How will Universal's Epic Universe effect Disney?

[Disney Analyst]

Despite most theme park people agreeing that IoA is the better park, I believe that TEA reported that USF consistently gets better attendance. I think this is likely due to two factors. The first is that USF is an easily identifiable, iconic brand vessel for Universal. A lot of the people going to the park are the same kind of people who call the Magic Kingdom "Disney World" and are looking for "Harry Potter Land". Second, I believe it's also seen as the more "family" of the parks as opposed to Islands' thrills. I continue to be impressed with the wait times for Despicable Me even if I think it's a rather "meh" attraction that's not worth the wait. I think that's a large part of why another Minions attraction is coming to the park, along with what likely appears to be a Dreamworks retheme of Kid Zone.

IOA surpassed USF in 2021, based on the TEA/AECOM report.

 

[TwilightZone]

One one hand, the recent leaving of some universal creative got me a bit worried. But on the other, I don't think it will make much of a dent in E.U., it's a full brand new theme park that seems like it will be full of imagination. Something modern disney is really lacking in.

Disney is now copying Universal's homework and its not working. All the teachers and students of the world notice its a lesser product than it used to be.

 

[Minthorne]

In my opinion, if TWDC can keep DVC owners and get new DVC buy-ins, even if they are going to universal, TWDC wins.

It seems to me TWDC's DVC business is a huge money maker for TWDC no matter what the owners decide to do during their DVC stay.

Some may argue that folks purchase DCV to go to Disney parks, but if the offerings are better at Universal parks, although the DVC owners are committed to the room they stay in, they are NOT committed to what they do during their stay.

Sure, DVC owners will go to WDW parks, but they may now take a few days to enjoy Universal too.

Makes me like my SSR points more. Easy to pop the bubble from that launch pad.

 

[Sirwalterraleigh]

Disney parks have recently been on an unprecedented pricing binge over the last few years. Decisions being made at Universal, suggest that the impact to Disney's bottom line from upcoming Universal offerings will be significant. How do the upcoming Universal moves affect Disney parks? In order to truly understand the weight of possible impacts, I believe we have to first process the possible long-term impacts of the decisions that have been made by Disney over the last few years. In particular, the shift to Operational revenue focus and the lack of appreciation for the cost to value proposition mind-set of the typical Middle and Upper Middle-class guest.


Though the Orlando Disney parks are undeniably crowded, the recent Operating Revenue and Cash streams reported suggest guests are primarily focusing their spending on tickets and hotel stays. This is the reason for the recent price increases we have seen on those specific items at the parks. I don't think anyone would argue against the practical fact that Disney Genie is just a fancy way to charge you for an additional park ticket while disguising it behind a smoke-filled, coffee house crap façade of "saving you time". I also believe few would agree that hotel quality and amenities at Disney resorts are typical and reasonably commensurate to their cost? Food, drinks, souvenirs, events, i.e. all the residuals that have the primary profit overhead points are slowly being excluded by those guests with no additional discretionary money left to spend after paying for access. Residuals are one of the key profit basis for the Amusement industry and I believe the exorbitant pricing that Disney has recently adopted will have a negative impact on these financials over the long haul. The base of support for the parks comes from Middle and Upper-Middle class customers, not the wealthy. For many of the base customer set, the increased charges have pushed beyond the point of being reasonable and will create a negative impact on guest spending that will continue and grow with the current pricing conditions in place.


