News Disney plans to accelerate Parks investment to $60 billion over 10 years

[fgmnt]

How about: Sensible project spending, actual expansion of capacity, and some original ride ideas instead of every damn thing requiring movie IP? Nah, that's too logical. Better to double/triple/quadruple down on Iger's strategies from the past 15 years, that'll fix everything.

There’s some kind of synthesis of the cynicism: the willful rotting and active dismantling of WDI under Iger is going to be a countervailing force against executing this capital outlay. You’re going to outsource more (elements of) projects to more expensive and more generic professionals and you’re not going to solve your seemingly intractable problem of project budget cost and time bloat.

There’s also a kind of cost to the road not taken by kneecapping WDI: what efficient, high RoI ideas die in the womb because of executive IP edicts or poor health of the WDI institution?

How bad Disney got at delivering P&R projects under Iger shows how not seriously the division’s long term domestic outlook was developed. I think we have gotten a lot of great domestic projects to open in the last decade but the company is worse at it than they were 30 years ago and they are not really trending back to that level.

 

[flynnibus]

My take is… I think controlling costs and raising prices are opposing goals. Controlling costs means decreasing output. (Unless they have some kind of hack for that, that I’m unaware of - more output, without reality shows, for less cost? Now that would be a secret.) Content is expensive as heck to make. But D+ already lags behind platforms like Netflix when it comes to content. Reduce it more, plus increase prices? People will pop in for a month to catch up and then peace out.

You assume today’s landscape is forever- it’s not.

They can reduce costs and still make compelling content.

The idea of switching by month will get squeezed out by leveraging prices to make it more attractive for people to sign up for 6-12months.

Disney will not be alone chasing these goals. People are not going to flock back to antennas or cable. The market will move as the players shape it

 

[Stripes]

The chart represents Disney's willingness to invest current revenue into P&R's future.

That $6B per year is spread across a lot more theme parks, resorts, and DCL ships than it would have been decades ago.

Pulling out a chart I created years ago, Disney used to spend a lot more per theme park than they do today.

View attachment 743923

No one should think $60B is a pittance. We're sure to see exciting new lands and attractions added to WDW, much better than the lean years of the early 21st Century.

But $60B spread across Disney's worldwide P&R ventures is not the "wow" number I first thought it was.

It would seem to me that, based on the $60 billion figure, we’re looking at another Disney decade.

$60 billion is $500 million per park per year, and while this doesn’t include the cruise line, it also doesn’t count the fact that $60 billion is coming from the Disney company. Many of the international park projects will be funded at some significant level by partners.

 

[CaptainAmerica]

Time for a chart!

At first I thought, wow! $60B over 10 years at domestic & international theme parks, resorts, and DCL - pretty good!

But then I was shocked at how ordinary this is compared to previous Iger years, and poor compared to Eisner years and before. To appreciate this, I have to explain the following chart.

This chart looks at current year's Parks & Resort (P&R) revenue compared to the average P&R capex spent over the next 10 years.

For example, Disney announced plans to spend $60B over the next 10 years, an average of $6B per year. If 2023's P&R revenue is $30B, then this works out to 20% ($6B / $30B) in 2023.

For 2023 and before, actual P&R revenue and capex are used. For 2024 and later, I simply assume an average of $6B P&R capex per year.

When you chart what Disney has done in the past compared to what they've announced, it's just not impressive:

View attachment 743920

Why would you frame it as "capex as a percentage of revenue"? I'm much more interested in capex in absolute terms, maybe adjusted for inflation.

What's a bigger investment? Building two cruise ships when I already have two? Or building three cruise ships when I already have four? Your chart tells us that the former is a bigger investment but common sense tells us that the latter is.

 

[seascape]

Disney is going to double CapEx spending in the parks division means nothing. That is in dollars but due to inflation, prices will more than double. So a 100% increase in spending has to be cut by more than half, or spending will actually decrease.

 

[doctornick]

I didn’t think it was some kind of secret, I just find it implausible. Which is why I was curious regarding what metric for profitability you found convincing.

