Spirited News & Observations II -- NGE/Baxter

[asianway]

This is what '74 has been saying all along, I believe.

Someone, believed to be a well-paid consultant, sold Disney on the idea of catering to fan bloggers and lifestylers as a means of countering any potential criticism that may arise online. (I cant remember the guy's name, or his exact quote, but it was something about how one positive review can outweigh X number of complaints.)
In essence they are creating a small army of "brand advocates" by wining and dining them, giving free trips and tours, (heavily controlled) access to imagineers, etc.

This is separate from the actual travel industry bloggers that they also court. A legit, high-traffic blog or site that doesn't strictly cater to fans is indeed a wise investment. As Matt said earlier, they can reach a ton of people that otherwise aren't thinking about Disney. That Drummond woman's 13-20 million page views could certainly worth a trip. But what if your site gets less than 100 hits per day, mostly from friends and fellow Disney fans? Why are those folks getting trips and cruises? (Hint: The answer is above.)

Not sure if you are thinking of Duncan Wardle, VP of and bull, stating that for every negative comment it is drowned out by 18 positive ones. Its on youtube somewhere.

 

[PhotoDave219]

You're assuming the bloggers' only audience is those who CHOOSE to search the blogs themselves for tips and tricks. I'm saying the blog message seeps into the mainstream media, meaning the people getting the message are NOT limited to those who already booked a WDW vacation.

This is irrelevant if we're talking about this week's events because it's primarily a radio event. If you don't believe me come to Epcot today. 35 stations broadcasting live from behind the Monsters topiaries. Same as yesterday at Wilderness Lodge. This is a "mainstream media" event. The bloggers are cheap add-ons. There was even live TV from the Rose Garden yesterday. Chicago station I believe.

You forgot the giant mess of TV trucks over by the old kennel at Epcot following the 24 hour announcement. At least 5 by my count.

 

[Goofyernmost]

You guys are probably correct, but here is my non-expert/don't know anything about the topic thinking. I would assume that the thing that is hard to measure with all types of marketing is behavioral change. Would the person have bought the car even without the ad. My gut tells me that the people who read these blogs would be coming to WDW, since I think the discovery of one of these sites is an active thing (i.e. you have to have reason to seek out a blog about WDW and get advice from it). I'd be real curious to see how numbers/impact from this type of thing is calculated. I agree 100% with the idea that the cost of this is essentially nothing for Disney, so even if the impact is essentially zero, it is fine.

Think selling up. Yes, those that follow the blogs are already sold on Disney itself. But, like myself, I do it on the cheap. I stay offsite, never having bought into the emersion theory, and eat offsite primarily. I am a Disney fan, but a frugal (OK, cheap) one. Now if I follow a blog and they rave about the Grand Floridian. If they make it sound so good that I want to try it even if just to see what it was like. In Disney's eyes the cash register is practically on fire. Without the freebee's would those followers still go to Disney, sure! Will they be tempted to upgrade, I think that is the motivation for the special treatment. I'm sure that CM's are instructed to treat these people like royalty. That word gets to their followers and like magic (Pixie Dust) if you will, the next trip is upscale. More money for the mouse from the same people that were coming anyway. I'm so glad, sometimes that I don't like Kool Aid.

 

[Funmeister]

It's free because there is essentially no cost of Disney giving a rooms and food away.

Sorry...I have to disagree with you. Each room and meal that are provided are charged to a job number that comes out of a budget. This applies to just about everything Disney does from an accounting standpoint. It is a checks and balances system with real money so revenue generating departments (resort front desk) can show that a room was indeed paid for and not given away.

 

[Tim_4]

You forgot the giant mess of TV trucks over by the old kennel at Epcot following the 24 hour announcement. At least 5 by my count.

Local TV is tricky to predict. On a slow news day, Disney announcements are a BFD. If something blows up somewhere Disney news is irrelevant.

 

[MattM]

Sorry...I have to disagree with you. Each room and meal that are provided are charged to a job number that comes out of a budget. This applies to just about everything Disney does from an accounting standpoint. It is a checks and balances system with real money so revenue generating departments (resort front desk) can show that a room was indeed paid for and not given away.

