More Disney Trouble...

[tigsmom]

Saw this on the Motley Fool website yesterday...

By Jon Friedman, CBS.MarketWatch.com
Last Update: 4:22 PM ET Mar 4, 2003

NEW YORK (CBS.MW) -- Walt Disney Co. may have to issue a warning about its fiscal second-quarter earnings, SoundView Technologies analyst Jordan Rohan said in a note to clients Tuesday.

Citing war worries, terrorism fears, shaky consumer confidence and harsh weather, Rohan predicted that Disney's entertainment parks division will drop by about 5 percent from a year ago as attendance contracts at a pace projected in the "high single-digit" percentage range.

Shares of Disney (DIS), a Dow Jones Industrials component, lost 75 cents, or 5 percent, to $16.05 in midday action. Join the discussion.

Rohan chopped his second-quarter estimate to 10 cents a share from 14 cents but maintained his "neutral" investment rating and $17 price target on Disney's shares. He issued similar remarks several months ago.

Separately, Disney was reported to be squabbling with its Miramax films division. Miramax has contributed the lion's share of Oscar nominations to Disney's slate this year, including such well regarded movies as "Chicago," "Gangs of New York" and "The Hours."

 

[CAPTAIN HOOK]

The sign of things to come ????

 

[gjpjtj]

Or...is it almost time to Buy?

 

[Shaman]

Stocks are the last thing economist look at to determine whether we are in a recession or whether we are getting out of one, and the same goes for companies. Besides DIS is the Walt Disney Company and while the parks may not be doing too well, other sections of the company are thriving. Mirimax (which is Disney owned, eventhough, they are having some "family" troubles) has a whole mess of movies up for Oscars, and the ticket sales for those movies are adding alot of $$ to the company. ABC seems to be doing a bit better, than it use to, with better ratings on some shows. In all, I think that to look at a company's stocks is kind of ridiculous at this point because we are in such a bad recession and investors rather invest in better companies, once we get out of this recession (which I don't see happening in the near future, I wonder who's to blame :lookaroun ) then I see DIS theme park division on the up, and more people will invest in DIS. I'm not an economist or anything, and maybe this is just alot of BS, but thats the way I see it.

 

[tigsmom]

If I understand correctly Disney is in partnership with 2 brothers who own Miramax.(Can't find the article, but I 'll keep looking..I think ther name is Weinstein). They are arguing about who gets how much profit. Not an economist or financial advisor either, but if you can spare some money (it is a risk) I think it would be a good time to buy stock. I really don't see Disney going anywhere anytime soon. The article warns about a less than expected stock gain. Maybe the crowds will be less for those of us who are going to WDW!

 

[tigsmom]

Just found this on the Fool website while researching Miramax. It was just posted.

Analyst Cohen cites theme park concerns

By Jon Friedman, CBS.MarketWatch.com
Last Update: 9:17 AM ET Mar 5, 2003

NEW YORK (CBS.MW) - Merrill Lynch cut its profit estimates on Walt Disney Co. Wednesday, the second Wall Street firm to lower its targets in two days amid concern about the impact of cold weather and potential war on the company's theme parks.

Merrill Lynch analyst Jessica Reif Cohen said in a report to investors on Wednesday that she was lowering her fiscal second quarter and fiscal 2003 estimates for the company. "The bulk of our decrease is in theme parks," Reif Cohen said.

Merrill lowered its March quarter estimate by 3 cents to 11 cents a share. It also reduced its 2003 earnings per share forecast by 6 cents to 64 cents a share.

Disney (DIS) is set to hold its annual shareholder meeting in Denver on March 19. Companies like to build momentum before the meetings, in which shareholders get their best shot at quizzing the chairman and chief executive officer in a public setting.

Disney's stock fell 75 cents to $16.05 on Tuesday. The company's shares have tumbled 32 percent over the past 12 months.

Merrill said it's lowering its fiscal second quarter theme park revenues estimate by $90 million to $200 million, a decline of 29 percent versus $280 million a year ago.

Disney's prospects have been hurt badly by external conditions. Terrorism fears, particularly in the U.S., a looming war with Iraq, a slumping economy and unusually harsh weather have caused Disney's theme park business to suffer.

One day ago, Jordan Rohan, an analyst with SoundView Technologies, weighed in with a pessimistic forecast for Disney, too.

Citing war worries, terrorism fears, shaky consumer confidence and harsh weather, Rohan predicted that Disney's entertainment parks division will drop by about 5 percent from a year ago as attendance contracts at a pace projected in the "high single-digit" percentage range.

Times have got to get better.... would love to be able to go the stockholders meeting, but it's too far away. Last years was VERY interesting.

 

[Shaman]

Originally posted by tigsmom
If I understand correctly Disney is in partnership with 2 brothers who own Miramax.(Can't find the article, but I 'll keep looking..I think their name is Weinstein). They are arguing about who gets how much profit.

