What did Disney gain/lose for their Billion dollars?

[over50visits]

This shouldn't be a judgmental thread at all! I read that the new system (FP+, MDE, wrist bands, new reading stands and terminals, etc.) cost Disney about a billion dollars. Nice round number, we of course do not know the true amount, but let's take that as a starting point.

What did they get for this investment? Rational business investments should return more than what is spent, of course. Possibilities:
- Repackage FP program so they can charge for it in the future (more income)
- Reduce number of employees as some guest services are moved to technology (MDE) (lower labor cost)
- Track customer movement in parks to (1) send electronic messages encouraging more spending and/or (2) sell consumer behavior information to other businesses
- Declare more attractions as FP (pirates, Small World, characters, parades) to disperse crowds more, so less time spent in line and more time spending money (shops, food). Enhances the perceived value of FP+ and increases income

What opportunities did they miss? What could this billion dollars have been spent on otherwise? Here are some random examples:
- New theme area (for example, I read in one report that Avatar land cost $400M). They could have extensively expanded their theme parks, giving more value to your entry ticket
- Add more individual rides to disperse the crowds (again, shorter wait time, more spending)
- Declare a larger bonus for investors (distribute the profits)
- More employees in phone customer service to reduce wait times and improve customer perception of Disney customer orientation
- Add a simple and low cost but very public perk (free bottle water or soft drinks in the parks, free raincoats when it rains). Result would be a significant publicity coup, enhancing the perceived value of visiting Disney.

What am I missing. Seriously - what did they get (or expect to get) that justifies spending a billion dollars? Could it have been a better investment elsewhere?

 

[FireDancer]

There is nothing more valuable then information and tracking and that is what they got.

The way they monetize that information is almost entirely pure speculation at this point because we haven't seen the NextGen project completely rolled out and until then we won't see how they use it. I suspect Disney will not talk about the future ROI in any specifics any time soon, not to us and not even to investors.

I have some ideas about it but I think in the end it will return a good ROI, much more then a land or even additional park would have for the same investment.

 

[Laketravis]

That is exactly what the analysts are going to want to know on the next conference call.

I'm looking forward to hearing the answers.

 

[Dreams0308]

I think one of the biggest advantages they will see over time is an increase in spending. The Magic Bands are a tool that make it easier and more conveinent to spend money and quicker. The Key To The World Cards also were conveinent but they were just like a normal credit card and you had to dig them out of wherever you stored them once you wanted to make a purchase. The Magic Band is right there out all the time and ready to be scanned anytime you want anything. You see a Mickey Bar you can get it in seconds and no having to put back your money into your wallet or your card back into its holder. There's no regroup time after you purchase anything which makes the buying process faster and seem easier for guests.

I also think that the Magic Band distances people from the idea of spending money in the way we traditionally think of spending money. We associate plastic cards and the Key To The World Cards with spending because we use credit cards every day in the real world. The Magic Band is just another way to distance you from your money so that while you are making impulse purchases, you are less likely to think about how much you are spending (until you get that hotel statement ). I know that for my family, even in the past with the Key To The World Cards, we are always shocked at how much adds up when we get that hotel statement at the end of the trip. HAHA

Overall, I think long term, they will make more money from spending by guests using the Magic Bands ... but that's just my opinion.

 

[wiigirl]

That is exactly what the analysts are going to want to know on the next conference call.

I'm looking forward to hearing the answers.

Me too.

 

[ArwenMarie]

It's all about the hotels. The parks exist to fill up the hotels, not the other way around.

They will get some people to move onsite from offsite. They will be able to reduce free dining and room discounts. They will make their money back, it will just take longer than they thought.

The loser in this will be the customer, who will end up paying more and receiving less.

 

[xie]

That is exactly what the analysts are going to want to know on the next conference call.

I'm looking forward to hearing the answers.

Indeed. All I can recall seeing from before is that they were sure it would lead to increased spending.

 

[FireDancer]

That is exactly what the analysts are going to want to know on the next conference call.

I'm looking forward to hearing the answers.

