Spirited News & Observations II -- NGE/Baxter

[alphac2005]

You can't think like this. Profit motive is how the game is played. I know what you're driving at. They don't care. These types of stockholders really only care about protecting the value of their securitized investment offerings, whether it's a pension system or a mutual fund...and if DIS offers either stability or value to that end, that's the reason they invest in DIS.

Every other publicly traded company has the same exact problem. Do you think Apple's investors are all middle-aged housewives with an apple sticker slapped to the back of their family Civic? Google or Amazon investors are just post-hipsters who landed a cool Silicon Alley job in manhattan? Not true. ALL of these companies have similar major investors....and they care about one thing and one thing only. ROI....and how that ROI benefits their own financial products.

So you can't draw DIS out to be some exception to the rule. Each company has to juggle both the expectations of the Board (who are beholden to the Stockholders) with the expectations of customers. Great companies have a Board who's expectations are sympathetic or aligned to that of the customers. Great Companies appoint/hire managers (CEO's, CFOs, CIOs, mid-level, etc) who ensure this.

I know that we've had other threads delve into this arena and Disney isn't a trailblazer here, rather it's a systemic problem as you've well noted.

There was a time, not so long ago, that while the greed that only focuses on ROI because of major institutional ownership of American corporations, there was an alternative in being a privately held company. Over the past two decades, the concept of privately held has been turned upside down as well. Very few major or even midsized U.S. companies are privately held by families that built their respective brand(s). The one that I think of that still is held by the family is S.C. Johnson.

Most "privately" held companies are now funded by private equity, but their end game is leveraged buyouts unless it's start-up capital, but their end game there is the same as well, to get out and profiteer. So the alternative to large institutional ownership of big companies is essentially worse (can it be any?) than the alternative. The less of two evils that are virtually on par with one another. A least one might pay a dividend and not go all scorched earth on the employees and/or product.

It's a mess, plain and simple. What's even more distressing is that in the wake of the fiscal collapse, the greed and further consolidation into full institution control of nearly all public companies has continued unabated. Lessons weren't learned when it comes to greed and bubbles and regulators (no politics here, rather something that people of all walks of life should agree on) were soft, to say the least, and as our public and private officials continue to go between top fiscal institutions and top levels of the government, nothing changes in this arena, regardless of political party. I was talking to my father last night and I have an issue about something pertaining to my business and an agency of the federal government. He then told me that he'd make a phone call to a friend of his that is in the WH and asked me if I had seen his confirmation hearing. Where did this guy come from last before the WH? An oil company. Ahem.

For those mentioning OLC, the odds would be quite strong that they would run the property quite differently as corporate culture in Japan is about the complete flip of here in the States, but that's most likely pure fantasy about them ever having Florida property control.

 

[MattM]

When a person gets ready to sell a house they fix everything up and slap on a new coat of paint. DLR is undergoing that same sort of ongoing renovation right now.

Same applies when someone plans on staying somewhere for a long time. So what?

 

[BwanaBob]

NGE is still voluntary...and most likely will remain that way.
There is still the 'cash' customer...
There is still the customer/guest that chooses to pay with another credit card.
(Keys to the Kingdom cards are still a WIDELY underused source of payment)

An enhancement, sure. Interactive, and a selling point in the process of planning the vacation.

 

[flynnibus]

Most "privately" held companies are now funded by private equity, but their end game is leveraged buyouts unless it's start-up capital, but their end game there is the same as well, to get out and profiteer. So the alternative to large institutional ownership of big companies is essentially worse (can it be any?) than the alternative. The less of two evils that are virtually on par with one another. A least one might pay a dividend and not go all scorched earth on the employees and/or product.

The change is so much money is necessary...companies need outside capital to fund and operate. By taking in money, they are are the mercy of those who put the money forward.. be it stockholders or investors. The money investors are right to demand a return on their money. The difference is just a matter of over what period of time and under how much scrutiny they face. If they weren't looking for a return.. the money would be a gift, not an investment

So the challenge basically boils down to independence... do you have enough resources to be able to operate independently? And with the scale of things these days.. almost no one does.

 

[Clever Name]

Same applies when someone plans on staying somewhere for a long time. So what?

I was looking at Disneyland in light of the BOS concept. DLR is red ocean and I think Disney would prefer to sell it off and let the new buyer worry about the old game competitive market. WDW with NGE is blue ocean and they can use value innovation and ignore the competition. That would explain a lot about the last several years of P&R management. Of course, it's only speculation at this point.

 

[marni1971]

Laymen's terms maybe...

It wasn't broke.

Unlike the attractions.

 

[MattM]

I was looking at Disneyland in light of the BOS concept. DLR is red ocean and I think Disney would prefer to sell it off and let the new buyer worry about the old game competitive market. WDW with NGE is blue ocean and they can use value innovation and ignore the competition. That would explain a lot about the last several years of P&R management. Of course, it's only speculation at this point.

So do you think TWDC would sell-off Disneyland?

