Spirited News & Observations II -- NGE/Baxter

[tomman710]

You're missing the point of what I was saying. I was using the percentages to explain some of the decisions they're making and you're focusing on whether or not they're putting out a quality product. I think many of us would agree here that the product is not up to Disney's usual standards.

No you misunderstood me ... I was agreeing with you ... just basically saying that to me their decisions are driven by far less acceptable numbers, which they would deem "good enough."

 

[GoofGoof]

Thank you. The point of my earlier post (which I believe started this particular topic) was to indicate that Disney will be investing in NextGen for the foreseeable future because many of its components will need relatively frequent upgrades, unlike a traditional brick-and-mortar attraction. Budgets are finite. If Disney is spending on NextGen, it’s not spending on attractions.

Putting aside Disney’s possible motives, if they’ve put any thought into planning (and I’m sure they have) Disney must have a growth path for MM+. Right now they are unveiling the beta version. In 12 months we’ll see v1.0. What happens after that?

Beyond what exists today, technology will expand in directions that no plan can foresee. Disney executives need to be prepared to modify their NextGen plans to take advantage of the latest technology.

The technology baselined today should allow for MM+ expansion. Disney needs to get v1.0 out now so they can start realizing revenue from their investment. Beyond that, they better have plans to generate additional revenue from future enhancements, otherwise MM+ quickly devolves into one of those brick-and-mortar attractions Disney’s current executives criticize as not leading to sustainable growth. MM+ v2.0, v3.0, etc. will require further R&D and infrastructure upgrades. MM+ will continue to cost Disney for years (and possibly decades) until they decide it’s no longer viable to invest in MM+.

It seems Disney executives believe attractions are less relevant in today’s theme park industry, suggesting BOS thinking. It should take 2-to-3 years to determine if those executives are right.

I don't doubt that they will need continued investment in NextGen over the years just like a ride or a hotel or a cruise ship. The major infrastructure should last for a long while. They will need to constantly upgrade the software just like any other computer system.

My point on Rasulo's statement is that the fact that accounting rules require you to depreciate the asset over a short period of time does not mean it will be obsolete in that time. For example, the major components of a ride like Peter Pan have been fully depreciated, many for years now, but the ride will likely still be around for a long, long time. Regular maintenance would just be expensed as incurred, but If they do a major overhaul that would extend the useful life of the asset it would be possible to capitalize the overhaul expense too. I really do think he was just reminding/preparing analysts for a larger depreciation expense in the short term than the normal run rate for P&R capital projects.

 

[dhall]

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.

I imagine that Disney, like most every other Fortune-500 size company, has a fairly significant internal communications infrastructure -- internal websites, internal social media, newsletters, mailing lists, etc. I'd also imagine (again, like most every other company) that stories about successful applications of new technology will spread far more easily than stories about failures & lessons learned. Funny how the second never gets that much attention in any big company.

 

[flynnibus]

Thank you. The point of my earlier post (which I believe started this particular topic) was to indicate that Disney will be investing in NextGen for the foreseeable future because many of its components will need relatively frequent upgrades, unlike a traditional brick-and-mortar attraction

Attractions also require constant upkeep - and periodic overhauls. The constant investment in nextgen will come from the constant evolving of it to do more and different things.

Like a reservation platform - Disney could keep it stable and use it for decades until it feels like a cobal mainframe.. but they will probably continue to expand and evolve it.

They will have service and support contract costs for sure.. but so do attractions through maintenance costs, physical assets, and periodic overhauls and upgrades. You can't under estimate those costs... its so expensive it was the first area the 'new kids' went after. Servers sound expensive.. until you compare them to the cost of anything used in something that could cause physical harm to someone. And let's not also forget that money spent on upkeep/service is also another color of money compared to capex.

The technology baselined today should allow for MM+ expansion. Disney needs to get v1.0 out now so they can start realizing revenue from their investment. Beyond that, they better have plans to generate additional revenue from future enhancements, otherwise MM+ quickly devolves into one of those brick-and-mortar attractions Disney’s current executives criticize as not leading to sustainable growth. MM+ v2.0, v3.0, etc. will require further R&D and infrastructure upgrades. MM+ will continue to cost Disney for years (and possibly decades) until they decide it’s no longer viable to invest in MM+.

