Interesting Disney Business Article Today

[alphac2005]

This is the argument I have been saying for a long time as to why a 5th Gate is a LONG LONG way off.

So, so true. I laugh when I read the countless threads with rumors that pop up year after year on the boards about a 5th gate. If there is a 5th gate in 15 years, I'd be surprised. Disney clearly has enough infrastructure in the existing parks to add to them greatly for years. A massive capital outlay for an additional park makes absolutely no sense business-wise. Look at Universal and IOA. They've converted and expanded a portion of the park into the Wizarding World and the growth in attendance and sales is quite obvious. If they look to expand their future numbers of visitors, adding quality product to their existing properties will work.

 

[DisneyMusician2]

I always laugh at people when they say that a 5th gate is needed. People barely have time to see what there is to see in a week trip, and a 5th gate would only add to the complications. Expanding the current offerings has always been more economical.

 

[WDWFan13]

QUOTE: "I'm actually amazed that WDW can pay 62,200 cast members, maintain and run all the resorts, buses, monorails, boats, and do all (or most of ) the maintainance necessary to run 4 theme parks, 2 water parks...."(dreamscometrue)


When I first thought about it, but when you think that the average family going to disney will spend at least 2000 total, and that could be for 4 people, then multiply that by the thousands and millions of people that visit the disney resorts all over the world through out the year and that is a ton of money. How could they not be doing well when they charge almost $4 for a bottle of water that i could get at a COSTCO for 55 cents:ROFLOL:

 

[mp2bill]

I know that park pass rates have increased (as have my dry cleaning rates, utility rates, movie prices and everything else I pay), but it's not realistic to expect constant expansion or creation of $80 million E-ticket attractions annually.

Agreed.

 

[flavious27]

QUOTE: "I'm actually amazed that WDW can pay 62,200 cast members, maintain and run all the resorts, buses, monorails, boats, and do all (or most of ) the maintainance necessary to run 4 theme parks, 2 water parks...."(dreamscometrue)


When I first thought about it, but when you think that the average family going to disney will spend at least 2000 total, and that could be for 4 people, then multiply that by the thousands and millions of people that visit the disney resorts all over the world through out the year and that is a ton of money. How could they not be doing well when they charge almost $4 for a bottle of water that i could get at a COSTCO for 55 cents:ROFLOL:

ditto, disney has that many cm's (and they aren't all FT) because there is a standard that guest except when they pay disney the amount that they do. there needs to be a small army of maintenance cm's so that the park looks fresh every day. the same goes for the landscapers, it is a 24/7 operation for them to make sure everything looks just right.

 

[flavious27]

As mentioned previously, the Parks carried the company for decades. The studios and ABC have largely been dog businesses. Over the last decade Disney has continued to raise fees for ESPN so the cable division is now the star of the company. As you can see below the Parks Division income margin used to always be above 20%. After 911 it dropped down into the mid-teens, and 2010 is an all-time low.


REVENUE INCOME %
1997 5014 1136 22.7%
1998 5532 1288 23.3%
1999 6106 1446 23.7%
2000 6809 1615 23.7%
2001 7004 1586 22.6%
2002 6465 1169 18.1%
2003 6412 946 14.8%
2004 7750 1077 13.9%
2005 9023 1178 13.1%
2006 9925 1534 15.5%
2007 10636 1710 16.1%
2008 11504 1897 16.5%
2009 10667 1418 13.3%
2010 10761 1318 12.2%

The average margin for a US company is less than 10%, so the Parks are still making good money and they CAN still afford to invest in them. Problem is it is not as good as it used to be, hence their reluctance to take risks. As the margins dropped Disney labelled the business mature and even flirted with the idea of leasing out the parks to someone else to manage so they could just collect royalties.

This type of thinking and conservative approach has only served to drag the business down even more. The business was built and thrived on taking risks and being bold.

The last couple of years have to be influenced by the recession and the 1.1 billion to fix dca and almost 2 billion for dcl.

The margins will improve as with the economy and such large projects are cleared off the balance sheet and start to make money.

 

[brucie]

Very Interesting read.... I just want the parks to go back to the glory days, increase in attendace, profits and continued expansion.

 

[Buried20KLeague]

Well, it certainly seems like this is at odds with the general notion around here that Disney is rolling in so much cash there is no logical reason they aren't doing "_____" to make the parks more to their personal liking other than greed and mismanagement. Perhaps it really is true that running and maintaining the theme parks is harder, more expensive, and less profitable than the typical armchair Imagineer is likely to admit...

Or maybe 3 billion invested in a couple projects, plus untold tens of millions we're not thinking about (nextgen, etc) might be having an effect on that bottom line??

 

[Criswell3000]

Brand Loyalty

I can only speak from my own anecdotal evidence, but my first trip to Disney World was in 2008, and since then I have become EXTREMELY loyal to the Disney brand. My wife and I laugh about how they brainwashed me on that trip. Since then we have gone to Disneyland and we plan to make it to some sort of Disney property ever other year or more. Can't beat quality.

 

[Buried20KLeague]

While they are putting some major $ in DCA and DCL, the total capital spend for the Parks division is only $500M higher this year than it was several years ago. Plus, the depreciation charge that hits income from these investments is spread out over 20+ years, so the impact on 2010 results from these spends is not that big. Attendance and spend/person trends are more responsible for the decline.

I'd be interested to see where all that capital was being spent in the years before the DCL and DCA projects.

I also think the folks here that have said they should cut back on discounts have been right for some time. Also virtually everyone that is infuiated with the lack of unique quality merchandise seems to have a valid beef.

 

[flavious27]

I'd be interested to see where all that capital was being spent in the years before the DCL and DCA projects.

I also think the folks here that have said they should cut back on discounts have been right for some time. Also virtually everyone that is infuiated with the lack of unique quality merchandise seems to have a valid beef.

Well they have spent money at all of the parks in cali and florida or add rides.

 

[Buried20KLeague]

Well they have spent money at all of the parks in cali and florida or add rides.

Sure, but not to the tune of BILLIONS...

 

[flavious27]

Sure, but not to the tune of BILLIONS...

Well toy story mania cost $80 million, I bet the space mountain reconstruction cost a pretty penny.

 

[Buried20KLeague]

Well toy story mania cost $80 million, I bet the space mountain reconstruction cost a pretty penny.

The DL version you mean? I seem to recall that was somewhere around $40-$50 mill.

The Subs are in there somewhere, too, I'd guess, if we're going back that far... Though the subs and SM weren't at the same time, nor was TSM...

 

[flavious27]

The DL version you mean? I seem to recall that was somewhere around $40-$50 mill.

The Subs are in there somewhere, too, I'd guess, if we're going back that far... Though the subs and SM weren't at the same time, nor was TSM...

I saw an estimate of the wdw tsm cost at about 80, but you know that the actual number we won't know unless someone from inside leaks it.