Another long boring financial post
You're right, it's not like someone is writing a check at
Disneyland that gets cashed by someone at ABC to pay Drew Carey for another episode of 'Whose Line'. Nor is it that someone in WDW loads up an armored car with cash and drives out west so Disneyland can pay off the BMX kids for the failed summer 'X-Games' show.
It's all about budgets. At the very top at Corporate a bunch of gnomes decide how much The Walt Disney Company has to make to keep the stock at a certain level. At the same time all of the business units tell Burbank how much they think they can make for the year. Naturally, everyone comes short of what corporate wants, so there's a bit of power politics about setting profit targets. Since Media (the broadcast & cable people) are the favorite children and Attractions (the theme parks, resorts, DVC and cruise ships) are the ugly step kids (according to the big guys) guess who comes out on top.
Within Parks each group (WDW, DLR, International, Cruise, etc.) gets to play the same game as well. So the overly ambitious demands from corporate gets divided up between all the parks. Disneyland has gotten caught each and every year by wildly overestimating their ability to turn DCA around (with a gimmick a season Electrical Parade, Fliks, 'Aladdin', 'Tower of Terror'), the cost of the ongoing safety mandates, and the ever increasing corporate requirements. In short, they always over promise.
Once the fiscal year begins, all of the operating units are held to their budgets. Things follow plans for about thirty-eight minutes as with any budget, the real results turn out different. As things change, each of the Attractions units tries to turn out their quota of cash going into the overall Attractions business unit. In part because it's their budget and they have to live with it, and in part because that's what management bonuses are based on. At Disneyland that means once DCA's latest gimmick craters, they have to make up the difference somewhere Disneyland maintenance, operations, ticket prices, whatever.
Disneyland also has the unfortunate history of being part of Paul Pressler's Rise to Fame and Glory®. The former head of Disneyland earned himself attention by constantly turning in better than expected numbers. He did this by slashing costs in the good times and lowering the bar for "the Disneyland experience". Delayed openings, maintenance reductions, limited investment and all the other goodies have been going out here for a decade. When the bad times hit (the opening of DCA), there wasn't anything left to cut.
Moving up the ladder, Attractions must keep
their overall number to Corporate. So when Disneyland Resort comes up short overall Attractions must make up the budget difference from somewhere else. That 'else' is WDW. The cuts don't seem so deep in Florida because of the scale of things. Cutting 'Timekeeper' and 'Carousel of Progress' at the Magic Kingdom is minor because they are only two attractions out of four parks with umpteen attractions. But two attractions at Disneyland are much more noticeable. And since WDW has troubles of their own, people naturally assume that hacking five hours off the Disney/MGM Studios operating hours is all to do with attendance at that park. Reality is a little more complex.
Lastly, back at Corporate, they are balancing all the profits from all the different areas in an effort to hit the Magic Wall Street Number of Wonder®. When 'Dinotopia' fails to become the billion dollar franchise mega hit and topples 'Friends' in the ratings and ABC's ad rates fall again you know they have to make up that money somewhere. So the call goes out to Attractions that they're going have "to step it up a bit to hit the quarterly numbers".
Media Networks (ABC, ESPN, Cable, etc.) is Disney's largest business group. When they're off a little bit percentage wise, that translates into a lot of real dollars. The only group left that anywhere near their size is Attractions. Consumer Products is a shadow now and Film hasn't made real money since the days of
The Lion King. So if ABC is down $200 million, only WDW & D/L can possible make up the difference. You can't count on help from Hollywood Records to sell more 'SheDaisy' albums when ABC has to pay off millions in make-good ads because the Oscars had such poor ratings but cutting food costs at WDW by 2% is a bundle of money.
In a fair world the opposite would work as well. If DCA continues to have problems (as if
) then ABC would be required to contribute a little more to the corporate pot. But that's not how Disney politics work.
The last published results were from the 3rd quarter. For the nine months that ended on June 30, Attractions made $732 million dollars. That was down 22% from the previous year's earnings, but that change also is because Disney gave up all their revenue from Euro Disney for the year to keep them from bankruptcy (which is a whole 'nother issue). And it's not so bad when you consider that the revenues were down 25%...in other words Disney cut costs faster than the guests stopped spending.
By contrast, Media made $841 million in the same time. That was almost exactly the same as the $839 they made in the previous year
but Media's revenues went up by 13%. So, they spent money faster than they were making it.
On last little tidbit while Disney made $732 million from the parks, its interest expense on all the borrowing it took out for ABC, Fox Family, GO.com and all the other fun stuff from the last few years totals $642 million. In other word, an awful lot of what you spend at WDW still goes to pay off the Power Rangers.