You have to think of it as a platform. It's almost like investing to put in a Global IP network in your business. That investment becomes the foundation for new applications you roll out.. that each have their own pros and cons.. but they all rely on the foundation to exist. That foundation needs attention and upgrades as the demands of the applications in use change. Same things apply here.. It's not 'Global IP network' v2, v3, etc every time you add a new application to the business. Tho overtime you do need to evolve the platform to keep up with new demands. That interval is based on what new apps you want and how their needs differ compared the previous ones.

 

[alissafalco]

What makes everyone so sure that they will upkeep and put $$ into the system? Look how they have let attractions rot. They will probably let NextGen rot also.

 

[the.dreamfinder]

Evil Tony Baxter wants to share some thoughts with you nice people.

You know how long it took me to get real rocks to actually fall on you in Frontierland? That's realism folks.

If you strike me down now Fitzgerald, I will become more powerful than you can possibly imagine.

Since I have "retired" I've been bored. Decided to mess with the Superdome's electric system, I liked the results.

Good thing about screens, we can replace them if Ray Lewis stabs them. #Screens4Life

It seems as if I have an army now. I knew you fools were good for something.

So any of you army lackeys up for egging the offices in Glendale? #DoMyBidding

I need somebody from #BaxtersArmy to be Joe and I's DD. Bring toilet paper too, we're going to make a stop at Fitzgerald's.

Joe is crying into his scotch. Somebody asked about Avatar.

We broke into the office. Stealing models.

Tom just came outside, hit with egg. Joe just shot a flare gun. Hear sirens. Running.

 

[Darth Sidious]

What makes everyone so sure that they will upkeep and put $$ into the system? Look how they have let attractions rot. They will probably let NextGen rot also.

Simple. Attractions don't directly add to profits and NextGen does. Attractions add indirectly but it isn't as measurable as NextGen will be (if all goes as planned).

 

[alissafalco]

Simple. Attractions don't directly add to profits and NextGen does. Attractions add indirectly but it isn't as measurable as NextGen will be (if all goes as planned).

I have to disagree with you on that. I think about 98% of the people that go to WDW are there for the attractions.

 

[Darth Sidious]

I have to disagree with you on that. I think about 98% of the people that go to WDW are there for the attractions.

It isn't really opinion... I rather attractions but NextGen is about money and margins, while attractions are a feature of the trip. I much rather new rides and if I was in charge I would be making attractions. Simply put though NextGen directly translates into dollars and you don't pay per attraction. Any attraction built only increases profits if people like it and it increases profits in terms of turnstile clicks and possibly ride merch.

Step outside a fan point of view and you'll see why Disney will 100% maintain their little money making data system. I wish I was wrong but it is what it is at this point.

 

[Goofyernmost]

Simple. Attractions don't directly add to profits and NextGen does. Attractions add indirectly but it isn't as measurable as NextGen will be (if all goes as planned).

I know I'm not the brightest bulb on the tree, but, I still cannot understand how this guarantee's more money (aka, more profit). It must have some magical thing happening that I am unable to comprehend.

I know that they somehow will be able to zero in on what we, as guest, do, see and buy, but how does that exactly convert into more money other then through inventory control. They can put all the wrist bands on me that they want, it isn't going to change my current spending habits. Does it create mind control? I can't even see how requiring expensive on-site lodging to get full benefits is going to help. Again, I would just stop going if I felt disadvantaged.

Since 2001 I have spent $35000.00 on vacations. 95% of them have been to Disney. I spent that on my terms and my discretion. That is what I budgeted and what I have spent. There is no more in the pot. If I cannot go to WDW, for example, on my terms and my budget...I can't go or won't go! If they lose that 35K who is going to make that up over the next ten years? How does it make more profit.

It would not be to their benefit or history to be willing to share with outsiders what is spent, on what , when and how much, so sharing that information would be competitively signing their death sentence by selling the secrets that Disney needs to maintain their dominance. So, again...where is the extra profit going to come from?

