Spirited News & Observations II -- NGE/Baxter

[luv]

Uni raised ticket prices this weekend.

Insert righteous indignation here.

Uni keeps charging more and providing more. They get better all the time. Nobody wants to pay more, but it is hard to complain about price increases.

If they were cutting back all the time, letting the parks get older and dirtier, have a staff that gets worse...then we could complain that they continue to charge more for less. But they don't.

 

[flynnibus]

Late to this party, but let's see if I can figure out what people are poring over and figure out if I have anything to add.

It's simple... The Pig wants to use comcast's short term capex expenses to show how their model is a runaway train bound to make them loose money.. because don't you see.. they're loosing money right now!!! Which of course ignores the difference between operating costs and capex investment - especially long term investment.. like attractions designed to last for decades.

 

[Tim_4]

It's simple... The Pig wants to use comcast's short term capex expenses to show how their model is a runaway train bound to make them loose money.. because don't you see.. they're loosing money right now!!! Which of course ignores the difference between operating costs and capex investment - especially long term investment.. like attractions designed to last for decades.

Attractions aren't revenue generating. Capex eventually depreciates, and if they don't get the asset lives right, they're in for major write offs when refurb time rolls around.

It all boils down to whether Potter is a permanent boon or a temporary one. They can't expand at this pace forever. There isn't enough cash or space. If expansion is the only way they can get new revenue streams, they're screwed. You just can't expand forever.

 

[djlaosc]

With that logic, literally ANYTHING can go in Islands of adventure as long as it's an island. Isn't that what people don't like about DHS's so-called identity crisis.

Whether or not it was intended, every island at IOA is linked to literature:
Port of Entry - Pharos Lighthouse
Marvel Comics
Newspaper Comic Strips
Jurassic Park - Michael Crichton
Harry Potter - J.K Rowling
Poseidon - Greek Mythology
Sinbad - Sinbad the Sailor
Seuss Landing - Dr Seuss

That is not the same as what is going on at DHS, where people on here seem to be asking for a more defined structure, so we don't have RnRC on Sunset Boulevard along with TOT, B&TB and Fantasmic, and so that we wouldn't have had Disney Channel Rocks going up Hollywood Boulevard, and there wouldn't be a single land containing American Idol, Indiana Jones and Star Wars, and a single land containing Muppets, HISTK Playground, LMA and Backlot Tour.

People may not have liked Disney Channel Rocks, but a lot of the complaints were because it didn't fit the location, and because it made it difficult to move around the park. If there was a land themed to a music studio or music production, which featured RnRC, DCR, Mulch Sweat & Shears and American Idol Experience, then a lot of the complaints would not have happened. (there would still be complaints about show quality, but not about where it was happening.)

If, instead of what we have now, DHS consisted of Hollywood Boulevard, Sunset Boulevard, Lucas Land/Star Wars Land, Muppet Land, Pixar Land, Backlot, Walt Disney Studios, Walt Disney Animation Studios, Music Production/Hollywood Records, etc., then lots of complaints about how things are grouped together would be void.

There would still be complaints about individual attractions (AIE, Backlot, LMA, etc.), but there wouldn't be any about the park layout.


And, as for ANYTHING can go in IOA, how is MK holding up recently, with a messed up Tomorrowland and Adventureland - they suffer the same issues that people have with DHS, not IOA. If TDO had used one of the expansion pads for Adventureland and turned that into Agrabah, then there would have been no complaints. If they had had Tinker Bell beside Peter Pan, there would have been no complaints.

 

[MichWolv]

Comcast had a strong earnings report in its most recent quarter, with theme park revenue increasing 12.2% to $462 million, and operating cash flow up 10.3% to $173 million.

1) The increase in operating costs outpaced revenue growth. That is never good.

2) Operating cash flow is not the bottom line. Since you have the numbers at your disposal, tell us what net income minus capital expenditures is. Is that number positive or negative? The net income number is in the double digits, yeah?

