News Dismal Q3 Earnings

[WDW Pro]

Management, Operations, Leads... everybody is talking about the Al Lutz article today.

 

[Brad Bishop]

Just checking in with this thread to see if Star Wars is still going to lead Disney into financial ruin.

It actually could. Not Star Wars single handedly, but with the purchase of all of these studios/properties under Iger and not a great turn around, it could actually put Disney in a really bad bind. Their debt has gone up significantly over the last few years and they have to service that debt and if big investments like Star Wars movies and SWGE aren't paying off it really could do some damage.

Add to that with Pixar not really producing great movies like they did before the acquisition and everything a retread/sequel plus all of their cash spent to bring the parks out of the 1990s, it starts adding up. It's going to have to pay off for it all to work and there are limitations involved that Disney doesn't seem prepared for:

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.
2) They keep raising their prices in the parks to help cover their losses elsewhere. This adds to the problem.
3) The next 4-5 Avatar movies seem like big budget failures just looming on the horizon. Outside of WOW-3D!, there was nothing else to carry those movies.
4) What are they going to do with Fox? It seems like a random purchase that they're now tasked with, "Well.. How do we make money out of this??"

My guess: About 5 years down the line you're going to see Disney selling off these properties at a loss, perhaps shuttering Pixar or "rolling it into" their own animation studios (shuttering, essentially - just sounds better), and trimming the fat everywhere they can while raising prices (cutting hours and $200/head/day for entry into their parks). This will likely keep more people away (cue the guy: "Oh, that just means more room for me - This is exactly what Disney wants") and Iger's successor will have to clean up the mess.

Realistically, I think that anything that isn't under construction now, isn't going to start after the 50th. I suspect there'll be 20 years of stagnation after the 50th. I don't see Tomorrowland getting any more than Tron (weirdly shoe-horned into that corner) and the pain job. Epcot?? They may tear down a building a plant some trees but it's cheaper to leave the buildings in place. I can't imagine new monorails at this point as all of the current ones have been upgraded to "good enough".

You can look and say, "...but Iger is a brilliant CEO!" Maybe. Maybe not. Other companies have been brought down by similar huge purchases with some great vision of the future that never panned out and then became too expensive to operate.

 

[bartholomr4]

It actually could. Not Star Wars single handedly, but with the purchase of all of these studios/properties under Iger and not a great turn around, it could actually put Disney in a really bad bind. Their debt has gone up significantly over the last few years and they have to service that debt and if big investments like Star Wars movies and SWGE aren't paying off it really could do some damage.

Add to that with Pixar not really producing great movies like they did before the acquisition and everything a retread/sequel plus all of their cash spent to bring the parks out of the 1990s, it starts adding up. It's going to have to pay off for it all to work and there are limitations involved that Disney doesn't seem prepared for:

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.
2) They keep raising their prices in the parks to help cover their losses elsewhere. This adds to the problem.
3) The next 4-5 Avatar movies seem like big budget failures just looming on the horizon. Outside of WOW-3D!, there was nothing else to carry those movies.
4) What are they going to do with Fox? It seems like a random purchase that they're now tasked with, "Well.. How do we make money out of this??"

My guess: About 5 years down the line you're going to see Disney selling off these properties at a loss, perhaps shuttering Pixar or "rolling it into" their own animation studios (shuttering, essentially - just sounds better), and trimming the fat everywhere they can while raising prices (cutting hours and $200/head/day for entry into their parks). This will likely keep more people away (cue the guy: "Oh, that just means more room for me - This is exactly what Disney wants") and Iger's successor will have to clean up the mess.

Realistically, I think that anything that isn't under construction now, isn't going to start after the 50th. I suspect there'll be 20 years of stagnation after the 50th. I don't see Tomorrowland getting any more than Tron (weirdly shoe-horned into that corner) and the pain job. Epcot?? They may tear down a building a plant some trees but it's cheaper to leave the buildings in place. I can't imagine new monorails at this point as all of the current ones have been upgraded to "good enough".

