Theme Parks to blame?

[Panthius]

Media companies to watch in 2003
Commentary: Investors could lament more pain
By Jon Friedman, CBS.MarketWatch.com
Last Update: 12:08 AM ET Dec 13, 2002

Walt Disney: Chairman Michael Eisner has to scramble to convince the world this isn't some Mickey Mouse operation.



Disney (DIS: news) can't seem to get out of its own way. Just when the media began to recognize the hidden value of its assets (Forbes and Barrons recently wrote glowing cover stories on the company), Disney's ballyhooed Christmas movie "Treasure Planet" bombed at the box office.



Disney was counting heavily on restoring its muscle in animated movies, following 2001 when "Shrek" enabled DreamWorks to topple its older rival. With theme park attendance remaining worrisome and ABC not quite over its ills, Disney sorely needed a content triumph. Instead, the failure of "Treasure Planet" has prompted analysts to question whether the company can continue to compete in animation, traditionally its backbone.



Disney's shares have dropped about 23 percent so far this year.



ONE PROBLEM THAT HAS TO GO AWAY IN '03: The threat of a war with Iraq must be resolved or Disney's ambitious, global theme park business will drag the company down further.

I hope somebody can explain this to me. From everything I read on various message boards and other places, it appears that primarily ABC is the division of Disney causing most of the financial problems. I am wondering why some seem to want to blame the Theme Parks as being the primary cause for Disney's financial problems? I thought the theme parks made more than enough to not only support themselves, but to also help out other underperofrming divisions of Disney. Is this just another form of the Disney spin at work or am I missing something?



Pan

 

[Lisa P.]

ONE PROBLEM THAT HAS TO GO AWAY IN '03: The threat of a war with Iraq must be resolved or Disney's ambitious, global theme park business will drag the company down further.

I am wondering why some seem to want to blame the Theme Parks as being the primary cause for Disney's financial problems?

I don't interpret that newsquote the way you do. It looks to me like they are saying that in the current climate (terrorist threat, reduced travel, the economy), that the theme parks cannot continue to help Disney in the future. It looks like an opinion that if Disney pumps a lot of money into expanding their parks within this climate, that this decision could drag down the company to a lower point than it is right now. That's different from saying the theme parks have dragged the company down so far. JMHO.

 

[Bob O]

I would agree that the Iraq situation will affect the parks but i think disney has done little to nothing to induce people to come to their parks. They have siphoned off money from the parks to pay for mistakes that they have made in other parts of the company.

 

[raidermatt]

Clearly, the quote is open to some interpretation.

However, Disney has already stated that their capital spending will remain "under control" for the next few years. So I don't think the ambitious comment is directed so much at future capital spending as it is at recent capital expenditures and operational costs.

Disney's parks are still making money. Its just that they are starting to make less money than what Disney counts on. They carry rather high fixed costs (costs that are incurred no matter how many people show up), so while cost-cutting can offset some of the attendance drop, it can't completely overcome it.

So on a relative basis, the parks could drag Disney's overall performance down by not doing as well as they have in the past. The performance would be lower on a comparitive basis, and that is a big part of what analysts look at. If ABC improves slightly, but the parks do slightly worse, the net is still a "no improvement" scenario for the overall company.

I don't think anyone is anticipating the parks will actually LOSE money like ABC (at least not in the near term, barring some catastrophic event), its just that they won't be the money maker Disney has come to expect unless attendance improves. This article speculates that the threat of war with Iraq is the key. I don't think its that simple. The overall threat of terrorism, and its impact on tourism is a factor, as well as the economy as a whole.

Then there's the much more subjective question of whether Disney is contributing to the parks problems through overall mismanagement. Most articles do not bother to mention this possibility, and certainly the company line doesn't mention it.

But back to the original question... Calling the parks a continuing drag is not really correct. They just might not do as well as in the past.

 

[Another Voice]

Well actually….

The currently Approved Corporate Spin is that the theme parks are the root of Disney’s entire problem. It isn’t all that accurate, but it serves management needs at this time.

Disney has been using the parks as a cash machine for several years as a way to cover bad times at all of the other divisions. Go back and read all the quarterly reports that mention “…was offset by increase performance in Attractions due to improved operational efficiency and increase per capita guest spending”. It’s a fancy way of saying budget cuts and price hikes made up for the Stores, ABC and the studio.

The problem now is that the ATM has run dry. Instead of really admitting the depth of trouble at ABC or that the studios have been a not-for-profit business for years, it’s much easier to blame the parks for failing to keep pumping the dough. And a simple line like “the economy and terrorism is hurting WDW” is much easier to get across to Wall Street than “we’re creatively bankrupt and don’t know what the hell to do anymore”.

But on this side of Wall Street there are growing rumblings from inside the company that the problems with the parks aren’t the result of economy or the antics of explosive-toting vermin from the Dark Ages. There is now a very strong feeling that the product Disney is offering is no longer desired by the public. The clearest example is in Anaheim where Disneyland will show a nice attendance bump this year while the new California Adventure will have a 20% attendance decrease from last year’s disastrous levels (according to the “rumors”).