Selective citations are the best friend of every Universal fanboy/girl.

Point 1 is just silly. There's no evidence that operating costs rose by more than revenue, either for the company as a whole or for the theme park division. That isn't in the report. Even if it was, it isn't ALWAYS the case that this is a bad thing, as there could be reasons for a jump in operating costs that signal strength, rather than weakness. But that's beside the point, because it didn't happen.

Perhaps you mean that operating costs appear to have increased for the theme park division at a higher percentage than revenue did, which is why operating cash flow rose at a lower rate than revenue, but revenue increased by more dollars than operating expenses did. That does seem to have happened. Far from never being good, this situation is usually good. Would you rather earn higher margin percentage or higher margin dollars? If that's all the info you have, the answer is higher dollars. Earning $100,000 on $1,000,000 in revenue is a 10% return. But given a choice, I'd rather earn $160,000 on $2,000,000 in revenues, even though that's only an 8% return. Sure, there are times when the growth of expenses faster than revenue on a percentage basis could indicate problems, but as long as revenues are growing by more dollars than expenses are, you're increasing profits, which is a good thing.

As for operating cash flow less capital expenditures, that's a nice number, but it sure ain't the bottom line either. The bottom line (net income attributable to Comcast Corporation) for the company as a whole went up from $1,224,000,000 to $1,437,000,000 from Q1 2012 to Q1 2013. That is a pretty good sized increase -- double digits, indeed, although I'm not sure what your reference "net income number is in the double digits" actually means. There is no comparable number reported for the theme park division. Free cash flow for the company as a whole also increased.

Selective citations are everybody's friend, but it appears you've chosen to go with no citations. Even better.

 

[MichWolv]

Are you trying to get to free cash flow?

Segment operating income for Q1 was $173M before depreciation and $101M after (couldn't find segment net income) vs capital expenditures of $138M. Not sure what that tells us. Seems like positive free cash flow (cash flow from operations less capital spend) despite a period of heavy construction and growth. I'm not seeing the bad guy in these numbers.

Nor am I.

 

[flynnibus]

Attractions aren't revenue generating. Capex eventually depreciates, and if they don't get the asset lives right, they're in for major write offs when refurb time rolls around.

You're acting like this is some huge risk Uni is taking.. while ignoring your golden child has forced attractions to operate for eons that no one cares about because of the same issue.

Attractions aren't revenue generating - but they are the anchors that pull the guests into all the other revenue channels of the business. Again.. nothing unique to UNI here... and ironically you use it as a negative, when it's really a negative against Disney. Who because of their lack of efficiency in execution and costs... make their 'non-revenue generating' attractions take too long to build, and cost too much. So that is periods where they've spent money, but aren't benefiting from it, AND spent too much doing it.

It all boils down to whether Potter is a permanent boon or a temporary one. They can't expand at this pace forever

They don't intend to. That's the theory behind building great attractions - build it and they will come. Not 'invent another marketing campaign to lure people into thinking something has changed..'.

Everyone knows this boom at UNI is a finite period.. just like DCAv2 was a finite expansion. It's only you and the pig who are trying to blur short term vs long term actions.

 

[MichWolv]

You took it off on the money tangent because you didn't understand the math behind what I said.

Pretty sure we understand....

 

[RSoxNo1]

Avatar is a firm green. Close to a billion dollar green.

That seems much higher than anyone on here knew it. That screams 3 rides then, is that correct?

 

[Tim_4]

Nor am I.

Why the exclusive focus on cash flow and/or operating metrics? My concern from a financial perspective is that they're sitting on a depreciation bomb that will continue to dilute earnings long after the Potter surge has died down.

 

[luv]

That seems much higher than anyone on here knew it. That screams 3 rides then, is that correct?

Or a wristband.