You can look and say, "...but Iger is a brilliant CEO!" Maybe. Maybe not. Other companies have been brought down by similar huge purchases with some great vision of the future that never panned out and then became too expensive to operate.

Wow... The sky is really falling.....

 

[doctornick]

It actually could. Not Star Wars single handedly, but with the purchase of all of these studios/properties under Iger and not a great turn around, it could actually put Disney in a really bad bind. Their debt has gone up significantly over the last few years and they have to service that debt and if big investments like Star Wars movies and SWGE aren't paying off it really could do some damage.

I'm no expert but is that true at all? Most of the purchases that have been made have been using stocks, not cold hard cash. I don't think Disney's debt low is high at all relative to revenues and for a company their size. Even if it were an issue, they could sell out components of their conglomerate they don't need/want (e.g. excess studios or networks acquired from Fox) if they wanted to pay off debt.

Add to that with Pixar not really producing great movies like they did before the acquisition and everything a retread/sequel

Coco? Inside Out?

And those sequels/retreads are largely making bank. you can talk about how they may be creatively bankrupt, but financially I think Disney is just fine with how Toy Story 4, Incredibles 2, etc. (or on the live action side, The Lion King, Aladdin, etc.) have done.

plus all of their cash spent to bring the parks out of the 1990s, it starts adding up.

The parks needs and are getting significant investment, but it's nothing crazy compared to how much they bring in with revenues. They could up the investment a lot of still be totally fine.

It's going to have to pay off for it all to work and there are limitations involved that Disney doesn't seem prepared for:

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.
2) They keep raising their prices in the parks to help cover their losses elsewhere. This adds to the problem.
3) The next 4-5 Avatar movies seem like big budget failures just looming on the horizon. Outside of WOW-3D!, there was nothing else to carry those movies.
4) What are they going to do with Fox? It seems like a random purchase that they're now tasked with, "Well.. How do we make money out of this??"

1) they can always offer more discounts or even *gasp* lower prices if this were a problem. It's not like they couldn't be widely profitable at a lower price point if needed. But the parks (this summer at DL notwithstanding) are often packed so I doubt they are worried right now.
2) no, they are raising prices at the parks because they feel that can increase profits/revenues from their existing customers. Where exactly are these "losses elsewhere" they would even need to be concerned about? Movies are doing great in their own right and consumer products is basically just pure profit.
3) So? And how much is Disney paying versus Cameron's production company? Do you think Disney doesn't know how to run a movie business. Have you not seen their returns in recent years?
4) they are going to roll out a direct to consumer streaming product with a crapload of contact. and buff up Hulu too.

My guess: About 5 years down the line you're going to see Disney selling off these properties at a loss, perhaps shuttering Pixar or "rolling it into" their own animation studios (shuttering, essentially - just sounds better), and trimming the fat everywhere they can while raising prices (cutting hours and $200/head/day for entry into their parks). This will likely keep more people away (cue the guy: "Oh, that just means more room for me - This is exactly what Disney wants") and Iger's successor will have to clean up the mess.

Realistically, I think that anything that isn't under construction now, isn't going to start after the 50th. I suspect there'll be 20 years of stagnation after the 50th. I don't see Tomorrowland getting any more than Tron (weirdly shoe-horned into that corner) and the pain job. Epcot?? They may tear down a building a plant some trees but it's cheaper to leave the buildings in place. I can't imagine new monorails at this point as all of the current ones have been upgraded to "good enough".

You can look and say, "...but Iger is a brilliant CEO!" Maybe. Maybe not. Other companies have been brought down by similar huge purchases with some great vision of the future that never panned out and then became too expensive to operate.

Um, wow. I don't think your assessment has anything to do with reality.

 

[ParkPeeker]

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.

Yea I think they know this is a problem. There are cast members who ask entering guests to get emailed a survey after their visits, and the research team has survey questions related to this.

 

[rudyjr13]

Disney is fine despite all this Star Wars drama. Killing it in the box office and Disney+ will be a hit.