 

[alphac2005]

The change is so much money is necessary...companies need outside capital to fund and operate. By taking in money, they are are the mercy of those who put the money forward.. be it stockholders or investors. The money investors are right to demand a return on their money. The difference is just a matter of over what period of time and under how much scrutiny they face. If they weren't looking for a return.. the money would be a gift, not an investment

So the challenge basically boils down to independence... do you have enough resources to be able to operate independently? And with the scale of things these days.. almost no one does.

Corporations are monsters in scope and size and do need a heck of a lot of capital, however, one can differentiate between that need and greed that has made businesses devoid of humanity. Large businesses for quite a long time historically found a balance between the need for a sizable return for their investors and decency with employees and their customers. Actually, many do have the resources to operate independently, their executives, however, choose the easy option for them, which is to issue shares, be bought out by private equity, etc. Dell will be interesting to see as it's a combination of the founder and private equity. I can't wait to see that once things are turned around how fast they unload their share to Michael Dell and at what markup over the original investment.

 

[Clever Name]

So do you think TWDC would sell-off Disneyland?

I think they would like to enter a joint venture with another company in which TWDC would maintain a controlling interest (51%) but sell the rest with multiple strict licensing agreements. If the joint venture pleased TWDC, they would reduce their interest over time. On the other hand, if the joint venture did not please TWDC, then they would buy back their full interest in DLR. It would be similar to how they handled The Disney Store deal with The Children's Place.

 

[lazyboy97o]

I think they would like to enter a joint venture with another company in which TWDC would maintain a controlling interest (51%) but sell the rest with multiple strict licensing agreements. If the joint venture pleased TWDC, they would reduce their interest over time. On the other hand, if the joint venture did not please TWDC, then they would buy back their full interest in DLR. It would be similar to how they handled The Disney Store deal with The Children's Place.

The Disney Store deal was a complete sell off and the chain was only reacquired because Hoop Retail, the subsidiary of The Children's Place that owned and operated the Disney Store, went bankrupt. Also, in none of Disney's three existing theme park resort ownership arrangements has the Company ever held a majority position.

 

[Clever Name]

The Disney Store deal was a complete sell off and the chain was only reacquired because Hoop Retail, the subsidiary of The Children's Place that owned and operated the Disney Store, went bankrupt. Also, in none of Disney's three existing theme park resort ownership arrangements has the Company ever held a majority position.

Sounds like a good time for a paradigm shift with gradual declension.

 

[MattM]

Comcast just gobbled up GE's 49% stake in NBC/Universal for a cool $16.7 billion. Will be interesting to see what happens with that. Will they cross-promote US like Disney Parks and ABC do? Will we have Wonderful World of Universal weekly TV night?

 

[Sneezy62]

I tend to find it creepy how Disney has taken that carefully crafted and much-deserved reputation and allowed it to be used to shill for products that are less than.

Did I ever blindly trust Disney? As a child, sure. Probably into my young adulthood as I had so much respect for what the company was producing at the time that I never cared to peak behind the curtain ... but once I started to ... well, it's sorta like virginity or death, once you go there's no going back.

I look back at growing up near this big construction project and having Disney World reps come into our school to do presentations about what was happening out in the scrub country. They showed a bunch of second and third graders the ideas behind things like the Contemporary Hotel and the monorail. Those guys were working hard to build trust in a community that didn't trust them. They gave us peeks behind the curtain. Yes it was marketing (to ten year olds) disguised as grade school science, but it was genuine. I wish I had held onto the handouts and I can't say that about many things from second or third grade.

I think those guys would have defined wishes as goals, dreams as plans, and pixiedust as the will to make it happen. NOw they are just buzzwords. It's a shame that nobody at TDO or whatever acronym deserves the blame can't remember the hard work that went into building the trust they now seem to be squandering.

 

[mgf]

I tend to find it creepy how Disney has taken that carefully crafted and much-deserved reputation and allowed it to be used to shill for products that are less than.

Did I ever blindly trust Disney? As a child, sure. Probably into my young adulthood as I had so much respect for what the company was producing at the time that I never cared to peak behind the curtain ... but once I started to ... well, it's sorta like virginity or death, once you go there's no going back.

Seems really relevant to this entire discussion:http://www.wired.com/business/2013/02/why-dont-people-hate-amazon/

I found this section particularly interesting:

"The poll — independently funded by Harris — broke down reputation into six main categories. Amazon trounced the competition in the category of “emotional appeal,” beating second-place Disney by five points on a 100-point scale – which seems bizarre considering the only contact most of us ever have with Amazon is via a cardboard box."

A Yahoo article included a line that I think speaks to the impact of PR and shows why Disney needs to be careful in its messaging:

"Some of the least reputable companies in America include Bank of America (BAC), Goldman Sachs (GS), AIG (AIG), Halliburton (HAL) and American Airlines."

 

[djlaosc]

Comcast just gobbled up GE's 49% stake in NBC/Universal for a cool $16.7 billion. Will be interesting to see what happens with that. Will they cross-promote US like Disney Parks and ABC do? Will we have Wonderful World of Universal weekly TV night?

It couldn't do any worse than some of the programmes on NBC are doing (they've got to be counting down the days until The Voice returns in March)

Seriously - they've averaged a 1.5 over the past 3 weeks.