The returns on this are long term, not for the current quarter or even year. I suspect the answers will be vague at this point about the monetary benefits of a larger data warehouse. Any specific answers would be very unwise on that conference call.

 

[kaybird]

Well, from us they got 4 more trips tthis year than usual, and an upgrade to AP's we haven't bought in a few years, and a renewed excitement!

 

[larryz]

This shouldn't be a judgmental thread at all! I read that the new system (FP+, MDE, wrist bands, new reading stands and terminals, etc.) cost Disney about a billion dollars. Nice round number, we of course do not know the true amount, but let's take that as a starting point.

What did they get for this investment? Rational business investments should return more than what is spent, of course. Possibilities:
- Repackage FP program so they can charge for it in the future (more income)
- Reduce number of employees as some guest services are moved to technology (MDE) (lower labor cost)
- Track customer movement in parks to (1) send electronic messages encouraging more spending and/or (2) sell consumer behavior information to other businesses
- Declare more attractions as FP (pirates, Small World, characters, parades) to disperse crowds more, so less time spent in line and more time spending money (shops, food). Enhances the perceived value of FP+ and increases income

What opportunities did they miss? What could this billion dollars have been spent on otherwise? Here are some random examples:
- New theme area (for example, I read in one report that Avatar land cost $400M). They could have extensively expanded their theme parks, giving more value to your entry ticket
- Add more individual rides to disperse the crowds (again, shorter wait time, more spending)
- Declare a larger bonus for investors (distribute the profits)
- More employees in phone customer service to reduce wait times and improve customer perception of Disney customer orientation
- Add a simple and low cost but very public perk (free bottle water or soft drinks in the parks, free raincoats when it rains). Result would be a significant publicity coup, enhancing the perceived value of visiting Disney.

What am I missing. Seriously - what did they get (or expect to get) that justifies spending a billion dollars? Could it have been a better investment elsewhere?

They lost goodwill. My goodwill, anyway. I hate this idea so much, I sold my DIS stock (disclaimer: not at a loss).

It'll take a free vacation (maybe, via the Resolutions contest?) to win it back...

 

[skilesare]

It's all about the hotels. The parks exist to fill up the hotels, not the other way around.

They will get some people to move onsite from offsite. They will be able to reduce free dining and room discounts. They will make their money back, it will just take longer than they thought.

The loser in this will be the customer, who will end up paying more and receiving less.

95% of the guests will be receiving significantly more and their experience will be better. They will come back more.

The power tourers will not have as many rerides and as a result will be exposed to more kurtosis. One thing disney does well is sprinkle magic in unexpected ways.

Their customer satisfaction surveys are about to go through the roof.

 

[larryz]

95% of the guests will be receiving significantly more and their experience will be better. They will come back more.

The power tourers will not have as many rerides and as a result will be exposed to more kurtosis. One thing disney does well is sprinkle magic in unexpected ways.

Their customer satisfaction surveys are about to go through the roof.

I guess we know where YOU work...

 

[skilesare]

I guess we know where YOU work...

I wish they'd hire me. I'm a data architect and build systems for a living.

I think...and this is pure speculation...that we're just seeing the foundations of framework laid that is going to have one heck of a house built on top of it.

 

[clsteve]

The returns on this are long term, not for the current quarter or even year. I suspect the answers will be vague at this point about the monetary benefits of a larger data warehouse. Any specific answers would be very unwise on that conference call.

They were very specific on the expected 10-12% uplift in per guest expenditure. Now that all resorts are up on MB's and they have 2+ quarters for measurement, I'm sure they'll be asked to give an estimate on what that should look like in the FY14 Financial Report that will come out in Dec. since it will be very visible.

MM+ is also expected to increase length of stay and occupancy rate, so with 2+ quarters left in the year, I'm sure they'll be asked what that is estimated to look like year end, since that will be very visible, as well.

The expected ROI when this project was estimated at $400-600 mil, was understandable to investors and analysts. Now that it's estimated by some of them to be heading north of 150% of budget and impacting other operational budgets and projects, there's going to be significant pressure to show or estimate some hard return in the near future.

 

[Planogirl]

I guess we know where YOU work...

I suspect that you're right. There was just a little too much confidence in that post.