It's important to recognize that attendance numbers do not in and of themselves necessarily equate to revenue and profit totals. Tickets, parking, hotels... these are typically just the access leaders to significant profit lines (i.e. Residuals) but when you squeeze that financial lemon of all it's juice with operational collections, you leave little to nothing left over for additional guest spending on items from which your biggest profits might be derived. When you continue to limit or remove access for a large volume of your customer base through continually increasing access costs, the residuals cannot or will not follow. This is a long-term, acquired result that stretches out and builds over time. Nothing wakes the average Disney guest up from the dream faster than the realization that after you've paid excessive dollars just to come in, corporate Mickey welcomes you, shaking your right hand while holding out his left for your now empty wallet, assuming you'll find more to give. This is compounded by the insult added to injury feeling you get from the ostentatious and conspicuous act of calling you "Pal" with a knowing twinkle in his eye. Disney's leadership has spent years relying on it's popularity combined with a sizable air of smug arrogance in making decisions about what its guests will tolerate when it comes to pricing. They ride heavily and recklessly on the wave of perceived "magic", additionally using the pandemic as justification while seemingly unaware that it's likely the Trojan horse that has now tipped the balance. "Revenge Travel" can only support you for so long before the euphoria wears off and the reality of what a family is willing to afford comes into question. I say "willing" because in the theme park industry, it's all about the value proposition for the customer. Disney is not selling widgets when it comes to the parks, it's selling experiences. Experiences lead to the sale of residuals, products in the form of tangible things. For the customer, It's not a question of affording the cost but rather the perception of the cost to value ratio and if the customer is then willing to spend their money on the experience and hence the tangibles. Most people are perfectly comfortable with paying more than typically expected for something as long as the perceived value justifies the significant cost. This is especially true with theme parks and is where I believe a negative shift in customer thinking has started to take place that is growing in number and accelerating down the wrong road with no braking in site.


Another aspect to this, that I feel Disney has been grossly oblivious to, is the effect of Social Media on customer value perception and feelings related to the parks. The messaging that I have witnessed among social media circles, albeit anecdotally, speaks to the growing and overarching perception of an ever decreasing value vs money spent proposition. This perception is shared inside and outside the fan community, setting a course that is having a pronounced, negative viral effect. The new reputation that Disney has and is building of "Pay more...get less" can be financially devastating over the long term while not necessarily apparent in the moment. This, I believe, is the reason for Bob Iger's recent comments and concerns with increased pricing at the parks. While the 2022 fourth-quarter financials show a clear increase in revenue, Iger seems to be checking the long tail and seeing the impact of current pricing decisions on customer value proposition and perception. Frankly, I am shocked how quickly it has reared it's ugly head with Chapek's removal, not withstanding the company's issues with Disney + losses which seems to have played a large role in the reasoning behind his ouster.


Within this current environment we come to Universal and it's upcoming Epic Universe, particularly the February 2023 Super Nintendo World opening, which are likely to exacerbate these issues in a considerable way. The same perception that is building with such a negative tact about Disney is mirrored by a mostly positive view when applied to Universal parks. Several significant Disney Social Media and Travel business outlets have gone so far as to openly share their recommendations for staying and playing at Universal in addition to and sometimes in lieu of Disney. This reflects an acknowledgment of the value proposition of one vs the other in a powerful way. For many years, Disney stood with Cinderella Castle on the Orlando theme park mountain unchallenged but is now faced with a serious storming of the walls, not the least of which was started by the recognition of monies decisively spent to summon the world of a well known boy wizard. Universal woke up to what Disney parks had known since their inception: Putting the proper amount of money, resources, creativity and attention to detail into a project returns significant profits without the need to demand unreasonable costs to your guests. Ironically, this lesson was likely learned by Disney from the innovative and highly-profitable approach taken by many an impresario at New York's Coney Island in its heyday. Disney was viewed as the innovator, the leader and now is perceived as the follower if not factually. The recent D23 presentations openly put the Disney think-tank on display. However, when carefully examined, it became quickly apparent that the Emperor has no clothes. Lots of pie-in-the-sky, what-ifs and maybes but nothing concrete. Disney is moving far to slowly in an industry that demands innovation and contemporary production. They are slow to produce while ever increasing costs to their guests and ever decreasing offerings to justify them. The announcement of Super Nintendo World, an entire new land in a Universal park with three major attractions, opening after only four years of construction, is an especially stark example when you observe that it has taken Disney almost five years to open Tron and four with Cosmic Rewind. I acknowledge these are not the only attractions that Disney has recently opened (i.e. Remy's) but in an industry which typically builds coasters within a single season or two, they stand out as examples of an over-extended period especially when you take into account Tron being a clone of an already existing ride.