I happened to luck into a last minute trip to California last week through my wife's work and took my kids to California Adventure, Disneyland and Legoland. Galaxy's Edge was neat to see but it is far from what it could and should be yet. I'm a big Star Wars nerd and I felt underwhelmed and disappointed. At the time I couldn't put my finger on it but upon reflection it's shops, a couple small food places and one ride that had a 45 minute wait. Carsland felt more complete and exciting to me and my girls.

There should be more exhibits or things to do especially for kids. I was impressed with the Redwood Creek Challenge Trail at California Adventure. My kids loved that and something similar would be a great addition to DHS either in Galaxy's Edge or Toy Story Land.

Everyone remember they opened the land early without one ride open to in my opinion help with the crowds. They clearly didn't want the Harry Potter opening day crowd pictures. I can't blame them, that's miserable. It felt like New Fantasyland...looks great but low on substance. The 2 Stormtroopers who interacted with us were a neat touch but after reading that Lutz article, the land could be so much more and maybe will be in 3-6 months once the other ride is open. With all this said, you should all check it out on your next trip to WDW but I wouldn't make any special trips down there for it. I don't blame all those AP'ers for not paying extra money to go see this yet.

Some pictures showing crowds that day (Friday 8/9 around 6pm) for those interested

 

[WDW Pro]

I'm no expert but is that true at all? Most of the purchases that have been made have been using stocks, not cold hard cash. I don't think Disney's debt low is high at all relative to revenues and for a company their size. Even if it were an issue, they could sell out components of their conglomerate they don't need/want (e.g. excess studios or networks acquired from Fox) if they wanted to pay off debt.



Coco? Inside Out?

And those sequels/retreads are largely making bank. you can talk about how they may be creatively bankrupt, but financially I think Disney is just fine with how Toy Story 4, Incredibles 2, etc. (or on the live action side, The Lion King, Aladdin, etc.) have done.



The parks needs and are getting significant investment, but it's nothing crazy compared to how much they bring in with revenues. They could up the investment a lot of still be totally fine.



1) they can always offer more discounts or even *gasp* lower prices if this were a problem. It's not like they couldn't be widely profitable at a lower price point if needed. But the parks (this summer at DL notwithstanding) are often packed so I doubt they are worried right now.
2) no, they are raising prices at the parks because they feel that can increase profits/revenues from their existing customers. Where exactly are these "losses elsewhere" they would even need to be concerned about? Movies are doing great in their own right and consumer products is basically just pure profit.
3) So? And how much is Disney paying versus Cameron's production company? Do you think Disney doesn't know how to run a movie business. Have you not seen their returns in recent years?
4) they are going to roll out a direct to consumer streaming product with a crapload of contact. and buff up Hulu too.



Um, wow. I don't think your assessment has anything to do with reality.

Star Wars won't sink Disney and neither will the Fox acquisition. However, with ticket prices far too high, and the dependence on Parks to absorb the cost of Disney+, the chance of a recession could create a situation in which Disney has to cut expenditures significantly and offer multi-layered promotions to drive up attendance. Let's just hope the indicators aren't correct for an upcoming recession; we really don't need a significant downturn given the amount of national debt racked up in the past two decades.

 

[Brad Bishop]

A related article:

These 4 Measures Indicate That Walt Disney (NYSE:DIS) Is Using Debt Extensively

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

finance.yahoo.com

 

[bartholomr4]

Yea I think they know this is a problem. There are cast members who ask entering guests to get emailed a survey after their visits, and the research team has survey questions related to this.

I literally answered this survey last week (We just came back from an early August visit to WDW)..... Nothing in the questionnaire was about perception of cost. It was about experience, ability to express your opinion to a "roving manager wearing a blue shirt" and if we received an email upon arrival from A VP of the parks telling us about the people with the Blue Shirts.

The parks were packed to the gills while we were there (4 days) and it was Florida Hot with afternoon showers all four days. It was a great time and while I wished GE was open, that the Gondolas were running, and that we didn't miss one of our fast passes because a ride was down, good times were had by all.....