The truth is that we don't know exactly what Disney has planned. I believe that this will be way more far-reaching than just convenience for the consumer. I expect that Disney will offer quite a bit, for a fee of course.

 

[morethananyonex]

95% of the guests will be receiving significantly more and their experience will be better. They will come back more. The power tourers will not have as many rerides and as a result will be exposed to more kurtosis. One thing disney does well is sprinkle magic in unexpected ways. Their customer satisfaction surveys are about to go through the roof.

Do you have any stats that back up that only 5% of people used FP for the same ride more than once, used for both TT and Soarin (or TSMM and RnRC), used FP in only one park, or used less than 3 in MK?

I'm not being snarky, I genuinely would like to see some info on FP- use and how closely it aligns with FP*.

 

[larryz]

I wish they'd hire me. I'm a data architect and build systems for a living.

I think...and this is pure speculation...that we're just seeing the foundations of framework laid that is going to have one heck of a house built on top of it.

Lots of us here have experienced the "thrill" of Disney IT for years on end, and we're basing our less-than-optimistic assessments on that track record.

 

[FreeThinker]

I think that people will definitely spend more $$ w/ the MB charging. How cool to swipe your wrist and charge a Mickey Bar! Those little $3-5 charges add up fast, and people won't watch as they spend $15-20 here and there thru their vacation. For those who have not used the old FP system, the 3 locked-in rides will seem great! They planned to wait in lines all day anyway. Disney will also be able to track exactly how may rides each guest is able to ride, how long they are in the park, and steer them off into other experiences. I think they long-term idea is to get guests out of the parks, and onto the resorts for golf or other charging attractions. They already have their $$ from the park ticket, now they want to get you to buy the extras. The other perks Disney offers that no one else does, the Magical Express and the Dining Plan, both sell convenience to customers. I think FP+ will be another perk! THey don't offer Magical Express b/c it makes it easier for guests, they do it b/c it locks people onto the property, buying all of their food and necessities from their stores, which makes them money. Same for the Dining Plan. If people eat at Disney restraunts, they won't be eating at other places, so sell it to them before they even arrive. Promise them 3 rides per day, then when those rides are up, steer them to the golf course, let Dad drive a racecar, push the Kids clubs and other resort ammeneties.

 

[skilesare]

Do you have any stats that back up that only 5% of people used FP for the same ride more than once, used for both TT and Soarin (or TSMM and RnRC), used FP in only one park, or used less than 3 in MK?

I'm not being snarky, I genuinely would like to see some info on FP- use and how closely it aligns with FP*.

What kind of evidence do you need? Have you been to the parks when Jungle Cruise was 85 minutes and fast passes were 60 minutes out and people were still getting in line instead of getting a FP-?

Use a bit of 2nd order thinking and imagine what happens when Disney uses this to redistribute the crowds more efficiently and let people prioritize what they want to do. Standby times go down and satisfaction goes up.

Do you think the dis makes up more than 5% of Disney's attendance each year? I bet it is far below that. Have you ever met a FP- master that didn't know about the DIS? What does that ven diagram look like?

Maybe I'm off by a few percent here and there, but I don't think I'm that far off.

 

[morethananyonex]

What kind of evidence do you need? Have you been to the parks when Jungle Cruise was 85 minutes and fast passes were 60 minutes out and people were still getting in line instead of getting a FP-? Use a bit of 2nd order thinking and imagine what happens when Disney uses this to redistribute the crowds more efficiently and let people prioritize what they want to do. Standby times go down and satisfaction goes up. Do you think the dis makes up more than 5% of Disney's attendance each year? I bet it is far below that. Have you ever met a FP- master that didn't know about the DIS? What does that ven diagram look like? Maybe I'm off by a few percent here and there, but I don't think I'm that far off.

You don't need to go on the DIS to know how to use FP efficiently. We did it for years without the help of a fan site. Looking at the DIS is not an accurate way to determine if people did or did not use FP in the parks.

So the answer to my question is no, you don't have actual numbers the 5% was just an educated guess, correct? All I was asking is if you had concrete facts about the use of FP- compared to FP+.