A Spirited Perfect Ten

[xdan0920]

As you both write, no one should expect Iger to invest at Eisner's levels.

Over 21 years, Eisner invested about 10% of domestic Parks & Resorts revenue back into theme park growth initiatives.

The thing is, Iger has invested about 2%.

My opinion is that theme park investment should be roughly 4% to 5%, or less than half of what it was under Eisner. Over Iger's 9 years (so far), the difference adds up to roughly $2.5 billion. In other words, up to this point, Iger probably has undercapitalized his domestic theme parks to the tune of $2.5 billion.

For some perspective, Disney has spent $39.7 billion on stock buybacks during Iger's tenure, $6.5 billion in 2014 alone. We know exactly where WDW profits are being invested, and its not back into the parks.

Capex is a long-term investment that takes patience to nurture. Stock buybacks are a quick way to pump up stock price.

The reason companies issue stock is to raise capital so they can invest in all the wonderful projects their creative (and well compensated) management have in mind in order to generate even more revenue and profit.

Stock buybacks do not generate revenue or profit. Over the long-term, stock buybacks are one of the worst ways for a company to invest its money and indicate a wholly unimaginative senior executive management team.

Under Iger, The Walt Disney Company revenue has grown at an anemic 4.8% annual compound rate, including the purchases of Pixar, Marvel, and Lucasfilm. Excluding those 3 properties, organic revenue growth has been pitiful.

Wall Street love Iger because Iger runs the company like Wall Street. Iger needs to start running the company like a CEO.

Of everything that gets posted around here, these Capex numbers are the most depressing*. Here's why.

This is primarily a Walt Disney World discussion forum. People here defending Iger's running of the company as a whole makes no sense in that context. He has severely underfunded WDW. So, he acquired Marvel, which can't be used at WDW. Great for TWDC as a whole, but essentially meaningless to the discussions we have here.

The exceptionally low reinvestment in WDW is painfully obvious in so many aspects of the resort. The monorails. Future World. Tomorrowland. General attraction maintence, see Ellen's Dinorama. Revolving door CMs. The list goes on and on, no reason to rehash ever issue here.

*depressing in a very specific, very low impact way. Disney park capex doesn't actually depress me and make me punch random animals.

 

[MySmallWorldof4]

They were told to diligently read body language and look for unhappy kids.

New member here and first post.

Back in 2012, my youngest was 17 months and still figuring out the whole walking thing. We were walking by the old "Wonders of Life" building. She had tripped and fell, and of course started crying. Behind us were what my husband calls "suits" at Disney.(The ones that wear the suits and walk around with the litter grabbers). They proceeded to gush on my little walker and asked her if some ice cream would make her feel better. She of course said yes and they gave us a certificate for all of us to get ice cream at one of the vendors.

So there are some CM's that are still trying to make magic for guests.

 

[Nubs70]

As you both write, no one should expect Iger to invest at Eisner's levels.

Over 21 years, Eisner invested about 10% of domestic Parks & Resorts revenue back into domestic theme park growth initiatives.

The thing is, Iger has invested about 2%.

My opinion is that theme park investment should be roughly 4% to 5%, or less than half of what it was under Eisner. Over Iger's 9 years (so far), the difference adds up to roughly $2.5 billion. In other words, up to this point, Iger probably has undercapitalized his domestic theme parks to the tune of $2.5 billion.

For some perspective, Disney has spent $39.7 billion on stock buybacks during Iger's tenure, $6.5 billion in 2014 alone. We know exactly where WDW profits are being invested, and its not back into the parks.

Capex is a long-term investment that takes patience to nurture. Stock buybacks are a quick way to pump up stock price.

The reason companies issue stock is to raise capital so they can invest in all the wonderful projects their creative (and well compensated) management team have in mind in order to generate even more revenue and profit.

Stock buybacks do not generate revenue or profit. Over the long-term, stock buybacks are one of the worst ways for a company to invest its money and indicate a wholly unimaginative senior executive management team.

Under Iger, The Walt Disney Company revenue has grown at an anemic 4.8% annual compound rate, including the purchases of Pixar, Marvel, and Lucasfilm. Excluding these 3 properties, organic revenue growth has been pitiful.