 

[Funmeister]

There is another factor when it comes to defining what is considered a full day park versus being a half day park. Think Timmy brought part of this up earlier. It is a fact that every Disney park is a full day park if you do everything that is offered in the park. I guess what I mean is how do you define a quality full day filled with shows and attractions and not so much color pages and themed games?

The problem is the cool fun things were replaced with cheap less expensive time consumers. For instance. I will say that Sorcerer's of the MK and the new Pirates game at MK are really neat. It's just that Disney relies or will rely on it to be part of your day. I would rather spend that time experiencing a ride, attraction or show. Too many times they have gotten rid of attractions only not to replace them or replace them with something that is not on the same scale but eats up your time.

How much of your one-day ticket admission to Epcot is worth stopping at each country for your child to make a paper mask at Kidcot zones around the lagoon? (Some of this is a little out of date but you see what I am saying.) The ole Kim Possible (now re-launched) game was neat but ate up a considerable amount of time that I would prefer riding a decent Energy, Imagination or new country attraction.

Fast Pass is another culprit. Many attractions are given Fast Pass to create a wait. CoP? Really? The Living With the Land? This was purely to cut cost on boat maintenance (I believe the river can hold 50+ boats at once and with Fast Pass they were able to decrease it to less than a dozen?) and require guests to wait. How much of that BS fast pass wait time contributes to being a "full day?"

 

[ParentsOf4]

Why the exclusive focus on cash flow and/or operating metrics? My concern from a financial perspective is that they're sitting on a depreciation bomb that will continue to dilute earnings long after the Potter surge has died down.

All amusement parks are potential "depreciation bombs", even WDW. Until recently, the business model has been to periodically invest in amusement parks to keep the parks "fresh" so they don't turn into "depreciation bombs".

It's been suggested that Iger/TWDC are trying to exit the theme park wars by adapting BOS. If this indeed is the case then, in my opinion, MyMagic+ is an example of an imperfect implementation that strategy; an attempt to repackage/remarket an existing product and then claim it's a new business model. BOS is about not competing for market share by creating something that doesn't neatly fit into an existing market. However, no matter how much Iger would like to think otherwise, WDW is a theme park and Disney is in the amusement park business.

Perhaps the most frustrating part is WDW still is the largest theme park resort in the world yet Iger/TWDC seems to be letting its once dominant position slowly erode because they don't understand the theme park business; their forte is film and tv. As a result, the last 10 years at WDW have represented mostly one miscue after another.

Can WDW dominate once again? You bet. They still are the biggest player but have lost their omnipotence; they are exhibiting the same arrogance GM once did. They have to stop resting on past glories and focus on providing their customers with superior products with growing demand rather than focusing on identifying new methods to pry money out of their existing customers' wallets.

 

[Nubs70]

Except you overlook the obvious that the boost in costs is due to short term capex investment. So they boost investment $150+mil or so.. yet in that same period they got a $50 mil boost in revenue. Only 3 years to get your ROI on investments scheduled to work for 20+ years? Anyone would jump on that.

They are investing because they are bullish that the revenue boosts are not short term, while their boost in capex is. They are investing on both costs.. heavily. They've already set the expectation with the market that capex for NBCU will be up well into 2015.

Not necessarily. It depends on the NPV, based on corporate WACC or whatever hurdle rate is established. There may be a $150MM project(s) somewhere out there that returns in 2.5 years. The 2.5 year project(s) will get the money.

 

[flynnibus]

Whether or not it was intended, every island at IOA is linked to literature/storytelling:

Intended or not... every story is written by someone. Shocker isn't it?
Intended or not... every medium relies on stories written by someone doesn't it?

Your point tying the lands to authors or written subjects.. is like saying we all have to pee after we drink a lot. Yes.. it all comes from somewhere!

People may not have liked Disney Channel Rocks, but a lot of the complaints were because it didn't fit the location, and because it made it difficult to move around the park. If there was a land themed to a music studio or music production, which featured RnRC, DCR, Mulch Sweat & Shears and American Idol Experience, then a lot of the complaints would not have happened. (there would still be complaints about show quality, but not about where it was happening.)