My take is… I think controlling costs and raising prices are opposing goals. Controlling costs means decreasing output. (Unless they have some kind of hack for that, that I’m unaware of - more output, without reality shows, for less cost? Now that would be a secret.) Content is expensive as heck to make. But D+ already lags behind platforms like Netflix when it comes to content. Reduce it more, plus increase prices? People will pop in for a month to catch up and then peace out.

There may be a path to profitability for D+. But I think it will involve something a little more uncharted than just assuming people will pay a much higher monthly fee as Disney’s production costs somehow go down.

Well, part of the large costs for D+ has simply been developing the platform in general and then substantial costs to roll it out in various countries (not just the physical distribution, but regulatory issues, etc). Disney has now rolled out pretty much throughout the developed works so those expenditures have been lower over time. It’s not just content.

 

[doctornick]

The chart is a little manipulative. Sure, as a percent it’s not as high. That’s because the business is much much bigger than it was 10 years ago, much less 50 years ago. You can’t expect a mature business to constantly reinvest 70% of revenue. This isn’t 1972. 10% of today’s revenue dwarfs 70% of 1972, even adjusted for inflation. The parks being in $10 billion in accounting profit (cash flow is much greater when you account for depreciation and other clever tax saving measures) nowadays.

Yeah, I would at least like to see a similar chart indicating expenditures in gross terms, adjusted for inflation.

 

[LSLS]

They have made this commitment in prior earnings calls as well, these are statements to investors and are not Josh level blue sky announcements. I suggest you both research the consequences for making false statements to investors. While the dollar amount may change, and macro economic factors may impact the true number, the investment is more likely than not in the ballpark of what they have said to investors.

And that was my point of the cost of even a scaled back galaxy's edge is still rather small compared to the enormous amount of what will be invested.

I really don't understand the pessimism.

I think you are thinking this is a lot more than it may be. It sounds huge, but it represents a 25% increase over what they normally spend in a year. That's a good thing, but it's not nearly as much as you are thinking it will be.

And as I said before, the pessimism of a lot is less to do with if the money gets spent and a lot more to do with if it will be meaningful at all. People want more attractions, not the same ones there simply redone. I agree with you, I don't think this is a blue sky thing in terms of money they will spend. But simply stating you will spend this money without showing what it will go towards isn't going to excite people at this point. There have simply been too many things announced that never went anywhere at this point, and people are in a "Show Me" attitude about what will happen with the money.

 

[ToTBellHop]

I’m super psyched that Josh finally came here and saw Martin’s maps revealing their 1000 acres to build on.

If only we had known Josh simply didn’t know there was space, we could have avoided all the replacements.

 

[Tha Realest]

I’m super psyched that Josh finally came here and saw Martin’s maps revealing their 1000 acres to build on.

If only we had known Josh simply didn’t know there was space, we could have avoided all the replacements.

Considering how few new rides and attractions have expanded the existing footprint of the respective WDW parks, this might be true!

 

[Disstevefan1]

Lying in a securities filing is a big no no. I would suggest you look at the document (DIS's 8k filed today) I will link it here for you. Even if there is no 5th park its simply false to say WDW won't get any meaningful updates based on today's securities filing and that the $60 billion investment would be a lie.

https://www.sec.gov/edgar/browse/?CIK=1744489

I hope WDW gets some of the money and its spent to do something meaningful. "Plans" change over time. Lets see what happens.

 

[Goofnut1980]

It would seem to me that, based on the $60 billion figure, we’re looking at another Disney decade.

$60 billion is $500 million per park per year, and while this doesn’t include the cruise line, it also doesn’t count the fact that $60 billion is coming from the Disney company. Many of the international park projects will be funded at some significant level by partners.

I wonder what it cost them to build Tron over the last 72 years?

 

[ToTBellHop]

I wonder what it cost them to build Tron over the last 72 years?

