Disney’s Q2 (Jan/Feb/Mar) FY 2020 Earnings Results Webcast on Tuesday, May 5, 4:30ET

Sirwalterraleigh

Premium Member
Was it this?

"Michael Nathanson -- MoffettNathanson -- Analyst

Thanks. I have two. One is, I wonder, for Bob Chapek. How do you staff the parks in anticipation of an opening? What signals do you look for and what drives your optimization? Is it the number of basically the experience you want to have measure up to a park at full opening? So any type of signals, any type of history you have to staff up in anticipation of an opening. That's one.

And then two for Christine, in answering Ben's question you were helpful in giving us the impact from COVID. But then you guys furloughed employees in April. So how would that answer change furloughed employee world. So how much of the cost base becomes variable post the furloughs? So those are my questions."

Bob Chapek -- Chief Executive Officer

"Yeah, in terms of the signals we look for park opening, our hypothesis is because of pent-up demand that if we open up at something less than 50% of our standard capacity that we're probably not going to have trouble filling that. So whatever level we stage that out, whether it's 10%, 25% or 50% of typical crowds, that's what we'll be able to have at our park. Therefore we will staff accordingly to that type of level, whatever that level will be eventually.

In terms of optimization and sort of how we'll approach that, obviously labor is a huge component of our cost base and so that will slide with the attendance. And that's why I said when we're looking at the decisions for what that level would be inside the parks and what we're going to be targeting for, it's really looked at as a contribution to net contribution and profit as opposed to saying that we're going to sort of cover the entire [Technical Issues]. Therefore, that gives us the ability to make our decisions on a variable basis and keep as much of that cost structure variable as possible. Obviously, we'll practice a yield strategy overall just like we always have."
That to me looks like a guy who will keep the attendance down to Maximize prices at first...no promos.

It’s up to the consumers to regulate what they pay in the new world...actually it always is...but they’re rarely “up” to it.
 

GoofGoof

Premium Member
Was it this?

"Michael Nathanson -- MoffettNathanson -- Analyst

Thanks. I have two. One is, I wonder, for Bob Chapek. How do you staff the parks in anticipation of an opening? What signals do you look for and what drives your optimization? Is it the number of basically the experience you want to have measure up to a park at full opening? So any type of signals, any type of history you have to staff up in anticipation of an opening. That's one.

And then two for Christine, in answering Ben's question you were helpful in giving us the impact from COVID. But then you guys furloughed employees in April. So how would that answer change furloughed employee world. So how much of the cost base becomes variable post the furloughs? So those are my questions."

Bob Chapek -- Chief Executive Officer

"Yeah, in terms of the signals we look for park opening, our hypothesis is because of pent-up demand that if we open up at something less than 50% of our standard capacity that we're probably not going to have trouble filling that. So whatever level we stage that out, whether it's 10%, 25% or 50% of typical crowds, that's what we'll be able to have at our park. Therefore we will staff accordingly to that type of level, whatever that level will be eventually.

In terms of optimization and sort of how we'll approach that, obviously labor is a huge component of our cost base and so that will slide with the attendance. And that's why I said when we're looking at the decisions for what that level would be inside the parks and what we're going to be targeting for, it's really looked at as a contribution to net contribution and profit as opposed to saying that we're going to sort of cover the entire [Technical Issues]. Therefore, that gives us the ability to make our decisions on a variable basis and keep as much of that cost structure variable as possible. Obviously, we'll practice a yield strategy overall just like we always have."
I saw that section. If this is it then I just misunderstood what the other poster was saying. I thought he meant they gave a specific percentage for WDW like they did for Shanghai.
 

GoofGoof

Premium Member
That is a first that an executive divulged the secret attendance capacity numbers.
I know...it’s stunning they even gave a number at all.
If you believe the TEA reports Shanghai had 11.8M visitors in 2018 that’s roughly 32,000 per day on average. So they are limited by the government to 24,000 but they expect that to go up soon. It doesn’t seem like the limit at Shanghai will impact guest count all that much.
 

Jtdancy

Member
What makes you think Disney Plus doesn't pay the studios for their content. Netflix was paying Disney various studios 300 million a year plus buying the Marvel Shows. You can count on the fact tgat Disney Plus is actually paying more. As I tried to explain before, Disney can be making more money with Disney Plus than they were with Netflix and still have Disney Plus show a loss. Look at it this way, Disney Plus now has 54.5 million customers paying just over $5.00 a month. That brings in 272.5 million a month. Out of that they are paying for new shows, Disney Plus exclusives and the rights to the various libraries. So, suppose they are paying 150 million a month on new shows and 200 million a month for the libraries. That does not even cover operating costs or start up costs but the loss of about 400 million in the quarter ignores the fact that 600 million was paid to the studios for their libraries vs the 75 million Netflix was paying so their profits were actually 125 million higher than they would have been under the old Netflix contract. The numbers I used werevfor comparative purposes only and are not the actual numbers.

Maybe I'm missing the point here... but Disney owns all of the content on D+ so they are paying no rights/licensing fees, right? They do have to pay production costs, e.g. $100 million for the entire Season 2 of Mandalorian.
 

peter11435

Well-Known Member
Maybe I'm missing the point here... but Disney owns all of the content on D+ so they are paying no rights/licensing fees, right? They do have to pay production costs, e.g. $100 million for the entire Season 2 of Mandalorian.
Disney+ (Part of Disney Direct-to-Consumer & International) has to pay the other divisions of the company (parts of both studio entertainment and media networks) for content. Just as Netflix or any other service would have had to pay them for that content before.

