Spirited News & Observations II -- NGE/Baxter

[djlaosc]

A long, long time ago...last time I went to SeaWorld, well, was probably in the early 1980s. Looking forward to going there, too!

I would guess that it's possibly changed quite a bit since then (did SeaWorld even have any rides in the early 1980s?)

Universal Studios/Islands of Adventure/SeaWorld/Discovery Cove/Aquatica and Busch Gardens are all great parks, that I would encourage anyone to go to!

 

[tomman710]

Using the example I gave, say us fanbois are 100% satisfied with the parks on days that we experience 12-14 attractions. Say the uninformed guest is 75% satisfied when they experience 6-8 Attractions. If both groups experience 9-10 attractions they may be 90% satisfied, and to Disney that's probably, "good enough".

The other option would be to build more attractions, spread out the crowd and make everyone 100% satisfied.

I think your percentages are way off ... if the majority of people leave 60% satisfied, meaning maybe come back in 5-7 years, I think TDO is happy.

There is no way the product they are putting out now would register at 90% satisfaction level on average. If we were to quantify the satisfaction level on averages.

 

[asianway]

I think your percentages are way off ... if the majority of people leave 60% satisfied, meaning maybe come back in 5-7 years, I think TDO is happy.

There is no way the product they are putting out now would register at 90% satisfaction level on average. If we were to quantify the satisfaction level on averages.

Im sure it does through rigged surveys. We need to start a "survey dissection" thread.

 

[tomman710]

Im sure it does through rigged surveys. We need to start a "survey dissection" thread.

Well I guess I stand corrected, their surveys are like this right ...

How would you rate your day in The Magic Kingdom Park?
1. Very Good 2. Very Great 3. Very Magical 4. Magically Good 5. Magically Great 6. Very Magically Great or 7. Very Magically Great and Good

 

[Lee]

Well I guess I stand corrected, their surveys are like this right ...

How would you rate your day in The Magic Kingdom Park?
1. Very Good 2. Very Great 3. Very Magical 4. Magically Good 5. Magically Great 6. Very Magically Great or 7. Very Magically Great and Good

Nice...and though a joke, painfully close to the real thing.

Like with Pleasure Island. No survey ever asked "Do you wish there were fewer clubs?" They only said something like "Would you like to see more and varied shopping and dining at PI?"

Assassination by survey.
But that was under the former administration.
George wouldn't do anything like that...or would he?

 

[Figments Friend]

-

Another fab fun photo...
Tony and Chris getting into their work hands on...

 

[Californian Elitist]

From MiceChat:

Tony working on Thunder Mountain for Disneyland/Magic Kingdom.

http://micechat.com/21184-disney-news-round-up-3/

 

[GoofGoof]

Sure. High tech items typically are depreciated much faster; perhaps over 4 years or so. But there's a reason they are depreciated so quickly. A 4 year-old computer is old. Given the demands MM+ will place on the system, it will be necessary for Disney to keep MM+ technology relatively current, much more so than a typical brick-and-mortar attraction.

Flynnibus is right. GAAP accounting often does not follow logic or economics. The accounting useful life of a fixed asset usually cannot be stretched even if you believe the actual asset will last longer. Generally, computers and software will be 5 years or less. A big part of the costs for NextGen will be the consulting fees paid to develop and implement the software. That consulting expense can be capitalized, but generally will also have a short useful life. With a big project like Carsland or FLE the bulk of the spend is on buildings, ride systems, roads/paths and landscaping. All of those components can have much longer useful lives, up to 40 or more years in some cases.

This does bring up another reason why even if NextGen flops it will be with us for the foreseeable future. If they decided to abandon the project or not use the systems now what's left of the capitalized fixed asset would be impaired and would need to be written off in the current period. Try spinning a $1B+ impairment expense to investors.

 

[Darth Sidious]

Sure. High tech items typically are depreciated much faster; perhaps over 4 years or so. But there's a reason they are depreciated so quickly. A 4 year-old computer is old. Given the demands MM+ will place on the system, it will be necessary for Disney to keep MM+ technology relatively current, much more so than a typical brick-and-mortar attraction.