Wall Street love Iger because Iger runs the company like Wall Street. Iger needs to start running the company like a CEO.

I was listening to a talk on buybacks and capex investment. The main postulation of the speaker was:

1. Buybacks typically return a 9% return on capital.
2. Capex investment returns a 20% return on capital

He was quite concerned/perplexed on the focus in buybacks in today's corporate environment.

 

[the.dreamfinder]

I'm a big history guy, and while taking in A show at HoP over the weekend I found myself thinking about how awesome the experience is. The whole show is just very well put together and maintained.

Maybe I'm just a softy for the patriotic stuff. The American Adventure is pretty awe inspiring too, even if I cringe at the end every time now since old American hero Lance was outed as a phony.

Or Tiger Woods...

 

[George]

I've since come to like and respect a few select members of that group, including yourself. I believe you are honest about your views and you always state if you are getting something for free because you have a blog. I don't always agree with you (like that crazy notion that folks shouldn't have rental cars in Central FL, now if you had said that because no one knows how to drive and it's so dangerous then I might have agreed ...)

A subtle reason why driving is A-OK for me when we come down from the midwest is that I learned how to drive in central Florida. So, I'm a crazy, aggressive driver who views red lights as suggestions. :lookaroun

Several posts ago someone was sharing a fascinating background about how they got involved with this site (they referred to themselves as "the Librarian"). Interesting topic. I'm the other end of the spectrum when it comes to awareness of the online world of Disney. You'll see my join date here is 2005. What happened was, sometime in 2003, I was at work and I was wondering about taking a trip down to the greater O-town, themed, area complex with our newly minted kid. For convenience, I wondered what it was like to stay on property (though I had pulled a local and used resort arcades and pools 8 billion times, oftentimes during my HS years we would just play around resorts and the rest of property when our 3 season salutes were invalid) it seemed like a night or two avoiding the 40 minute drive to my parents with the kid would be interesting and different (my parents have since retired to the Ozarks in Arkansas which probably was the main driver in purchasing the resale DVC points). Anyhoo, one afternoon at work when an inviting ten minute dorkaround on the internet window loomed, I thought, "I wonder what kind of presence Walt Disney World has on the internetz". I was shocked by the sheer number of sites. Over time I decided that this here site was far and away the best and most entertaining in large part because the other sites I read seemed to be focused either on 1) people who had never been to WDW or 2) if they had been to WDW, complete idiots. Plus, I have issues with over the top peppiness and discussions on how awesome Dole Whips (a thing which I didn't know was a super important thing pre-internetz) are.

The short story is this - If you guys don't link to an article by one of these weirdos I am wholly unaware of it.

 

[ParentsOf4]

I was listening to a talk on buybacks and capex investment. The main postulation of the speaker was:

1. Buybacks typically return a 9% return on capital.
2. Capex investment returns a 20% return on capital

He was quite concerned/perplexed on the focus in buybacks in today's corporate environment.

Capital investment takes time and patience. It takes effort.

It's a lot easier to buy back stock. Just write a check.

Or raise prices.

Or cut quality.

These are quick-and-dirty ways of improving company/stock performance. They are signs of lazy executives who are managing by Excel spreadsheet.

Instead, get out of the office, stop the endless array of meetings & presentations, and get into the theme parks in order to figure out what's happening. Then come up with creative solutions to improve business and drive revenue growth by providing customers with value. Figure out ways to create new goods and services that customers want to buy.

Create new experiences that drive sustainable growth, not big price increases that cause customers to buy less.

Stop going for the quick fix. Don't be afraid to get your hands dirty.

 

[Nemo14]

Create new experiences that drive sustainable growth, not big price increases that cause customers to buy less.

Stop going for the quick fix. Don't be afraid to get your hands dirty.

A signature-worthy quote!!!!

 

[George]

That's true, but largely irrelevant. At least, it's irrelevant to me. I never even look at post or like count. I have a general feel of which posters I'm interested in reading, and who I should simply scroll past. As I'm sure we all do. In fact, I bet lots of people are flying right past this very post. And I have lots of posts, and lots of likes. And I very rarely even browse the chit chat sub forum. It gets weird in there. Anyway, my rambling point is. I don't think post or like count can be diluted, as there is no barrier to posting as much as you like, it's already diluted.

