Profitability Today Does Not Guarantee Profitability Tomorrow
You probably know this but I want to make sure you know I wasn't calling you an idiot. Rather the "Bigger Idiot Theory" is an expression used to explain the stock market and other transactions where price is influenced heavily by opinion vs. fact.
This is typically true of cutting services while charging the same to make more money, not charging more to be more profitable. Very different animals.
I believe Disney is the exception. You are correct Disney will make more money by excluding certain people which is already a fact.
However there has been a steadily growing tide of anti-corporate behavior when people feel companies are profiting too greatly. Look at the Oil & Gas industry, Banking, Pharamceuticals, Insurance; each is a great example. Every company should seek to maximixe profits but beyond a certain point doing so damages their reputations and when done collectively often leads to government regulation (not suggesting, just showing the logical end point). Disney is in the cross hairs too.
And Disney is a pyramid brand where products and services all work to reinforce each other. As such a threat to one is a threat to all.
Check out some of the Disneyland boards where there are constantly discussions about the annual passes being too cheap-- overcrowding the park, and ruining the experience, which chases away some people. So why not chase away some people with higher prices instead, creating a better experience for you guests, while requiring less staff which also boosts margins?
First Disney would love to overcrowd the park every day if they could. If they could raise profits with fewer guests that would work for a while but they would then do everything they could, probably via discounting, to cram extra people into the park.
Also Disneyland's target demographic is much different. Disneyland survives on teens much more than WDW. They don't necessarily like it, but they recognize it and price accordingly. Without return visits by teens via annual passes they would be in trouble many years, especially with Disney's California.
A personal example, there are three grocery stores within 5 minutes of me, I shop at the most expensive one because the experience is much better (nicer interior, knowledgeable staff) and I feel its worth it. It doesn't make me an idiot that I choose to shop there, I know of the cheaper alternatives.
Now, if I lose my job, I may not be able to shop there any more, or I may just decide at some point that its not worth the premium for me personally. Neither of those mean that the grocery store won't go on being profitable. Understand?
Agreed. However if you and a number of other people lose their jobs then the premium store sees a drop in traffic. What does it do? It can try discounts to get you back, but you are likely preconditioned to expect higher prices and therefore why make the longer trip when there are alternatives. Worse, perhaps you find that one of the closer stores is acceptable, perhaps better. When you do find a job how likely are you to go out of your way? That is my point. It's not about being profitable, it's about trying to be profitable today at the expense of profits tomorrow.
Our local premium grocery store has made sure to reduce prices on core staples (milk, eggs, bread, etc.) just as soon as the economy took a hit. Not discounts, price reductions. Why? So when people lose their jobs they don't look elsewhere for the staples, so they don't find acceptable alternatives.
Being profitable on a per item sold basis is great, as long as you have people buying. It's meaningless if nobody enters your store.
From your earlier post it sounds like thats the situation you're in with WDW, it just isn't worth the premium anymore. That's fine. But it doesn't mean Disney isn't profitable or that they are incompetent just because they don't discount to get your business back.
I would suggest to you that there are scores of people at Disney that know quite a bit more about economics than you (or I for that matter) and have access to significantly more data.
Not that they can't do any wrong, but they deserve some respect.
I've never argued Disney isn't profitable at their theme parks. I feel Disney is nearing a tipping point betweeen scarcity and value. Their profits should be plowed back into the parks to a greater degree than today instead of being used as the cash cow to prop up other portions of the company which seem to always be struggligng. Disney says they're discounting due to the economy. I believe it's flawed logic because the discounts are far greater, in my opinion, than required to reflect the market.
I appreciate your comments and
I very well could be wrong. I just see data lining up to indicate Disney will reach profit optimums at a degree of risk to their brand that I feel they either don't see, won't admit, or are hiding from their board. I was a cast member and have been a consultant on numerous projects over the years from strategy including market research to IT and even Imagineering. Of my friends, some of whom are current and former executives, most agree with me. Time will tell.