 

[ParkPeeker]

I literally answered this survey last week (We just came back from an early August visit to WDW)..... Nothing in the questionnaire was about perception of cost. It was about experience, ability to express your opinion to a "roving manager wearing a blue shirt" and if we received an email upon arrival from A VP of the parks telling us about the people with the Blue Shirts.

The parks were packed to the gills while we were there (4 days) and it was Florida Hot with afternoon showers all four days. It was a great time and while I wished GE was open, that the Gondolas were running, and that we didn't miss one of our fast passes because a ride was down, good times were had by all.....

My survey was from Disneyland. They asked about that exactly. If it was worth going. They asked about cost of ticket prices. About income yearly so they could organize you into income groups. About how much money I spent aside from the tickets like merch and food, and opinions about that. So yes there were questions about cost, and perception.

 

[bubbles1812]

It actually could. Not Star Wars single handedly, but with the purchase of all of these studios/properties under Iger and not a great turn around, it could actually put Disney in a really bad bind. Their debt has gone up significantly over the last few years and they have to service that debt and if big investments like Star Wars movies and SWGE aren't paying off it really could do some damage.

Add to that with Pixar not really producing great movies like they did before the acquisition and everything a retread/sequel plus all of their cash spent to bring the parks out of the 1990s, it starts adding up. It's going to have to pay off for it all to work and there are limitations involved that Disney doesn't seem prepared for:

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.
2) They keep raising their prices in the parks to help cover their losses elsewhere. This adds to the problem.
3) The next 4-5 Avatar movies seem like big budget failures just looming on the horizon. Outside of WOW-3D!, there was nothing else to carry those movies.
4) What are they going to do with Fox? It seems like a random purchase that they're now tasked with, "Well.. How do we make money out of this??"

My guess: About 5 years down the line you're going to see Disney selling off these properties at a loss, perhaps shuttering Pixar or "rolling it into" their own animation studios (shuttering, essentially - just sounds better), and trimming the fat everywhere they can while raising prices (cutting hours and $200/head/day for entry into their parks). This will likely keep more people away (cue the guy: "Oh, that just means more room for me - This is exactly what Disney wants") and Iger's successor will have to clean up the mess.

Realistically, I think that anything that isn't under construction now, isn't going to start after the 50th. I suspect there'll be 20 years of stagnation after the 50th. I don't see Tomorrowland getting any more than Tron (weirdly shoe-horned into that corner) and the pain job. Epcot?? They may tear down a building a plant some trees but it's cheaper to leave the buildings in place. I can't imagine new monorails at this point as all of the current ones have been upgraded to "good enough".

You can look and say, "...but Iger is a brilliant CEO!" Maybe. Maybe not. Other companies have been brought down by similar huge purchases with some great vision of the future that never panned out and then became too expensive to operate.

Ok, so, I can be pretty cynical about the choices Disney makes but most of your predictions go aggressively swan diving off the deep end. 200$ day entry to the parks someday? Maybe. Pixar shutting down in 5 years? Uh, no. The 20 year old property that is Toy Story just made a billion dollars. I think someone mentioned you could argue that Pixar is down a bit creatively but their sequels are still making bank, as do the majority of their films. Pixar is a valuable distinct brand the same way Marvel is. No way they are just going to lump it into Disney animation, unless all their films start tanking [unlikely].

Your idea of 20 years of stagnation after the 50th is also pretty laughable. I'm not saying I wish Disney wouldn't do more or shouldn't do more in each of the four parks. Everyone including myself wishes for that. In fact, I think most of Future World needs to be scrubbed and redone. Yes, they all need work and will continue to need work and are currently getting work done but the thought that Disney is going to stop investing completely beyond culling shrubbery seems wildly unrealistic. Their biggest competitor just announced a new park and I'm glad for it. Competition fosters investment and hey, I like Universal generally, so more rides for me! But back to the point, if Disney wants to keep people coming, they'll have to continue with some investment. It just may not be an E ticket every single year.

I don't have Pixie Dust in my eyes. Iger ain't perfect but his purchases have overall panned out [thus far]. They literally just bought Fox. Let's see how it goes before jumping to the point where Disney is apparently selling off everything.