Quality of posts, not quantity.

Plus, almost exactly half of my posts were pre-like. Then I take an 18 month hiatus and its like a "whole new world" on the blue boards (thank god that was still the default background). My first like was a pity one. Something like, "6,000 posts and no likes, you poor, poor man." Like you though, I rarely look at the stats unless someone is quoted and the reply is, "So, your first post on this site is claiming that Horizons is coming back. What a crock . You should be shot. @all the insiders - is this true?"

 

[ford91exploder]

I was listening to a talk on buybacks and capex investment. The main postulation of the speaker was:

1. Buybacks typically return a 9% return on capital.
2. Capex investment returns a 20% return on capital

He was quite concerned/perplexed on the focus in buybacks in today's corporate environment.

It's easy - most executive compensation packages are based on stock performance, Buybacks are an easy way to inflate EPS and P/E ratios.

 

[Nemo14]

Plus, almost exactly half of my posts were pre-like. Then I take an 18 month hiatus and its like a "whole new world" on the blue boards (thank god that was still the default background). My first like was a pity one. Something like, "6,000 posts and no likes, you poor, poor man." Like you though, I rarely look at the stats unless someone is quoted and the reply is, "So, your first post on this site is claiming that Horizons is coming back. What a crock . You should be shot. @all the insiders - is this true?"

*pity like*

 

[George]

*pity like*

It is also how I get all my lady friends.

 

[Nemo14]

It is also how I get all my lady friends.

You have more than one?

 

[George]

You have more than one?

Sometimes, a certain line of joking should be ended because if there is a one and a million chance these here blue boards will be opened to this page at home and a small chance the wife would take this line of discussion seriously, the finite probability of these things happening does exist. So, back to work I go.

 

[lazyboy97o]

New member here and first post.

Back in 2012, my youngest was 17 months and still figuring out the whole walking thing. We were walking by the old "Wonders of Life" building. She had tripped and fell, and of course started crying. Behind us were what my husband calls "suits" at Disney.(The ones that wear the suits and walk around with the litter grabbers). They proceeded to gush on my little walker and asked her if some ice cream would make her feel better. She of course said yes and they gave us a certificate for all of us to get ice cream at one of the vendors.

So there are some CM's that are still trying to make magic for guests.

Tossing out free stuff has become Disney's go to tactic that has facilitated a lot of destruction.

 

[lebeau]

Again, Disney doesn't care anymore about so many of the things that made it Disney. Walt would be drummed out of the company if he were alive today.

This is so true. I don't think a lot of Disney fans who like to quote Walt in defense of Disney's current decisions get this. His crazy ideas would not be welcome in Iger's Disney.

 

[PhotoDave219]

You have more than one?

Don't we all?

 

[Nemo14]

Don't we all?

I knew you couldn't let that one get by...

 

[JWG]

Of everything that gets posted around here, these Capex numbers are the most depressing*. Here's why.

This is primarily a Walt Disney World discussion forum. People here defending Iger's running of the company as a whole makes no sense in that context. He has severely underfunded WDW. So, he acquired Marvel, which can't be used at WDW. Great for TWDC as a whole, but essentially meaningless to the discussions we have here.

The exceptionally low reinvestment in WDW is painfully obvious in so many aspects of the resort. The monorails. Future World. Tomorrowland. General attraction maintence, see Ellen's Dinorama. Revolving door CMs. The list goes on and on, no reason to rehash ever issue here.

*depressing in a very specific, very low impact way. Disney park capex doesn't actually depress me and make me punch random animals.

That's fair, but under this premise you can't also say that Iger is the demise or ruining of TWDC and has to go (not you specifically, but "we" in general). We can be unhappy with his focus on the parks, but overall he's doing exactly what investors and shareholders of TWDC want. The parks continue to become a smaller piece of the total puzzle and just a means to put their brand in front of us (at our expense) so we'll continue to invest our time and money into them elsewhere.

 

[PhotoDave219]

I knew you couldn't let that one get by...

Years ago, the PML was my personal playground.....

 

[Nemo14]

Years ago, the PML was my personal playground.....

so I hear...