I think you see the complaints more about the park layout which as we know is a hodpodge as they took over parts of what used to be 'backlot'. The disjointed paths and indirect ways people have to move through the park.

There would still be complaints about individual attractions (AIE, Backlot, LMA, etc.), but there wouldn't be any about the park layout.

Except the whole layout and path things again.. but you're talking so hypothetical and so impractical.. what's your point?

 

[Tim_4]

Not necessarily. It depends on the NPV, based on corporate WACC or whatever hurdle rate is established. There may be a $150MM project(s) somewhere out there that returns in 2.5 years. The 2.5 year project(s) will get the money.

Not to mention that the $50M and $150M figures are completely made up. Even worse is the implicit assumption that a $50M boost in year one will continue straight-line in perpetuity.

 

[flynnibus]

Not to mention that the $50M and $150M figures are completely made up. Even worse is the implicit assumption that a $50M boost in year one will continue straight-line in perpetuity.

Uhh.. when did I say it would continue in perpetuity in a straight line? You're just making @#%$ up to try to counter it. That's sad.

I said ROI and was talking about payoff. A payoff UNI already saw with HPv1 and will continue to earn and draw in revenue for a very long time to come.

The numbers aren't made up.. they are rounded to simplify because the point doesn't hinge on the absolute numbers.. only the relative. If you want the spreadsheet analysis.. you'll have to pay me.

It's hysterical that you wonder twins are focusing on the capex.. when the real mojo is on the revenue streams. The capex is a sunk cost its done and gone... the trick is making it pay over and over and over. Pretty paid off buildings don't earn alone.. so the make or break is on the revenue.

A large part of HPv1.0 success was the merchandising. WB+UNI capitalized on an underserved market with huge pent up demand. That lead to an immediate blow out of merchandising numbers. The real trick is going to be sustaining such high demand for HP merchandise long term. It will sell.. but can you really count on the types of numbers you saw after exploiting the pent up demand? How do you introduce new merch in this area to get repeat buyers? You can only have so many $30 plastic sticks..

 

[RSoxNo1]

With that logic, literally ANYTHING can go in Islands of adventure as long as it's an island. Isn't that what people don't like about DHS's so-called identity crisis.

My understanding was that the loose connection was "literature".

 

[Tim_4]

Uhh.. when did I say it would continue in perpetuity? I said ROI and was talking about payoff. A payoff UNI already saw with HPv1 and will continue to earn and draw in revenue for a very long time to come.

The numbers aren't made up.. they are rounded to simplify because the point doesn't hinge on the absolute numbers.. only the relative. If you want the spreadsheet analysis.. you'll have to pay me.

It's hysterical that you wonder twins are focusing on the capex.. when the real mojo is on the revenue streams. The capex is a sunk cost its done and gone... the trick is making it pay over and over and over. Pretty paid off buildings don't earn alone.. so the make or break is on the revenue.

A large part of HPv1.0 success was the merchandising. WB+UNI capitalized on an underserved market with huge pent up demand. That lead to an immediate blow out of merchandising numbers. The real trick is going to be sustaining such high demand for HP merchandise long term. It will sell.. but can you really count on the types of numbers you saw after exploiting the pent up demand? How do you introduce new merch in this area to get repeat buyers? You can only have so many $30 plastic sticks..

Your last paragraph is my main point. The cash has been spent but the expense has not been incurred. The investment must continue to AT LEAST cover the depreciation, . This is why Disney builds slowly. You spread out service dates so the giant depreciation bubble doesn't pop all at once, but oozes slowly.

 

[Tim_4]

My understanding was that the loose connection was "literature".

So Potter 1 is literature but Potter 2 is in a studio? But they're connected? Can't wait to see the Potterites tie themselves in knots to explain that continuity.