[Also, the monorails are good enough... Would you really want a new monorail or a new ride? Cause that probably ends of being your likely choice. The monorails are only used by a limited segment of guests. So, I'm fine with them the way they are for the 5 minutes at a time I'm on them]

 

[bartholomr4]

My survey was from Disneyland. They asked about that exactly. If it was worth going. They asked about cost of ticket prices. About income yearly so they could organize you into income groups. About how much money I spent aside from the tickets like merch and food, and opinions about that. So yes there were questions about cost, and perception.

They have magic bands in Florida. No need to ask about spending..... they already have it! Probably the difference!

 

[LuvtheGoof]

It actually could. Not Star Wars single handedly, but with the purchase of all of these studios/properties under Iger and not a great turn around, it could actually put Disney in a really bad bind. Their debt has gone up significantly over the last few years and they have to service that debt and if big investments like Star Wars movies and SWGE aren't paying off it really could do some damage.

Add to that with Pixar not really producing great movies like they did before the acquisition and everything a retread/sequel plus all of their cash spent to bring the parks out of the 1990s, it starts adding up. It's going to have to pay off for it all to work and there are limitations involved that Disney doesn't seem prepared for:

1) It's not whether a family CAN afford to go to Disney but rather if they see it being worth it. I could easily afford to go to Disney. I don't. It's no longer worth it.
2) They keep raising their prices in the parks to help cover their losses elsewhere. This adds to the problem.
3) The next 4-5 Avatar movies seem like big budget failures just looming on the horizon. Outside of WOW-3D!, there was nothing else to carry those movies.
4) What are they going to do with Fox? It seems like a random purchase that they're now tasked with, "Well.. How do we make money out of this??"

My guess: About 5 years down the line you're going to see Disney selling off these properties at a loss, perhaps shuttering Pixar or "rolling it into" their own animation studios (shuttering, essentially - just sounds better), and trimming the fat everywhere they can while raising prices (cutting hours and $200/head/day for entry into their parks). This will likely keep more people away (cue the guy: "Oh, that just means more room for me - This is exactly what Disney wants") and Iger's successor will have to clean up the mess.

Realistically, I think that anything that isn't under construction now, isn't going to start after the 50th. I suspect there'll be 20 years of stagnation after the 50th. I don't see Tomorrowland getting any more than Tron (weirdly shoe-horned into that corner) and the pain job. Epcot?? They may tear down a building a plant some trees but it's cheaper to leave the buildings in place. I can't imagine new monorails at this point as all of the current ones have been upgraded to "good enough".

You can look and say, "...but Iger is a brilliant CEO!" Maybe. Maybe not. Other companies have been brought down by similar huge purchases with some great vision of the future that never panned out and then became too expensive to operate.

Sorry, but you really need to share some of what you are smoking. None of your opinions about what is going to happen in 5 years, or over the next 20 hold any water at all. The acquistions have done nothing but bank billions for Disney. They are firing on all cylinders right now, and there is no end in sight.

 

[ParkPeeker]

They have magic bands in Florida. No need to ask about spending..... they already have it! Probably the difference!

Yea probably. And we probably also answered the questions differently leading to different questions. I’m thinking I answered no to ‘would you come again soon,’ or no to ‘if you go yearly.’ (Don’t remember the questions) and Because I put no I was asked why, and the answers had options including being able to afford it and it being worth it, etc. And it went on etc.

 

[MisterPenguin]

Sorry, but you really need to share some of what you are smoking. None of your opinions about what is going to happen in 5 years, or over the next 20 hold any water at all. The acquistions have done nothing but bank billions for Disney. They are firing on all cylinders right now, and there is no end in sight.

Well, yes for Pixar and Marvel.

Whether LucasFilm is going to make back the investment is yet to be seen, depending on merch sales. Because, for the films so far, the *profit* hasn't made up for the $4B price tag. And that's because of the budget and advertising and theater-profit-sharing that eats into the Box Office. Disney has only made $660M in profit in the theatrical window for their new SW movies.

