News Chapek FIRED, Iger New CEO

[Sirwalterraleigh]

@el_super I mean I guess in a really facile and simplistic way, you could say that overcrowding at the parks is a function of low supply and high demand, and that in order to optimize profits Disney should switch demographics from the middle to upper class by increasing ticket prices, thereby achieving the maximum amount of money for an inherently limited total capacity. But if we factor in any more nuance, this idea falls apart.

First of all, the United States economy could not support this business model. The upper class is both too small and too economically diverse to specialize in as a market when you're operating with four mega theme parks.

Secondly, they're theme parks. To the middle class they are a great family destination and so demand is high, but for the upper class-- who can afford real luxury vacations-- they are cheap and gaudy. There isn't any way in which you can plus the theme parks in order to increase their prices enough to compensate for the massive drop in attendance that would be associated with switching from the general public to the upper class specifically.

Plus, you yourself have claimed that Disney is largely popular not because it's actually worth what it costs, but because it's THE American family vacation destination and people feel like they need to take their kids there. But if you switched to the upper class, Disney would necessarily become an unpopular family vacation destination, because it would be too expensive for most American families. The cultural privledges Disney has would then probably be lost, and that's a best case scenario, providing they don't accumulate negative public perceptions due to outpricing normal people.

Plus, this isn't even considering merchandise, food, etc, where Disney gets lots of money from the parks. Decreasing attendance and increasing ticket prices would only reduce profits in these areas, and given how cheap their merch and food are in value terms, they couldn't increase their prices no matter who they're selling to. So they would also need to change their mechandizing strategy, which seems almost as unlikely as the main objective here.

So wait a minute…you’re saying there can be CONTEXT to economic principles?…like in the real world?

…hmmm…might just be crazy enough to be true…

 

[el_super]

But if you switched to the upper class

It's not an either/or situation. There's over 100 million adults considered "middle class" in the US, and WDW can probably get 20 million through the resort a year. You can price out half the middle class, and still have a lot of population to work with.

Yes, Disney loses money by pricing their product too high and pricing people out, but the other side to that argument is: how many people have refused a trip, and how much has Disney left on the table, just by being uncomfortably busy all year round?

 

[Sirwalterraleigh]

It's not an either/or situation. There's over 100 million adults considered "middle class" in the US, and WDW can probably get 20 million through the resort a year. You can price out half the middle class, and still have a lot of population to work with.

Yes, Disney loses money by pricing their product too high and pricing people out, but the other side to that argument is: how many people have refused a trip, and how much has Disney left on the table, just by being uncomfortably busy all year round?

50,000,000 middle class aren’t going to wdw each year…most don’t have any inkling to go near it. Reducing the pool isn’t gonna increase the uptake.

Not everyone loves the place or feels proud of themselves to be there. Add that “log” onto your fire.

Same vein…there aren’t 10,000,000 “upper” class who would go there with frequency either.

It’s just not good enough. Meat market rides, housekeeping every other day, no food past 10 o’clock…and chicken fingers at that …

You’re bringing a knife to a gun fight here.

The place wasn’t “thrown together” without a plan…
…it’s merely being run that way now.

 

[el_super]

50,000,000 middle class aren’t going to wdw each year…most don’t have any inkling to go near it. Reducing the pool isn’t gonna increase the uptake.

No one wants the parks to grow pass where they already are. We are talking about reducing demand, not increasing it.

 

[Sirwalterraleigh]

No one wants the parks to grow pass where they already are. We are talking about reducing demand, not increasing it.

But not reducing attendance.

If you reduce your pool that much…you’ll take down both

 

[el_super]

But not reducing attendance.

If you reduce your pool that much…you’ll take down both

As far as long term growth is concerned, they don't care what the attendance of the park is. Iger was clear on this. They only care about the revenue.

Iger was convinced that the Wal-Mart model of low prices and heavy volume wasn't good for the long term. I agree with him on this.