MACRS and the reason as you stated is Moore's Law

http://www.irs.gov/pub/irs-pdf/p946.pdf - page 35

http://en.m.wikipedia.org/wiki/Moore's_law

(This is not directed towards you obviously just anyone interested in further reading. You know your stuff)

 

[fillerup]

This would be from back when Disney knew what they were doing and did it right down to the promotion.

Tony's in there a couple of times.

Slightly depressing actually. Imagineers obviously excited about their creation and enthusiastic to provide an amazing experience while anxious to not let the guest see how it's done.

Contrasted with this 5 minute commercial on the "Making of Everest" which includes about 9 seconds of Joe Rhode and an actual pre-disco Yeti (for those of you who've never seen it).

[/media]

 

[stlphil]

Flynnibus is right. GAAP accounting often does not follow logic or economics. The accounting useful life of a fixed asset usually cannot be stretched even if you believe the actual asset will last longer. Generally, computers and software will be 5 years or less. A big part of the costs for NextGen will be the consulting fees paid to develop and implement the software. That consulting expense can be capitalized, but generally will also have a short useful life. With a big project like Carsland or FLE the bulk of the spend is on buildings, ride systems, roads/paths and landscaping. All of those components can have much longer useful lives, up to 40 or more years in some cases.

This does bring up another reason why even if NextGen flops it will be with us for the foreseeable future. If they decided to abandon the project or not use the systems now what's left of the capitalized fixed asset would be impaired and would need to be written off in the current period. Try spinning a $1B+ impairment expense to investors.

Actually this is good news. Succeed or fail, NextGen will be fully depreciated fairly quickly so it doesn't have to be kept on the books much longer than the time it looks like they are going to need to roll it out fully.

And the GAAP rules do make sense in this instance. NextGen is mostly an IT infrastructure project, and the tech world moves so fast that state-of-the-art systems don't have much longer shelf life than milk that has been left out of the fridge. Even if the hardware is still running, it won't be long before the IT executives are begging for upgrades, and the success (or lack thereof) will determine whether they get them, or the system is tweaked or to some extent goes away. Regardless of what happens, I think some parts of NextGen are here to stay, such as the RFID door locks (which I bet have a longer depreciation schedule).

 

[ParentsOf4]

This does bring up another reason why even if NextGen flops it will be with us for the foreseeable future. If they decided to abandon the project or not use the systems now what's left of the capitalized fixed asset would be impaired and would need to be written off in the current period. Try spinning a $1B+ impairment expense to investors.

NextGen includes many "low risk" improvements to Disney's infrastructure. Network & software upgrades, touch-to-pay, new gates, resort doors, etc. All these things represent real capital improvements. There won't be any need for Disney to declare an impairement. Instead, the question is if NextGen will be the revenue multiplier Disney executives dream it to be.

For a project of NextGen’s magnitude, there should be layers of financial justification. “Guests” could consider NextGen to be a dud while, internally, NextGen still could be a modest financial success. Disney’s risk lies in internal expectations. If there was a “NextGen will save opex with some revenue growth” attitude, then it probably will be a viewed as a success. If internal expectations were “NextGen is going to be a financial juggernaut!”, then it’s off to a rocky start.

A project like NextGen tends to produce groupthink, with everyone involved not only believing “this can’t lose” but also “this is going to be our greatest success ever!” They have emotional and often financial stakes in its success. This clouds judgment. “This is going to succeed because we want it to succeed” rather than “This is going to succeed because it’s a strong plan.”

The Emperor’s New Clothes is not just a child’s fairytale. Business leaders often live the same fairytale and, regrettably, receive millions as long as they maintain the fairytale.

 

[Disneyhead'71]

I think one of the major areas where the NextGen project is going to fail is in labor costs. First I think that they will NOT be able to eliminate EMHs like they plan without a major backlash from the existing customer base. And also I think that staffing based on pre-booked FP+ and FP+ Dining is going to result in long lines at guest services complaining about under staffing and inability to get FP+s when people change their itineraries at the last minute. Like when people realize it's going to rain all day and decide that DAK is probably a bad idea for the day.

 

[GoofGoof]

NextGen includes many "low risk" improvements to Disney's infrastructure. Network & software upgrades, touch-to-pay, new gates, resort doors, etc. All these things represent real capital improvements. There won't be any need for Disney to declare an impairement. Instead, the question is if NextGen will be the revenue multiplier Disney executives dream it to be.