That’s not fair. The building sat empty for years after Walt died so they could figure out how to complete his last great idea. It was worth the wait, though. Walt could have never fathomed blue gates.

 

[ParentsOf4]

The chart is a little manipulative. Sure, as a percent it’s not as high. That’s because the business is much much bigger than it was 10 years ago, much less 50 years ago. You can’t expect a mature business to constantly reinvest 70% of revenue. This isn’t 1972. 10% of today’s revenue dwarfs 70% of 1972, even adjusted for inflation. The parks being in $10 billion in accounting profit (cash flow is much greater when you account for depreciation and other clever tax saving measures) nowadays.

Let's focus on more recent history.

In the 10 years (2010-2019) before COVID resulted in unprecedented P&R revenue disruption, the average "Forward Capex vs. current revenue" number was 24.6%.

With the announced $60B investment over the next 10 years, that number stands at an estimated 21.3% in 2023.

Even compared to recent history, the $60B investment is just so so.

Why would you frame it as "capex as a percentage of revenue"? I'm much more interested in capex in absolute terms, maybe adjusted for inflation.

What's a bigger investment? Building two cruise ships when I already have two? Or building three cruise ships when I already have four? Your chart tells us that the former is a bigger investment but common sense tells us that the latter is.

capex as a percentage of revenue is a common metric across multiple industries. It shows how much a company is investing in its future. A large percent shows a company is trying to grow its business. A small number shows it is trying to maintain its business.

DCL is a good example. The fleet is quickly expanding from 2 ships to 7 ships. Disney is rapidly growing its cruise line business.

What about what most on this thread really care about, WDW?

It’s now been 25 years since WDW’s last theme park, by far the biggest span between expansions.

It’s even worse than that at WDW.

Rather than getting new lands, capex is spent (for the most part) tearing down existing lands and attractions, and simply replacing them with something based on an IP. This is not expansion. Instead, this is closing down popular lands and attractions and replacing them with things with more film and retail tie-ins.

WDW hasn’t expanded much since 1998 and that’s my point. $60B sounds like a great number (with Disney previously reporting that $17B of this is targeted for WDW), but we have not see a large expansion at WDW in decades. Avatar is a new land, but it was needed because DAK was an unfinished park when it opened.

Meanwhile, Universal recently acquired and then opened a new water park, and is in the process of soon opening an entirely new theme park.

The comparison is even worse than that. Universal opened Islands of Adventure in 1999. A very incomplete Disney’s Animal Kingdom opened in 1998. Technically, Universal has opened two theme parks since WDW’s last theme park.

Repeating what I previously wrote, we should see some nice lands and attractions at WDW in the coming decade. But, at least for WDW fans, $60B is not a “wow” number.

 

[el_super]

I think you are thinking this is a lot more than it may be. It sounds huge, but it represents a 25% increase over what they normally spend in a year. That's a good thing, but it's not nearly as much as you are thinking it will be.

There is something about this that is ... wrong. The amount they spent over the period between 2015 and 2019 was not "normal" in any sense. They spent a lot trying to get the two SWGE lands open, in addition to the smaller attraction openings that were still occurring. Wall Street made a note of it. Iger commented on it. It was seen as an unusual uptick in spending with the hope that, once those new lands were open, Disney would pull back on park spending and reap the rewards of years of investment.

To say that they are going to continue that level, and then exceed that, is remarkable.

 

[ToTBellHop]

There is something about this that is ... wrong. The amount they spent over the period between 2015 and 2019 was not "normal" in any sense. They spent a lot trying to get the two SWGE lands open, in addition to the smaller attraction openings that were still occurring. Wall Street made a note of it. Iger commented on it. It was seen as an unusual uptick in spending with the hope that, once those new lands were open, Disney would pull back on park spending and reap the rewards of years of investment.

To say that they are going to continue that level, and then exceed that, is remarkable.

If they can make another damn Marvel series, they can give us another carousel or something.

 

[el_super]

With the announced $60B investment over the next 10 years, that number stands at an estimated 21.3% in 2023.