In case you aren't listening in, Disney is indicating that WDW's attendance is at or surpassing 2019 levels today, even though International visitors still haven't come back. Demand is not abating.

They are going to have to start turning more and more people away with reservations. Is that really the better option than just pricing them out?

 

[pdude81]

As far as long term growth is concerned, they don't care what the attendance of the park is. Iger was clear on this. They only care about the revenue.

Iger was convinced that the Wal-Mart model of low prices and heavy volume wasn't good for the long term. I agree with him on this.

In case you aren't listening in, Disney is indicating that WDW's attendance is at or surpassing 2019 levels today, even though International visitors still haven't come back. Demand is not abating.

They are going to have to start turning more and more people away with reservations. Is that really the better option than just pricing them out?

They can't count on this level of demand forever. This is a moment to make as much as you can while people are still trying to pretend everything is normal in the world. And if there is a major recession, they can lower prices to bring back some of the riff raff. International travel should be ramping up as some of the domestic revenge travel dies down.

 

[el_super]

They can't count on this level of demand forever. This is a moment to make as much as you can while people are still trying to pretend everything is normal in the world. And if there is a major recession, they can lower prices to bring back some of the riff raff. International travel should be ramping up as some of the domestic revenge travel dies down.

Yeah it's a given that they can lower prices and offer discounting when demand is low, but why isn't the opposite accepted: that they can raise prices when demand is high? Seems counter intuitive.

 

[MrPromey]

You're not really saying anything different here from what I was saying: Disney chooses to keep the prices where they are at, because they want to keep more people happy. They are betting that their wider audience is happier with cheaper access and convoluted pricing schemes than they would be if they just raised prices across the board and improved the experience.

To be completely fair though, Disney has been good at offering better experiences for people who want to pay more: Genie+ being one of them, but you can also count the private parties (paying the same for a few hours of no lines), and even things like the Cruise Line all the way up to Club 33.

Going to the park and paying for a ticket during a "normal" operating day is just a basic entry level experience and Disney keeps it that way because it's better for the overall health of the company to keep people engaged in the brand, and digesting content through the parks, than it is to provide a premium experience.

Perhaps the difference is in the nuance.

The way you've continuously worded this makes it sound like they're throwing people a bone. You put it at one point as making people happy and sacrificing profit for that.

I'm saying if they thought they could completely shuck the middle class, go for whales and leach them dry to make as much or more money, they'd do it in a heartbeat.

They're not sacrificing or trying to keep more people happy. They're trying to extract the most money they can out of the most customers they can - period.

These extra hours events? That causes the parks to close early creating shorter times in the MK without any discount. They've essentially found a way to sell the same day to people twice and given them an incentive to pay the higher price for the second even shorter hour ticket. The shorter hours for day guests that result also compresses capacity meaning that it's not just mid-day that's busy anymore and that in turn pushes people to spend on the extra hours events to be there when the rest of the crowds, now more miserable, aren't.

Did people really want that? Or did Disney create a problem for guests to buy their way out of?

Outside of Mickey's Not So Scary which one time went for just a little over a month and the Very Merry Christmas, a "normal" operating day is all there was.*

Not so anymore and the primary benefactor in all of that is Disney.

This is just one example of how Disney absolutely is not trying to keep more people happy. They're artificially making the MK more congested in that example and then selling the solution to the problem they created back to guests.

Genie+ is simply another example of that.

Cruise lines and Club 33 which don't generally create a negative impact on other paying guests are all well and fine but this other crap is, well, crap.

*E-Ticket night was obviously an exception but looking at the pricing and the "day" park hours for those, it clearly wasn't in the same ballpark as what they're doing now.

 

[BlakeW39]

It's not an either/or situation. There's over 100 million adults considered "middle class" in the US, and WDW can probably get 20 million through the resort a year. You can price out half the middle class, and still have a lot of population to work with.

Lol, Disney already does this. Their parks are, and this may be shocking, actually very expensive, and a Disney vacation is not affordable to a large part of the American middle class. Disney also continues to increase prices, and logically therefore continues to cut out a larger share of poorer guests. If this was all you were suggesting, then no one would have anything to argue with.