At WDW the issue isn’t so much a public reluctant to fly – it’s that they just don’t to fly to Orlando. Years of cutbacks and closures, years without anything new (snow globes on parade don’t really wow people) and ever increasing prices have taken a lot of the shine off the place. And from the “rumors” I’ve heard, attendance on the cruise line hasn’t been affected anywhere near the levels that WDW has. Obviously there are people willing to fly and pay Disney’s premium price for something they feel is worthwhile.

The irony is the only way Disney can open the cash mine again is to invest money into the parks. A lot of money. But Disney doesn’t have anymore laying around and it’s last big investments – California Adventure and Disney Studios Paris – are going to require double their initial costs to correct. Eisner is obviously very reluctant to throw his few good dollars down any more sink holes.

So the management solution to the problem is to do nothing. The official corporate line is that the parks are having a rough time in the economy. People postponing their trips to WDW simply builds demand for when the economy gets better. Magically, people will return without Disney having to lift a single finger (or spend a single dollar). Eisner is betting the future of Disney on this idea even though there is no evidence of it (and a lot of evidence that other major destinations are recovering already leaving Disney out of the money).

Remember his last big idea was that people would go see any animated movie as long as it had the “Disney®” sticker on it. And we’ve all seen how well that one has worked.

 

[lrodk]

The following offers proof that not everyone who has a stake in the theme park industry is suffering as terribly as Disney in the current recession.

SeaWorld officials said that for the first time at that attraction all employees, numbering more than 3,000, will receive Christmas bonuses. Keith Kasen, executive vice president and general manager of the Anheuser-Busch Co.-owned attraction, said the bonuses are a reflection that, "Despite the tourism recession, we have been performing well, and we're generating near-record attendance in 2002." The bonus for workers who have logged at least 1,000 hours this year will be $400 each. For those who have worked from 500 to 999 hours, the bonus will be $200. And employees who have clocked from 1 to 499 hours will receive $100. That would mean that even seasonal workers hired for Christmas will get a bonus. About 65 such workers will be added to the payroll for the coming holiday season. All nine of Busch's SeaWorld and Busch Gardens parks in the United States will receive bonuses for Christmas, Kasen said.

 

[Bob O]

I also saw the article about Sea World and think it great the company is rewarding the workers for a job well done!! It shows not all parks are using terrorism/economy as excuses for their inability to attrack people into their parks.
And ditto's to AV.

 

[Planogirl]

Kudos to Sea World for getting their act together! It shows what CAN be done.

It appears that such things can only happen at Disney with a different management team in place.

 

[manning]

That should do wonders to the morale at Disney.

When that goes, the slippery slide downward gets ever so steeper.

 

[TiggerFreak]

Anyone care to speculate on how many current employees at Seaworld are former valued/experienced WDW Cast Members who quit/layed off/hours reduced .....
Not to say that Seaworld did not have any quality in their ranks, but it has been said that the best and brighest worked for the Mouse and everyone else got the leftovers. Have seen many rumors that this is not the case anymore.

 

[eeyore0062]

Basically, it comes down to this.... the Parks are the major money maker for Disney... when they do well, they are wonderful, when the economy goes into a slump, they are to blame for not bringing in the needed capital. The parks, in essence, are the scapegoat for anything that isn't right with the company. They are the largest, and most visible portion... so it is easy to lay the blame on them. If other areas of the company were stronger, then the parks wouldn't have to pull the lion's share of the income... and therefore wouldn't be the liability the critics make them out to be.

 

[seashoreCM]

I greatly enjoy WDW and have looked forward to every trip I have made there.

But I have gone to see any of the major animated Disney feature films of the last ten years.

Disney hints:
http://members.aol.com/ajaynejr/disney.htm

 

[King Triton]

Here's how to boost attendance at the parks (which will boost the stock price).

1) DCA must be saved. What a bad idea but you have to do what it takes to make it work now. You need more unique E-ticket rides (maybe a Journey into the center of the Earth ride like Disneysea). Adding the Aladin show was good. You need more broadway type shows to save the park (for goodness sakes take out the tortilla ladies making tortillas exhibit.

2) Keep Fantasmic running year round at Disneyland. There is no excuse shutting it down during the holidays. That is the best Disney show ever - it's crazy to shut it down. It keeps people away.

3) Epcot needs a lot of help. Get rid of Living Seas, and Bodywars. Boring. Removing Horizons and World of Motion was a HUGE mistake!! Epcot needs more cool dark rides. Build a Horizons II and a World of Motion II ride. Everyone misses Horizons - Disney needs to listen. The old Epcot was 100 times better.

Michael Eisner has made some very bad decisions over the past few years. You da man who gives the green light on all big moves. All the responsibility falls on YOU. Get back to making Disney magic. Stop building crappy parks like DCA and build something more like DisneySea instead. What's that I hear? You need sponsors? Well, go out and get them. Why did Japan get the job done but not here???? Go for QUALITY!!!!

King Triton

 

[Bob O]

From just having been to DCA i would say it needs a couple of e ticket attractions and many smaller ones to be up to the quality of a disney theme park, but saying that i had a good time at the park and it was better than i thought it would be.
AT DL since they do have space issues i dont see why they dont develop the Festival Arena/Thunder ranch section of the park, its a big area to just sit unused while i was their(of course regulars to the park may have more info on that area).