Many have discussed for years about the possibility of Disney "crossing a financial line" with its guests and I think it's becoming patently clear that they have now stepped over that line. The question is, what are they going to do about it? Quick changes are never easy especially with Disney parks and it's operations. Changing ingrained, negative customer perceptions is a challenge not easily met. We are talking about a large ship with a very small rudder and executing a clearly needed turn will take significant effort and time. Meanwhile, Universal continues to barrel forth unabated in its efforts to draw customers to their parks and ultimately away from Disney. Is Disney imminently in any real trouble from Universals actions? Apparently not. But, I would argue that they have already been negatively impacted and that negative trend will continue and grow without a course correction on their part. It's a battle of attrition when it comes to the theme park guest and where they choose to place their discretionary dollar, and I think Disney is currently losing that battle.

Brian Roberts?…is that you?!?

 

[the.dreamfinder]

In my opinion, if TWDC can keep DVC owners and get new DVC buy-ins, even if they are going to universal, TWDC wins.

It seems to me TWDC's DVC business is a huge money maker for TWDC no matter what the owners decide to do during their DVC stay.

Some may argue that folks purchase DCV to go to Disney parks, but if the offerings are better at Universal parks, although the DVC owners are committed to the room they stay in, they are NOT committed to what they do during their stay.

Sure, DVC owners will go to WDW parks, but they may now take a few days to enjoy Universal too.

What you’ve described is why DVC is so harmful to Disney’s business. It’s more important how well one business unit does, at the expense of the whole.

 

[AMartin7777]

Brian Roberts?…is that you?!?

Uh...no. It's me. LOL

 

[lewisc]

I don't want to quote a couple of long posts. Disney can offer a package with free QS dining (or at least free breakfast), genie and vouchers.for bus transfers. The masses will think Disney is back offering value. Not enough? Off free upgrade to hopper tickets and discounted (or free) photopass with 7 night stays.

 

[Sirwalterraleigh]

Uh...no. It's me. LOL

It’s me…hi!…I’m the problem it’s me

 

[SpectreJordan]

That's actually a really interesting thought. I was thinking back to how cannibalization would usually impact a second gate first before the first gate, but that was really just using Disney as an example, where the first gate was this iconic brand experience immune to a lot of cannibalization. Is USF really that iconic that it couldn't just be skipped for IOA and Epic? Maybe it's not.

Studios is the easy choice to skip. It has the main Potter land & none of its rides compare to Veloci/Hagrid/Spidey/Hulk. The only thing it has going for it is Diagon Alley & the iconic name of the park.

I'm pretty sure IOA's attendance is already higher than Studios anyway.

 

[chama1]

I think...with the cost of everything...ppl will might think what's best for their bucks....Uni has everything in one spot while Dis has everything scattered...making it harder to get to it's parks...reservations has been an issue for Dis...hard to get at times...Uni makes it a little easier for those who hate crowds, they have events were you can do the whole park (for a separate fee) with drinks/food/shows, etc included...almost like Dis events but with more for your bucks...Uni will make a dent...but not a long one...

 

[JoeCamel]

I think...with the cost of everything...ppl will might think what's best for their bucks....Uni has everything in one spot while Dis has everything scattered...making it harder to get to it's parks...reservations has been an issue for Dis...hard to get at times...Uni makes it a little easier for those who hate crowds, they have events were you can do the whole park (for a separate fee) with drinks/food/shows, etc included...almost like Dis events but with more for your bucks...Uni will make a dent...but not a long one...

The private event you can purchase tickets for are hosted by a private company that rented the parks not Universal so they are not following the Disney model of selling the parks twice themselves. Great events though, I highly recommend

 

[Minnesota disney fan]

Studios is the easy choice to skip. It has the main Potter land & none of its rides compare to Veloci/Hagrid/Spidey/Hulk. The only thing it has going for it is Diagon Alley & the iconic name of the park.

I'm pretty sure IOA's attendance is already higher than Studios anyway.