For a project of NextGen’s magnitude, there should be layers of financial justification. “Guests” could consider NextGen to be a dud while, internally, NextGen still could be a modest financial success. Disney’s risk lies in internal expectations. If there was a “NextGen will save opex with some revenue growth” attitude, then it probably will be a viewed as a success. If internal expectations were “NextGen is going to be a financial juggernaut!”, then it’s off to a rocky start.

A project like NextGen tends to produce groupthink, with everyone involved not only believing “this can’t lose” but also “this is going to be our greatest success ever!” They have emotional and often financial stakes in its success. This clouds judgment. “This is going to succeed because we want it to succeed” rather than “This is going to succeed because it’s a strong plan.”

The Emperor’s New Clothes is not just a child’s fairytale. Business leaders often live the same fairytale and, regrettably, receive millions as long as they maintain the fairytale.

The depreciation will be a nice tax deduction either way. The wifi in the parks along with the door locks, gates and cash register scanners are probably a pretty good investment and the scanners can easily be switched back to work with plastic cards if the wristbands really bomb. The data mining system is debatable at best. The interactive queue elements could go either way. I want to see how they look and work before judging.

 

[flynnibus]

Flynnibus is right. GAAP accounting often does not follow logic or economics. The accounting useful life of a fixed asset usually cannot be stretched even if you believe the actual asset will last longer. Generally, computers and software will be 5 years or less. A big part of the costs for NextGen will be the consulting fees paid to develop and implement the software. That consulting expense can be capitalized, but generally will also have a short useful life. With a big project like Carsland or FLE the bulk of the spend is on buildings, ride systems, roads/paths and landscaping. All of those components can have much longer useful lives, up to 40 or more years in some cases.

Yes - which is what JR was warning about in his statement.. not that 'we are building a system that has no lifespan' - simply that the accounting rules dictate this expense will have an impact not like most of the large scale expenditures the investors are used to seeing from Disney.

While there is obvious truth when it comes to the differences in the useful lifespan of a IT system vs a rockwork covered building.. that's not what JR was warning about.

 

[GoofGoof]

I think one of the major areas where the NextGen project is going to fail is in labor costs. First I think that they will NOT be able to eliminate EMHs like they plan without a major backlash from the existing customer base. And also I think that staffing based on pre-booked FP+ and FP+ Dining is going to result in long lines at guest services complaining about under staffing and inability to get FP+s when people change their itineraries at the last minute. Like when people realize it's going to rain all day and decide that DAK is probably a bad idea for the day.

Or when a ride breaks down for 4 hours in the afternoon. I see this as a huge problem. If I book my FP+ 60 days in advance and plan my ADRs around them and I get to Splash Mountain at my assigned time and it's broken I will be one of those people in line at guest services.

One upside for staffing is Disney will be able to more accurately project how many people will be going to each park each day and hopefully that helps them to allocate more resources to the crowded parks. Not sure how well that will work in practice, but it sounds good on theory.

 

[Disneyhead'71]

Or when a ride breaks down for 4 hours in the afternoon. I see this as a huge problem. If I book my FP+ 60 days in advance and plan my ADRs around them and I get to Splash Mountain at my assigned time and it's broken I will be one of those people in line at guest services.

One upside for staffing is Disney will be able to more accurately project how many people will be going to each park each day and hopefully that helps them to allocate more resources to the crowded parks. Not sure how well that will work in practice, but it sounds good on theory.

I think Disney is looking at it as how they can allocate LESS resources to any given park.

 

[OFTeric]

I think one of the major areas where the NextGen project is going to fail is in labor costs. First I think that they will NOT be able to eliminate EMHs like they plan without a major backlash from the existing customer base. And also I think that staffing based on pre-booked FP+ and FP+ Dining is going to result in long lines at guest services complaining about under staffing and inability to get FP+s when people change their itineraries at the last minute. Like when people realize it's going to rain all day and decide that DAK is probably a bad idea for the day.

Can you reserve your time to complain at guest services with MM+?

 

[HMF]

Reading from some elements of the fandom that are happy about the situation with Baxter and calling it "Marc Davis' revenge", Very sad!

 

[John]

You know I was thinking....just when the thread was really starting to get into the meat and potatoes of NG and some real disection of the financial aspect of it....along comes somebody to derail the thread.....coincedence? I think not. Its happened to many times.