donsullivan
Premium Member
This seems to be consistent with some of the statements made on the most recent earnings call. During that call, one of the analysts asked whether they would be seeing the revenue/expense benefits they had projected for FY14 from MM+. They (Rasulo & Iger) acknowledged that with the rollout delays they would not be seeing the benefits they initially projected during FY14 which began in October but would start seeing many of the expenses associated with it.
As a result of that condition, they are likely not hitting their operating expense budget targets as a whole for P&R for the year and have to reduce those expenses to stay on budget. IN a public company they don't have the option to just go over budget and loose money. In a corporation the size of Disney, those budgets were likely set 6 months ago and done with a set of assumptions about availability of MM+ that are now proving invalid.
It seems in this case you've got a bunch of choices ranging from reducing staffing in the parks to lowering expenses for future projects to hit your budget goals. They could have easily cut staffing in the parks to stay on budget but took a less disruptive to day-to-day operations approach of reducing other expenses instead.
The dialog that has been referenced about reducing investments that comes up in the earnings calls is typically about Capital Investment not operating expenses which are 2 different things. Without getting into all of the details of it, now that MM+ is live (working is a totally different debate) all of the expenses to run it for IT, staffing etc. are hitting the operating budgets but due to delays, the projected benefits are not hitting. All of that is resulting in a likely very significant hit to operating expenses.
While I'm not a fan of the delays in potential development projects, I'd rather see that than reduced staffing and everything that comes along with that in the parks for a few months while things catch up.
As a result of that condition, they are likely not hitting their operating expense budget targets as a whole for P&R for the year and have to reduce those expenses to stay on budget. IN a public company they don't have the option to just go over budget and loose money. In a corporation the size of Disney, those budgets were likely set 6 months ago and done with a set of assumptions about availability of MM+ that are now proving invalid.
It seems in this case you've got a bunch of choices ranging from reducing staffing in the parks to lowering expenses for future projects to hit your budget goals. They could have easily cut staffing in the parks to stay on budget but took a less disruptive to day-to-day operations approach of reducing other expenses instead.
The dialog that has been referenced about reducing investments that comes up in the earnings calls is typically about Capital Investment not operating expenses which are 2 different things. Without getting into all of the details of it, now that MM+ is live (working is a totally different debate) all of the expenses to run it for IT, staffing etc. are hitting the operating budgets but due to delays, the projected benefits are not hitting. All of that is resulting in a likely very significant hit to operating expenses.
While I'm not a fan of the delays in potential development projects, I'd rather see that than reduced staffing and everything that comes along with that in the parks for a few months while things catch up.