Respectfully, it doesnt really matter if you disagree. It is the way it is. Truth is, it costs Disney next to nothing (notice I didnt say nothing) to give away a room and a couple of quick service meals. Do you know the margins on a burger at Disney, much less a soft drink? The extremely minimal cost is easily absorbed. Especially when it doesn't take many rooms booked to make overhead at 500$+/night.

 

[Tim_4]

Sorry...I have to disagree with you. Each room and meal that are provided are charged to a job number that comes out of a budget. This applies to just about everything Disney does from an accounting standpoint. It is a checks and balances system with real money so revenue generating departments (resort front desk) can show that a room was indeed paid for and not given away.

They come out of departmental budgets but it's funny money that washes out in the consolidation process. Intercompany transactions are all eliminated at month and quarter end. It's like when horticulture bills resorts for landscaping services. It's revenue to horticulture and expense to resorts so it shows up in each department's P&L but these transactions are all reversed for external reporting purposes. Otherwise a company could sell a stapler from one department to another and report record revenue growth.

 

[asianway]

They come out of departmental budgets but it's funny money that washes out in the consolidation process. Intercompany transactions are all eliminated at month and quarter end. It's like when horticulture bills resorts for landscaping services. It's revenue to horticulture and expense to resorts so it shows up in each department's P&L but these transactions are all reversed for external reporting purposes. Otherwise a company could sell a stapler from one department to another and report record revenue growth.

There is still a variable level cost associated with any give-away. It is not a net zero transaction.

 

[Tim_4]

There is still a variable level cost associated with any give-away. It is not a net zero transaction.

Of course. But it's the food cost, housekeeping, transportation, etc. Not the rack rate for a night at the Grand.

Not super important but most media is staying at the Lodge this week, not the Grand.

 

[asianway]

Of course. But it's the food cost, housekeeping, transportation, etc. Not the rack rate for a night at the Grand.

Not super important but most media is staying at the Lodge this week, not the Grand.

There is an opportunity cost if the inventory could have been rented at rack rate...

 

[Goofyernmost]

There is still a variable level cost associated with any give-away. It is not a net zero transaction.

Yes, but it is a miniscule transaction at best. An empty room generates zero income and is considered an overhead expense with zero value. A donated room is deductible at the rack rate for tax purposes so, in that way it is actually a plus transaction. It's all done on paper anyway and can be looked at from a million different directions. All of them mean that Disney is ahead of the game. An empty room = zero. A paid for room = revenue less tax. A donated or "expensed" room = tax deduction covering the revenue of a paid room. It's a silly world, but, the rich do contentiously get richer. Now they certainly have to stay within a percentage if they want the IRS to accept it, but, it only behooves them to expense empty room when they can.

 

[Funmeister]

Respectfully, it doesnt really matter if you disagree. It is the way it is. Truth is, it costs Disney next to nothing (notice I didnt say nothing) to give away a room and a couple of quick service meals. Do you know the margins on a burger at Disney, much less a soft drink? The extremely minimal cost is easily absorbed. Especially when it doesn't take many rooms booked to make overhead at 500$+/night.

Nope. Sorry. That is not how business works. Especially Disney business. Lost revenue is lost revenue no matter what you are using the room for and who is staying in it. Trust me...I know how it works.

 

[Tim_4]

There is an opportunity cost if the inventory could have been rented at rack rate...

You're assuming 100% occupancy. It's late April. No guests were turned away to fill media rooms. If there's vacancy, there's no opportunity cost .

 

[Tim_4]

Nope. Sorry. That is not how business works. Especially Disney business. Lost revenue is lost revenue no matter what you are using the room for and who is staying in it. Trust me...I know how it works.

There's no lost revenue. The resorts aren't full. 80%, maybe. A guest wanting a room on 4/25 got one.

 

[Funmeister]

They come out of departmental budgets but it's funny money that washes out in the consolidation process. Intercompany transactions are all eliminated at month and quarter end. It's like when horticulture bills resorts for landscaping services. It's revenue to horticulture and expense to resorts so it shows up in each department's P&L but these transactions are all reversed for external reporting purposes. Otherwise a company could sell a stapler from one department to another and report record revenue growth.