Now, the old movies and the post-theatrical window and the merchandising are certainly bringing in big buck. But, I don't know if all that has surpassed the $4B investment (plus another billion for SWL).

Also, Disney Movie Studios, my usual whipping boy, is still only breaking even on average in the theatrical window (I'm sure post-theatrical puts it far into the black). But, that studio still needs to be straightened out as much as the current Fox movie studio, IMO.

 

[SteamboatJoe]

Well, yes for Pixar and Marvel.

Whether LucasFilm is going to make back the investment is yet to be seen, depending on merch sales. Because, for the films so far, the *profit* hasn't made up for the $4B price tag. And that's because of the budget and advertising and theater-profit-sharing that eats into the Box Office. Disney has only made $660M in profit in the theatrical window for their new SW movies.

Now, the old movies and the post-theatrical window and the merchandising are certainly bringing in big buck. But, I don't know if all that has surpassed the $4B investment (plus another billion for SWL).

Also, Disney Movie Studios, my usual whipping boy, is still only breaking even on average in the theatrical window (I'm sure post-theatrical puts it far into the black). But, that studio still needs to be straightened out as much as the current Fox movie studio, IMO.

The handling of Star Wars, at least the films themselves and the parks implementation, has been shockingly bad, especially considering how well Marvel has been managed, at least on the film end of things.

 

[MisterPenguin]

The handling of Star Wars, at least the films themselves and the parks implementation, has been shockingly bad, especially considering how well Marvel has been managed, at least on the film end of things.

Well, I've never heard anyone express that sentiment before!

My point was: Don't assume that the SW movies have made a profit like the Marvel or Pixar ones have. And it's not because of any mishandling of the movies -- they simply haven't even had enough movies made for an appreciable retun, as with much larger number of Marvel and Pixar movies. And before anyone shouts "Solo!", remember that both Pixar and Marvel had movies that weren't profitable in the theatrical window, too.

If we're talking the handling of movies and the profits they brings, the SW movies (during their theatrical run) had a return of investment of 38%. Pixar was only marginally higher at 42%. [Marvel at 63%, Blue Sky at 150%.]

 

[SteamboatJoe]

Well, I've never heard anyone express that sentiment before!

My point was: Don't assume that the SW movies have made a profit like the Marvel or Pixar ones have. And it's not because of any mishandling of the movies -- they simply haven't even had enough movies made for an appreciable retun, as with much larger number of Marvel and Pixar movies. And before anyone shouts "Solo!", remember that both Pixar and Marvel had movies that weren't profitable in the theatrical window, too.

If we're talking the handling of movies and the profits they brings, the SW movies (during their theatrical run) had a return of investment of 38%. Pixar was only marginally higher at 42%. [Marvel at 63%, Blue Sky at 150%.]

Don't get me wrong, I agree with you. My assessment came less from a business angle and more from just a fan angle.

 

[bartholomr4]

Well, I've never heard anyone express that sentiment before!

My point was: Don't assume that the SW movies have made a profit like the Marvel or Pixar ones have. And it's not because of any mishandling of the movies -- they simply haven't even had enough movies made for an appreciable retun, as with much larger number of Marvel and Pixar movies. And before anyone shouts "Solo!", remember that both Pixar and Marvel had movies that weren't profitable in the theatrical window, too.

If we're talking the handling of movies and the profits they brings, the SW movies (during their theatrical run) had a return of investment of 38%. Pixar was only marginally higher at 42%. [Marvel at 63%, Blue Sky at 150%.]

If your only reason for purchasing Lucas Films was for the SW movies, you may be true.... There is alot more to the investment. Your point is well taken, in the law of large numbers, SW movies haven't made the same percentage as Blue Sky......

 

[WDW Pro]

The handling of Star Wars, at least the films themselves and the parks implementation, has been shockingly bad, especially considering how well Marvel has been managed, at least on the film end of things.

That's because Feige is a genius. Geniuses are exceedingly rare. Lucasfilm is lacking a genius. Lucasfilm had unprecedented control over SWGE.