Yes they are arguing with the Weinsteins, who seem to have hired the same lawyer who is taking care of the Winnie the Pooh lawsuit, to help them figure this thing out with Disney (if you ask me its halarious:lol: ). I believe that Eisner is giving the Weinsteins some trouble, and even though I think Disney should be in control here, I think it should play nice with Miramax, especially seeing how they made great movies this year. (Hopefully Disney won't make the same mistake it made with Lord of the Rings). Just some more thoughts.:wave:

 

[SpongeScott]

But yet they raised ticket prices last year. Now, I'm not an economist, but can someone explain to me why you wouldn't want to actually lower your prices to entice more people to come in the parks? Doesn't more people translate into more money being spent on concessions, meals, gifts, and souvenirs? Reduce your ticket prices by 10% ($5 off the park entrance sounds pretty nice) and increase your in-the-park expenses by 5-10% (spending an extra $3 at Pecos Bills isn't going to break me). Can someone refute my logic or explain why this wouldn't work?

 

[Shaman]

I totally agree, it seems smarter to lower the ticket prices. Perhaps they figure its better to screw those people who are WDW regulars and don't have an annual pass (who knows). In many ways they ensure that although attendence is low, they are getting more money in a sense because they make up for the lack of attendence with the extra money people pay to get in. On the other hand, if you would lower prices, more people could in turn come to the parks. But look at the current situation, fear of terrorism and of war, and lack of consumer confidence all adds up to people taking more care of their money which means that the trip to WDW many peoplewould've planned is canceled, thus Disney figures, lets screw those that are still coming, to somewhat makeup for those who are not. Thats the only reason I see Disney would want to raise the prices. As a matter of fact I believe all the parks in Orlando have jacked up prices.:brick:

 

[WDWGarden]

Originally posted by sandjhooker
But yet they raised ticket prices last year. Now, I'm not an economist, but can someone explain to me why you wouldn't want to actually lower your prices to entice more people to come in the parks? Doesn't more people translate into more money being spent on concessions, meals, gifts, and souvenirs? Reduce your ticket prices by 10% ($5 off the park entrance sounds pretty nice) and increase your in-the-park expenses by 5-10% (spending an extra $3 at Pecos Bills isn't going to break me). Can someone refute my logic or explain why this wouldn't work?

It's the difference between revenue and profit. Sure more people in the park means more revenue...more cash going in. However, it also means more labor (money going out). The people who are going to let that 10% off tix decide whether or not they go to Disney are not the ones who are going to spends loads of money in the park...where the real money is made. So they're going to up the attendance and require more cast members to run the park, but they're not going to produce the profit to make the discounted tix...profitable.

You could cut the price of a bottle of soda in half and your sales could go up 500%. But the cost to sell that soda (not to mention the ugly line one would have to wait in) skyrockets, too. The law of diminishing returns....

 

[TURKEY]

Originally posted by WDWGarden
It's the difference between revenue and profit. Sure more people in the park means more revenue...more cash going in. However, it also means more labor (money going out). The people who are going to let that 10% off tix decide whether or not they go to Disney are not the ones who are going to spends loads of money in the park...where the real money is made. So they're going to up the attendance and require more cast members to run the park, but they're not going to produce the profit to make the discounted tix...profitable.

You could cut the price of a bottle of soda in half and your sales could go up 500%. But the cost to sell that soda (not to mention the ugly line one would have to wait in) skyrockets, too. The law of diminishing returns....

That's pretty much it.

Profit = Revenue - Fixed Costs - Variable Costs

Any lowering of a price will increase demand.

Lowering prices of tickets and rooms would increase demand, thus increasing costs. More CM would be need to run parks and resorts will more people there. Variable costs (electric bill, water bill, gas bill, etc) would also go up. Fixed costs would stay the same.

If I'm charging $300 a night for a small hotel (50 rooms) and I'm getting 10 guests per night, I should be able to handle their needs with only myself or another person or two. If I drop my rates to $200, lets say I get 20 more people, now that's 30. I can't handle that many guests so I can't do it. I add more labor, my bills go up.

Less Profit = Less Revenue - Equal FC - Greater Variable Costs



The only real area in which you could lower prices in would be in food and beverage and merchandise. Even here you might not be able to do it. Depending on the price cuts, the demand may not go up much. You could probally handle any demand increases with the same amount of CM. Variable Costs shouldn't increase too much so you shouldn't be too worse for the cuts.

Less Profit = Less Revenue - Equal FC - Small Increase in VC.


Goodwill would increase when prices were cut though, especially if cutting ticket or room prices. You would be able to attract new people to visit, but those new guests might not be willing to return ever, much less when prices eventually are raised again. So your goodwill is gone after that.