We must be strange because we like US side better than IOA. I like Minions, MIB, HP land and awesome ride, The Bourne Experience, The Horror Makeup show,.

and there's more but I forget for now. We always spend more time in US side.

The IOA side with it's garish comic book offerings seem juvenile to us. The rides you mention are great though.

To each their own, but to say that as a fact is not true.

 

[JoeCamel]

,.

and there's more but I forget for now.

Yeah, you left off E.T.

 

[FettFan]

Disneys biggest issue seems to be that they’re crazy grudging when it comes to things that actually increase park capacity at the Magic Kingdom.

Walt himself once touted Florida as having “the blessing of size”, yet ironically it seems that TDO is obsessed with coloring within the lines.

We had Pooh replace Toad, Seven Dwarfs Mine Train as a late addition at the expense of Scary Adventures, Tiana moving into Splash….it’s a miracle that Tron even got built as it’s own thing and wasn’t just a reskin of Space Mountain.

 

[SpectreJordan]

Disneys biggest issue seems to be that they’re crazy grudging when it comes to things that actually increase park capacity at the Magic Kingdom.

Walt himself once touted Florida as having “the blessing of size”, yet ironically it seems that TDO is obsessed with coloring within the lines.

We had Pooh replace Toad, Seven Dwarfs Mine Train as a late addition at the expense of Scary Adventures, Tiana moving into Splash….it’s a miracle that Tron even got built as it’s own thing and wasn’t just a reskin of Space Mountain.

I have to imagine it's cheaper to replace than expand. I wish they'd stop thinking like that though; as long as what they expand with is good, I think it'll earn them more money in the long running than replacing would.

 

[danlb_2000]

I have to imagine it's cheaper to replace than expand. I wish they'd stop thinking like that though; as long as what they expand with is good, I think it'll earn them more money in the long running than replacing would.

The big question is, would it earn more money? As you expand you are eventually going to hit a point of diminishing returns where the number of new guests you are attacking, or days people are adding doesn't offset the extra operating cost of the expansion.

 

[SteveAZee]

The big question is, would it earn more money? As you expand you are eventually going to hit a point of diminishing returns where the number of new guests you are attacking, or days people are adding doesn't offset the extra operating cost of the expansion.

I would guess that's why they've taken the strategy of first trying to get the profit per park guest as high as possible. Once they feel that's plateaued, they might consider significant expansion so that if the 'high profit' visitor pool doesn't expand, at least they could go for 'coupon day' to keep the place full.

I think they're mostly only attacking their wallets.

 

[danlb_2000]

I would guess that's why they've taken the strategy of first trying to get the profit per park guest as high as possible. Once they feel that's plateaued, they might consider significant expansion so that if the 'high profit' visitor pool doesn't expand, at least they could go for 'coupon day' to keep the place full.

I think they're mostly only attacking their wallets.

It's also less risky this way.

 

[FettFan]

I have to imagine it's cheaper to replace than expand. I wish they'd stop thinking like that though; as long as what they expand with is good, I think it'll earn them more money in the long running than replacing would.

Well they might want to get on that, as Universal is about to deliver an “Epic” smack down.

Especially damning when you consider Disney will have spent 5 years building a single roller coaster….and that single coaster isn’t even anything unique or special, just a carbon copy of what was done in Shanghai.

For comparison, Wizarding World at IOA was completed in just three years, and that was with two rides (Forbidden Journey and Flight of the Hippogriff).

 

[SpectreJordan]

Well they might want to get on that, as Universal is about to deliver an “Epic” smack down.

Especially damning when you consider Disney will have spent 5 years building a single roller coaster….and that single coaster isn’t even anything unique or special, just a carbon copy of what was done in Shanghai.

For comparison, Wizarding World at IOA was completed in just three years, and that was with two rides (Forbidden Journey and Flight of the Hippogriff).

I fully agree. Even if they're not scared of Epic Universe, they should be doing something. Even if it's out of pettiness to try & overshadow Epic Universe somehow. (Really not likely, but maybe they'd think they have a chance at doing that lol)