 

[Skibum1970]

I think that attractions drive profits. Why go to MK if there are no rides? Why go back when it stays stagnant? Many of us on this site go because we love it there. Many others won't go unless there is something new to ride. Theme parks across the US see bumps in admission when new rides are added. Increased admission means more ticket sales. Sales equals income.

I still cannot grasp how a magicband makes money when I have no incentive to go due to no new rides.

 

[awoogala]

I know I'm not the brightest bulb on the tree, but, I still cannot understand how this guarantee's more money (aka, more profit). It must have some magical thing happening that I am unable to comprehend.

I know that they somehow will be able to zero in on what we, as guest, do, see and buy, but how does that exactly convert into more money other then through inventory control. They can put all the wrist bands on me that they want, it isn't going to change my current spending habits. Does it create mind control? I can't even see how requiring expensive on-site lodging to get full benefits is going to help. Again, I would just stop going if I felt disadvantaged.

S

The first one is by firing a lot of employees. Less employees saves money. If they can track where everyone is, they can easily have less employees, and move them where they need them. Less at the turnstiles, less at the rides, the ones from the fp kiosk can now go...

Maybe you (and I) are not the type easily swayed by the other things, but plenty of people are. Especially if they can access kids cellphones.

I also am a little weirded out that the automatic default is charging ability on the kids magic band on any kid over the age of 10. A couple mistakes, or parents who don't check all the details... multiplied by thousands...

 

[WDW1974]

While I don't doubt what you say, wow, I sure wish we'd see a sign that they're listening,
and that someone, anyone "gets it". It sure won't be on the Parks Blog.

Still waiting for someone to take their lunch hour and go fix the Roger Rabbit window at the Studios.
Then we could all say, "the beacons are lit!".

The signs are out there ... sometimes right before your eyes. I think it becomes an issue of training and knowing what to look for.

You're just gonna have to trust me on this one, but they are reading.

That said, I'd love it if Blondie took me to lunch on her Dreams, Wishes, MAGIC company Visa card at any of the wildly overpriced Disney dining locations ... maybe Le Cellier (just to show there's always a way to get a table) or Cindy's Castle (because like most fanbois, I've always dreamed of being a princess!) and asked me about social media.

 

[Goofyernmost]

The first one is by firing a lot of employees. Less employees saves money. If they can track where everyone is, they can easily have less employees, and move them where they need them. Less at the turnstiles, less at the rides, the ones from the fp kiosk can now go...

Maybe you (and I) are not the type easily swayed by the other things, but plenty of people are. Especially if they can access kids cellphones.

I also am a little weirded out that the automatic default is charging ability on the kids magic band on any kid over the age of 10. A couple mistakes, or parents who don't check all the details... multiplied by thousands...

That last point would be a colossal mistake for Disney to manipulate. They would have parents and guests stampeding their offices. I don't see how they would allow charging for anyone under 18 ever especially against someone elses credit card unless a parent is present at the time. It's a huge PR and legal risk. They could easily end up taking back and comping more then they sell.

Although, I would feel sad for the CM's that were let go, there are many there that really shouldn't be there. Hopefully, they would be the ones to be shown the door. That is profit that isn't really coming directly from us so it really shouldn't change anything as far as we are concerned. Certainly, we, as guests, are not going to get involved with demanding that Disney does not have control over the number of employee's it has. Would you do that at your local grocery?

 

[WDW1974]

After Bob Iger replied to questions about MM+ at the Q1 earnings conference call, Jay Rasulo chimed in with this follow-up response:

This is depressing. Disney is acknowledging MM+ technology has a short shelf-life and will need constant future capital investment. Effectively, going forward, a large part of WDW’s capex will be spent feeding the MM+ beast, not on park improvements.

It indicates Disney has conceded the “attraction war” to Universal and reeks of BOS.

Obviously, that's my take. And announcing Cars land, as Pandora slowly dies (I knew the US military would destroy those damn blue tree huggers and steal their unobtanium !) won't change that opinion.

More than anything, this might be the single best reason for WDW fans to hate MM+.

