They are competing for visitors... because they are both marquee things you want to do when you visit SoCal. That's what I mean by Disney's real competition is people's time. When someone visits SoCal as a tourist, there are various things people want to do.. they want to goto the beach, they want to goto Hollywood, they want to see the movie studios, etc etc... these things and how much time they allocate to different things on their trip are Disney's real competition. It's not "hrmm.. I want to goto a theme park, should I goto KBF or DLR?"... its "I only have 3 days in town, which things do I want to do" - THAT is Disney's biggest issue to tackle and why they built DCA in the first place.. to try to make Disneyland into a destination upon itself, rather than simply "one of the five things I did when I visited SoCal"
Time.. time is disney's biggest constraint when it comes to Tourists because the Tourists have a limited amount of time and there are a huge variety of "must do" type of things in SoCal as a tourist.
I mean... tourists will skip a day at Disneyland to goto the beaches... yet most here would not call Huntington Beach a "disneyland competitor" because they are wildly differing products/offerings. But it is competition for Disneyland in the sense of they are both viaing for the same people who have a finite amount of vacation time.
What makes things so different for DL (vs say WDW) is Disney facing there is now an entire generation of people in SoCal that have known nothing but the AP model... and Disney is never going back to the days of 'cheap admission'... so the generation before that as well is also tied up in this huge population of people who expect to not just visit Disneyland.. but to do so frequently and 'affordably'. This is a huge chunk of their regular customer base. DLR has sold itself out.. and can't afford to go cold turkey either.
But instead of trying to keep things practical and affordable for all their customer base while shaping the programs to make them sustainable... instead Disney keeps raising prices through the roof under the guise of 'demand'.
Less than 10 years ago the DLR Premium pass was $359... now it's over $1000