will have the desire and money needed to buy into DVC (direct or resell).

I tend to agree. I often wonder if DVD has another developement in them after Poly2 and the cabins. My guess is they try to sell these out and then switch to the 2042 resorts. Lord knows that will be a challenge for at least OKW.

 

[RivShore]

they are bleeding money

They were cash flow positive $1.6B this quarter. Not bad considering the streaming monster.

Just don’t cheap out like DCA, Disney Hong Kong, and Disney Paris 1.0!

And ironically, i believe all those initial failures came about under Eisner.

 

[PolyRob]

And ironically, i believe all those initial failures came about under Eisner.

I was thinking the same thing. Eisner went off the rails when Frank Wells passed.

I am in no way an Iger apologist, but I do believe he will TRY and do what he can to make Disney profitable only because his deal depends on it. He won't get his big payday if Disney is suffering financially. Only time will tell.