Tim. It is not funny money. If that were the case then any company could in theory print their own money (not including Disney Dollars in years past). It is not about generating revenue as much as taking financial responsibility to show why a Cast Member had to clean a room or why the margins are off on a $7 hamburger. It is for checks and balances that a revenue generating center still has to account for.

I am not saying the company is making money off of itself I am saying the company has to account for everything that is "given away for free" to avoid fraud. They do this by using real money in real budgets.

 

[Funmeister]

You're assuming 100% occupancy. It's late April. No guests were turned away to fill media rooms. If there's vacancy, there's no opportunity cost .

Has NOTHING to do with occupancy. You have no concept of basic business.

 

[Funmeister]

Yes, but it is a miniscule transaction at best. An empty room generates zero income and is considered an overhead expense with zero value. A donated room is deductible at the rack rate for tax purposes so, in that way it is actually a plus transaction. It's all done on paper anyway and can be looked at from a million different directions. All of them mean that Disney is ahead of the game. An empty room = zero. A paid for room = revenue less tax. A donated or "expensed" room = tax deduction covering the revenue of a paid room. It's a silly world, but, the rich do contentiously get richer. Now they certainly have to stay within a percentage if they want the IRS to accept it, but, it only behooves them to expense empty room when they can.

Even if the room is empty and the occupancy percentage is 60% there is still a payable rate that has to be and is charged. It is an anti-fraud device to prevent...oh nevermind. Just remind me to never go into business with a few of you.

 

[Tim_4]

Has NOTHING to do with occupancy. You have no concept of basic business.

That's your problem. You think you understand Disney because you understand "basic business." Disney ISN'T a "basic business."

Yes, giving away a hamburger has a real cost but it's the cost of the ingredients, not the lost menu price of the burger. Accounting lesson:

Let's say a burger menu price is $10 and the ingredients cost $4. A guest buying the burger results in the following transaction:

Debit: Cash 10
Debit: Cost of Sales 4
Credit: Revenue 10
Credit: Inventory 4

Now if this is a press event and the burger is given away:

F&B books:
Debit: Accounts receivable- Intercompany 10
Debit: Cost of Sales 4
Credit: Revenue 10
Credit: Inventory 4

Marketing books:
Debit: Marketing expense- 10
Credit: Accounts payable- Intercompany 10

Marketing gets the expense and Food and Bev gets the revenue but those are intercompany transactions that are eliminated. Each department shows their side of the transaction in departmental financial statements, but the transaction is NOT in the consolidated P&L. Likewise, the Intercompany payable and receivables are not in the consolidated balance sheet. The departmental statements are used internally for management purposes (margins, etc) but the only number that's an expense to TWDC TP&R is the $4 of food costs.

 

[jakeman]

Uh oh...looks like we are going to have a....

BUSINESS OFF!

 

[Funmeister]

That's your problem. You think you understand Disney because you understand "basic business." Disney ISN'T a "basic business."

Yes, giving away a hamburger has a real cost but it's the cost of the ingredients, not the lost menu price of the burger. Accounting lesson:

Let's say a burger menu price is $10 and the ingredients cost $4. A guest buying the burger results in the following transaction:

Debit: Cash 10
Debit: Cost of Sales 4
Credit: Revenue 10
Credit: Inventory 4

Now if this is a press event and the burger is given away:

F&B books:
Debit: Accounts receivable- Intercompany 10
Debit: Cost of Sales 4
Credit: Revenue 10
Credit: Inventory 4

Marketing books:
Debit: Marketing expense- 10
Credit: Accounts payable- Intercompany 10

Marketing gets the expense and Food and Bev gets the revenue but those are intercompany transactions that are eliminated. Each department shows their side of the transaction in departmental financial statements, but the transaction is NOT in the consolidated P&L. Likewise, the Intercompany payable and receivables are not in the consolidated balance sheet. The departmental statements are used internally for management purposes (margins, etc) but the only number that's an expense to TWDC TP&R is the $4 of food costs.

Oh...so...where does it say "free" on your balance sheet as you previously proclaimed? My problem is that you think you know the company because you have an "inside line" on business feeding chimps at the ole animal park. You THINK you know...you WANT to know...but you don't....