The only way they're going to be able to show growth in the long term, is a massive "reset" of the parks business into a premium brand.

The parks are built to service the middle class; trying to turn them into an upper class premium brand would essentially require tearing them down and starting over from scratch.

That might be what is required... yes.

But if you switched to the upper class

But instead, you actually make it very clear that you are advocating for a switch in their business strategy, which you specifically frame as "either/or"-- you literally call it a "massive reset."

So this,

There's over 100 million adults considered "middle class" in the US, and WDW can probably get 20 million through the resort a year. You can price out half the middle class, and still have a lot of population to work with.

is really just moving the goal posts, which is a rhetorical fallacy. You're now walking back your more extreme takes in favor of more moderate ones.

 

[MrPromey]

It wasn't. Cable is a dying medium and they are working toward streaming as a way to replace the revenue coming from Cable. Not really all that difficult to see why. Technology moves forward.

As for the amount they're spending on Disney+: they are still first and foremost a studio. A content factory. Their IP business feeds all the other businesses, cable, streaming, theatrical and even the parks. No reason at all to complain that a content factory is making more content. The parks business will always be second to that. Always.

Cable's a dying medium but ESPN has already made the leap to streaming as I'm sure you know but when you talk about it in the past-tense, it makes it sound like you believe it's days of driving revenue are over.

What's replacing that?

Disney+ is a streaming service that shows no outward signs of a pivot to profit in the foreseeable future.

I was going to talk a ton about that with the cost of what they've produced that shows no forward moving value in things like DVD/Bluray sales or merchandise (besides stuff with green ears) - how many Lego sets have we seen based on any of the Marvel shows for instance? - where they make at least half of their revenue from most of their releases, how a large percentage of their current users are on discounted or free plans that can't continue indefenitely, etc. but I'm getting off track.

Disney+ is not the studios. It's a money pit with no clearly communicated path to profitability.*

Maybe it'll get there. Maybe it won't.

My point was, if they wanted to pivot WDW into something for the elite, they'd have to be willing to pull a Disney+ and probably take a loss for many years to build it into something worth asking a truly premium price for and allowing the time for the loss of 75% of their fan base to be recovered by the newer big spenders, assuming they could pull that off.

Personally, I don't think they could and I think the existing infrastructure is way too overbuilt (even if the guest-facing aspects of the parks are under-built) to survive under that model.

So they're largely stuck with the audience they have - people willing to spend on the Grand Floridian because in their normal life, they have never gotten close enough to high-end luxury to realize that ain't it when they're splurging on their big vacation and running up those credit cards.

I think I'm going to bow out with this post now, though.

I feel like you're ignoring a lot of the hard points I'm making and trying to debate on the parts you think you still can while changing context of the discussion mid-discussion as someone else pointed out and there are plenty of other people here to keep you busy so I'm going to leave you to it.


*UPDATE - Okay, I guess this is their plan:

Disney+ is getting more expensive... unless you want ads

Disney+ just got more expensive. Unless you're willing to watch ads.

www.cnn.com

which might work if the extra per capita revenue offsets the canselations and churn around releases that are going to result.

 

[Midwest Elitist]

So this,
is really just moving the goal posts, which is a rhetorical fallacy. You're now walking back your more extreme takes in favor of more moderate ones.

That is a Motte and Bailey, sir.

 

[BlakeW39]

That is a Motte and Bailey, sir.

Actually it is shifting goal posts: a motte-and-bailey implies two premises used in a more conjoined way, whereas he's just changing his argument over time as he's being criticized.

 

[HauntedPirate]

It took two nitwits less than 10 years together to erode 40 years worth of goodwill with their pricing schemes and neglect of the basics that built these theme parks. And people applaud them for it when they keep visiting.

 

[pdude81]

Yeah it's a given that they can lower prices and offer discounting when demand is low, but why isn't the opposite accepted: that they can raise prices when demand is high? Seems counter intuitive.