Even compared to recent history, the $60B investment is just so so.

Yeah but at that point, it almost seems like you're criticizing them for making TOO MUCH money now.

 

[SplashJacket]

Let's focus on more recent history.

In the 10 years (2010-2019) before COVID resulted in unprecedented P&R revenue disruption, the average "Forward Capex vs. current revenue" number was 24.6%.

With the announced $60B investment over the next 10 years, that number stands at an estimated 21.3% in 2023.

Even compared to recent history, the $60B investment is just so so.


capex as a percentage of revenue is a common metric across multiple industries. It shows how much a company is investing in its future. A large percent shows a company is trying to grow its business. A small number shows it is trying to maintain its business.

DCL is a good example. The fleet is quickly expanding from 2 ships to 7 ships. Disney is rapidly growing its cruise line business.

What about what most on this thread really care about, WDW?

It’s now been 25 years since WDW’s last theme park, by far the biggest span between expansions.

It’s even worse than that at WDW.

Rather than getting new lands, capex is spent (for the most part) tearing down existing lands and attractions, and simply replacing them with something based on an IP. This is not expansion. Instead, this is closing down popular lands and attractions and replacing them with things with more film and retail tie-ins.

WDW hasn’t expanded much since 1998 and that’s my point. $60B sounds like a great number (with Disney previously reporting that $17B of this is targeted for WDW), but we have not see a large expansion at WDW in decades. Avatar is a new land, but it was needed because DAK was an unfinished park when it opened.

Meanwhile, Universal recently acquired and then opened a new water park, and is in the process of soon opening an entirely new theme park.

The comparison is even worse than that. Universal opened Islands of Adventure in 1999. A very incomplete Disney’s Animal Kingdom opened in 1998. Technically, Universal has opened two theme parks since WDW’s last theme park.

Repeating what I previously wrote, we should see some nice lands and attractions at WDW in the coming decade. But, at least for WDW fans, $60B is not a “wow” number.

I think this is very disingenuous. Just because spending is at a lower percentage of total revenue, doesn’t mean the new spend is peanuts.

They’ve spent crazy money over the last few years on both attractions and infrastructure globally over the last decade. People complained that Shanghai stole all the budget. A sheer continuation of previous expansion is good news, an expansion of that budget is even greater news. The percentage of revenue statistic is extremely misrepresentative.

 

[monothingie]

I think this is very disingenuous. Just because spending is at a lower percentage of total revenue, doesn’t mean the new spend is peanuts.

They’ve spent crazy money over the last few years on both attractions and infrastructure globally over the last decade. People complained that Shanghai stole all the budget. A sheer continuation of previous expansion is good news, an expansion of that budget is even greater news. The percentage of revenue statistic is extremely misrepresentative.

What's disingenuous is the slight of hand that Disney is playing on the drive-by media and low-information fans via their Comms and PR consultants to play up this number as something significant.

 

[LSLS]

There is something about this that is ... wrong. The amount they spent over the period between 2015 and 2019 was not "normal" in any sense. They spent a lot trying to get the two SWGE lands open, in addition to the smaller attraction openings that were still occurring. Wall Street made a note of it. Iger commented on it. It was seen as an unusual uptick in spending with the hope that, once those new lands were open, Disney would pull back on park spending and reap the rewards of years of investment.

To say that they are going to continue that level, and then exceed that, is remarkable.

I don't have the energy to get into it with you again, but the fact remains that based on what they have spent on average in the last 10 years, you would see on average an increase of 25% spread across all parks over a 10 year period. If you want to say that's not normal, fine, whatever, I'm sorry I called the average normal. I'm simply pointing out it's not as large a number over where we currently are as is being discussed by some. Essentially, I want it known this is not a $60 billion increase on where we currently are. I'm not trying to say it's bad at all, but temper expectations a bit, especially until announcements are made for major new lands/rides that are greenlit and starting.

And for the record, I said the increase is a good thing, but I am cautiously optimistic on what it will mean.