Additionally the company is no longer being paid by outside services such as Netflix for content it now distributes in house.
 

drnilescrane

Well-Known Member
Maybe I'm missing the point here... but Disney owns all of the content on D+ so they are paying no rights/licensing fees, right? They do have to pay production costs, e.g. $100 million for the entire Season 2 of Mandalorian.

Disney+ pays full price to the The Walt Disney Studios for the content. Studios then reports that gross price as part of their income. They then true up the margin in a separate column (eliminations) to calculate the final overall company operating/net income.

That way it shows the true performance of the Studios business, i.e. the studios doesn't loose money just because they are forced to sell to Disney+ vs Netflix. Which is why you get into the silly situation of Peacock (NBC) bidding against Netflix for the rights to NBC's The Office.

Similarly, the Parks/Consumer Products business pay the studios royalties for the use of their IP.
 

Sirwalterraleigh

Premium Member
Disney+ (Part of Disney Direct-to-Consumer & International) has to pay the other divisions of the company (parts of both studio entertainment and media networks) for content. Just as Netflix or any other service would have had to pay them for that content before.

Additionally the company is no longer being paid by outside services such as Netflix for content it now distributes in house.
Disney+ pays full price to the The Walt Disney Studios for the content. Studios then reports that gross price as part of their income. They then true up the margin in a separate column (eliminations) to calculate the final overall company operating/net income.

That way it shows the true performance of the Studios business, i.e. the studios doesn't loose money just because they are forced to sell to Disney+ vs Netflix. Which is why you get into the silly situation of Peacock (NBC) bidding against Netflix for the rights to NBC's The Office.

Similarly, the Parks/Consumer Products business pay the studios royalties for the use of their IP.
That’s shell game accounting though...and in an ideal world they wouldn’t bother with that crap...

Same kinda nonsense DDC has when they are “negotiating” with parks. It’s silly.
 

bryanfze55

Well-Known Member
I’m fine with dividends as a way to return excess cash to shareholders. I think we should go back to the early 80s rules when it was illegal for a company to buy its own stock. I’m not allowed to buy a single share of my company during the quarterly blackout period (last day of a quarter until we file our 10Q/10K) because I have access to non-public financial information but my company can buy its own shares back during the same times. Stock buybacks combined with executive stock options drive the short term decision making that plagues corporate America.

Thank you for teaching me something new today. Buybacks are so commonplace nowadays, and my company talks about doing them so nonchalantly... I’m shocked to learn they were illegal less than 40 years ago (this was also way before my time).
 

WDW Pro

Well-Known Member
It’s a really bizarre relationship for sure...

It’s always played as a 50/50 thing...maybe on costs...but who are they kidding?

The state has a minimum 51% control when the buck stops

It was a huge gamble for Disney to build in China. Everyone can pretend Disney owns those parks, but if relations deteriorate between China and other countries, China can take control of those parks at any time. Playing with real authoritarianism is always dangerous... and you're kidding yourself if you think that fire won't eventually burn.
 

Sirwalterraleigh

Premium Member
It was a huge gamble for Disney to build in China. Everyone can pretend Disney owns those parks, but if relations deteriorate between China and other countries, China can take control of those parks at any time. Playing with real authoritarianism is always dangerous... and you're kidding yourself if you think that fire won't eventually burn.
Agree...

It was always going to be the “deal”

I also believe those parks have zero to do with growing business or generating fan bases in China.

I think Eisner and then Iger tried to get “ahead of the Curve” and offer American acceptance for the regime in favor of the very best sweatshop deals. Remember that 20 years ago when they were pitching the parks in China...merchandise was their easy money cash cow...and espn. They make a fortune off cheap produced product.

Now that is not as big a deal after consumer habits have begun to change...still lucrative though.
 

GoofGoof

Premium Member
I realize that...I’m currently in my “ideal” world.

The companies do - however - define the segments more or less.
I’d like to have the power for 1 day to change all of the SEC rules that make no sense...actually it might take me a little longer than a day;)

Companies have a lot of control over segments - there are guidelines but it’s an art not a science. The segment tables also show mostly in the MD&A which is less scrutinized than the audited financial statements and footnotes. Typically the biggest red flag would be if companies change their segments frequently. In the case of Enron they would change segments to hide poor results. Combine a business with good results with one that is underperforming. That’s frowned upon now. The SEC will issue comment letters if they feel your segments are not properly reflecting the business.

You are supposed to have a separate segment for each material aspect of your business. It’s usually based on how management is setup and who runs the businesses. In this example to avoid having inter-company charges between Disney+ and the Marvel Studios they would need to both roll up under one senior executive and be combined in the same segment. Since the business is not very similar it’s unlikely they would do that. Even if Disney+ and Marvel were in the same segment they would probably still have an inter-company charge between them because I’m sure they are setup as separate legal entities. Those inter-company transactions would just eliminate within the segment itself so you would never see them on the segment table. When an inter company charge crosses segments the offset is shown in the elim column to get you back to the consolidated results. For TWDC consolidated results those internal transfers don’t show anywhere.
 

Register on WDWMAGIC. This sidebar will go away, and you'll see fewer ads.

Back
Top Bottom