Rasulo’s response along with Iger’s earlier statement (“We want to make sure that we get this right before we go too fast with it”) also hints at what I’ve suggested for a while. Disney plans to continue to expand MM+’s footprint. MM+ will grow. Those who cynically have suggested eventually being required to schedule bathroom breaks might not be too far off the mark.

One last thought. As @WDW1974 already alluded to, there were references during the conference call to Disney quickly recovering its capital investments in its theme parks. This means price increases, potentially big price increases. Unless you are a Disney executive, it’s pretty much guaranteed your pay won’t keep pace with WDW’s prices. If you can, buy your tickets now. You’ll earn a lot more “interest” than leaving your money in a bank.

Better yet, purchase a Universal Annual Pass, which costs $40 less than a single 3-day WDW hopper ticket. At Universal, they are building really exciting attractions for you.

They have no choice but to go slow. Nothing to do with Congressman Markey or privacy concerns ... has nothing to do with educating the public (they've hired loads of $7.75 an hour CMs to do so) either. It has all to do with the fact that the systems just don't work consistently and reliably and with 'talking to each other' ... and, yes, prices will be heading up.

They already have the press release quotes made up using New Fantasyland and Tron Track to show all the 'new' reasons why WDW is a better value than ever before (even if it isn't!)

The first of multiple increases will hit before summer.

 

[WDW1974]

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.

Absolutely, MM+ will be the gift that keeps taking.

Not only will it morph(o) into an even more oppressive type of system for visitors with costs increasing for so many things, but since the IT will need constant improvements and fixes and band-aids, it will cost in that way and that also gets passed on to guests and cast.

 

[WDW1974]

Sadly, none of the three are still at WDI. One passed away, one was fired, and one "resigned".

A shame...

I just gave you your 3,999th like, but there's room for 4,000.

Not that anyone is counting likes ... or creating threads just to do so (I know who you are -- bad form, my friend. Bad form!)

And, yes, Bruce was a true tragedy ... and the others ... just sad.

But, hey, we still have Eric Jacobson and since Tony explained to him at IAAPA what the difference is between an attraction at MK vs. EPCOT, I'm sure we're all in fine hands!

 

[Darth Sidious]

Again, I agree attractions are the underlying driver but you need to step out of our perspective to grasp my original concept. Disney as a business sees the parks as they are as attractive for visitors. Their problem, in their eyes are subsequent revenues and costs after the guest has entered the park. Bring in MyMagic+, the purpose is to make you spend more and to shave costs. That is directly related to one thing... Money. Attractions are the reason why people are there but Disney will surely upkeep their $2 billion investment that brings them lower costs and more revenues.

Not my personal opinion but it is Disneys. There is no arguing that MyMagic+ is about money.

 

[WDW1974]

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?

I am very familar with the work of Disney's research department and it largely is a joke. It is designed to never get to the truth (sorta like talking to a Wall Street banker with his lawyers present).

You never get anything that you didn't want to get to begin with *with one notable exception I can think of ...

 

[dupac]

Obviously, that's my take. And announcing Cars land, as Pandora slowly dies (I knew the US military would destroy those damn blue tree huggers and steal their unobtanium !) won't change that opinion.



They have no choice but to go slow. Nothing to do with Congressman Markey or privacy concerns ... has nothing to do with educating the public (they've hired loads of $7.75 an hour CMs to do so) either. It has all to do with the fact that the systems just don't work consistently and reliably and with 'talking to each other' ... and, yes, prices will be heading up.

They already have the press release quotes made up using New Fantasyland and Tron Track to show all the 'new' reasons why WDW is a better value than ever before (even if it isn't!)

The first of multiple increases will hit before summer.

Blech. All the more reason to be looking at other vacation options. I'm thinking Europe, and I don't mean anything mouse related. When I'm paying more for the same (or worse because frankly pieces of the World weren't raining down when I visited last) product I received last visit, it's time to start checking off other destinations from my list.

If things continue as they are going, as much as I hate to say it, I'll probably end up being one of those people who takes their kids to WDW once as some rite of passage.