They can and already have. But if you've already gotten away with murder, do you really need to keep pressing your luck?

 

[MrPromey]

Actually it is shifting goal posts: a motte-and-bailey implies two premises used in more conjoined way, whereas he's just changing his argument over time as he's being criticized.

We need more debates like this on here.

Seriously, it's way more fun!

 

[ParksAndPixels]

Can I just say that every time I read this thread title… I have a brief moment where I’m very happy… then I realize it doesn’t say what I want it to… #ByeChapek

 

[Rich Brownn]

Ruh roh, someone go check on $lappie!

Want to watch free TV? This station owner is here to help

Media company E.W. Scripps has launched an education campaign to promote the use of over-the-air antennas to get broadcast signals.

www.latimes.com

Take this with a grain of salt, but there has to be some truth in this:

The irony, of course, was in the days of cable everyone complained they got channels they didn't want, and demanded a la carte. This is a great example of be careful what you wish for...

 

[Lilofan]

It took two nitwits less than 10 years together to erode 40 years worth of goodwill with their pricing schemes and neglect of the basics that built these theme parks. And people applaud them for it when they keep visiting.

Both have got the support of the Disney Board for their leadership and the current top dog even got a 3 year contract extension.

 

[el_super]

So this, is really just moving the goal posts, which is a rhetorical fallacy. You're now walking back your more extreme takes in favor of more moderate ones.

I think I see what happened here... you made some pretty significant assumptions on what I was trying to say and then wrapped it all up in a neat little package of personal bias.

The biggest assumption you seem to have wrongly made here is assuming that Premium Brand = Pricing out all of the middle class by default. That "massive reset" could only mean tearing the whole place down and building an ultra-lux paradise that only Jeff Besos would want to visit. Your original argument was peppered with either/or fallacies insinuating that Disney has to either appeal to the middle class


So to try to make this clear, yes I think Disney is a premium brand and yes I think they need to price more people out. Whether you want to extend that into a war on the middle class or not is up to you, but pricing more people out doesn't mean changing the brand to only attract the ultra-rich.

More specifically, and to address what I referred to as a "premium brand" they would need to:

• Remove the ticket prices tiers and plans
• Raise prices to reduce overall demand
• Lower attendance to create a more inviting experience
• Increase guest satisfaction by removing unneeded management schemes like Genie+ and Individual Lightning Lane
• Remove the park pass reservations

It's more of just a reset to what they used to be like in the past. I recognize that keeping attendance lower and improving the experience would absolutely mean higher prices and pricing more people out, but I'd personally be willing to pay more for a better experience than what the parks provide today. Not everyone has to agree with that, but I think Disney definitely has room here to move up.

And yes, it might require a massive reset in thinking and infrastructure. Keeping people coming back year after year at a higher price means that lower performing attractions would need to be removed, and that new attractions would need to be added at a constant rate. It would mean changing the a lot of the shape of the parks, to keep adding and plussing them, but I'm not afraid of change and I personally think it would be worth it.

NONE of this should be all that shocking, because it's just a variation of what Disney themselves have been saying for the last few years. They make more money when fewer people are in the park. This whole discussion is coming on the heals of the "Unfavorable Attendance Mix" comment made in the quarterly results yesterday. Disney absolutely knows they have a problem with brand perception and discounting and they need to change that perception away from the discounting (thru Annual Passes) that has ate into what their core audience is willing to pay for a trip.

Eliminating Annual Passes would definitely be a massive reset for their park business. It's a change to their general operating strategy they have had in place since 2008. Massive reset in this case doesn't mean this:

And I know I could be wrong, and that from a business perspective, Disney may want to continue the Wal Mart strategy of low prices and heavy volume for years if not decades to come. It keeps the audience expectations low and their costs down. It does work, but it leaves little to no room for any growth outside of building more international parks and cruise ships.

It just seems off that groups of people here on this board would be advocating for that strategy, but if it works for you, great.