Animal Practice and Do No Harm have been cancelled, 30 Rock and The Office are finishing this season.

They have to hope that Community won't drop from last week's premiere, Smash can increase from last week's premiere, and that Grimm and Revolution won't be killed off by a 4-month absence, or they're only going to end up with Chicago Fire, L&O: SVU, Parks & Recreation and Parenthood, and possibly Go On, Whitney and Guys with Kids if they don't drop any more.

 

[PirateFrank]

I know that we've had other threads delve into this arena and Disney isn't a trailblazer here, rather it's a systemic problem as you've well noted.

There was a time, not so long ago, that while the greed that only focuses on ROI because of major institutional ownership of American corporations, there was an alternative in being a privately held company. Over the past two decades, the concept of privately held has been turned upside down as well. Very few major or even midsized U.S. companies are privately held by families that built their respective brand(s). The one that I think of that still is held by the family is S.C. Johnson.

Most "privately" held companies are now funded by private equity, but their end game is leveraged buyouts unless it's start-up capital, but their end game there is the same as well, to get out and profiteer. So the alternative to large institutional ownership of big companies is essentially worse (can it be any?) than the alternative. The less of two evils that are virtually on par with one another. A least one might pay a dividend and not go all scorched earth on the employees and/or product.

It's a mess, plain and simple. What's even more distressing is that in the wake of the fiscal collapse, the greed and further consolidation into full institution control of nearly all public companies has continued unabated. Lessons weren't learned when it comes to greed and bubbles and regulators (no politics here, rather something that people of all walks of life should agree on) were soft, to say the least, and as our public and private officials continue to go between top fiscal institutions and top levels of the government, nothing changes in this arena, regardless of political party. I was talking to my father last night and I have an issue about something pertaining to my business and an agency of the federal government. He then told me that he'd make a phone call to a friend of his that is in the WH and asked me if I had seen his confirmation hearing. Where did this guy come from last before the WH? An oil company. Ahem.

For those mentioning OLC, the odds would be quite strong that they would run the property quite differently as corporate culture in Japan is about the complete flip of here in the States, but that's most likely pure fantasy about them ever having Florida property control.

All good, no great, points, but I'll submit that TWDC is a publicly traded company not a closely held or even leveraged private one. So we must measure it in the context of the stockholder/board/management/customer relationship I outlined above.

And to that end, there are great public companies, held in majority by major financial players....and those companies have management that has successfully brought the stockholders expectations in-line with the customers. If the profit motive for companies is the big bad root of all evil, then how is universal (owned by publicly traded comcast) kicking wdw's ?

That's sorta the point I was trying to make. It's not the profit motive, no matter what type of business owner/equity relationship there is, that ruins a product. It's far more than that as evidenced by the public (or privately leveraged) companies that are 'doing it right'

 

[ChrisFL]

I do know that I used to ENJOY spending money at the Disney parks, because I knew it would be reinvested in the parks and their maitenance was top notch, along with adding new attractions frequently. For the past 10-15 years, I don't feel that way at WDW.

However, when I go to Tokyo Disneyland...I spend money like its gonna rot! I LOVE spending money there, because the parks are spotless, staff is friendly, merchandise is awesome and I feel great about everything and I know they re-invest on it constantly.

That's the way the domestic Disney parks used to be.

 

[alphac2005]

All good, no great, points, but I'll submit that TWDC is a publicly traded company not a closely held or even leveraged private one. So we must measure it in the context of the stockholder/board/management/customer relationship I outlined above.

And to that end, there are great public companies, held in majority by major financial players....and those companies have management that has successfully brought the stockholders expectations in-line with the customers. If the profit motive for companies is the big bad root of all evil, then how is universal (owned by publicly traded comcast) kicking wdw's ?

That's sorta the point I was trying to make. It's not the profit motive, no matter what type of business owner/equity relationship there is, that ruins a product. It's far more than that as evidenced by the public (or privately leveraged) companies that are 'doing it right'

Remember that the Roberts family controls nearly a third of voting rights for Comcast, so this is the example of a public yet also family controlled company where their success isn't just measured in institutional ownership profits, but also the desire of the family to be a success. So we have both ego and desire to be a money making monster. They've understood on the theme park side that by spending and building quality, they'll increase they're ROI and they've done the same on the broadcast side.....but, this is also the same company on the cable side that has a woefully patched together and out-of-date network that they care very little to upgrade or improve.

Comcast is really the example of both sides of the coin. They'll spend in certain areas to improve profitability while giving the customer a quality product, but just like Disney that views WDW as an old property and essentially past its prime in terms of profit, Comcast continues to increase rates and not upgrade to provide better services because they don't see enough upside potential. I've yet to meet anyone that considers Comcast to provide a stellar home product. So in-truth, they're not the best of example because they operate just like Disney. Disney will spend a fortune on the broadcast end as they see still major further upside, but on the Florida theme parks front, it's a mature property on the downside.

I like your portion about bringing shareholder expectations in-line with the customers, it's unfortunate, though, that this has become few and far between.

 

[RSoxNo1]

NGE is still voluntary...and most likely will remain that way.
There is still the 'cash' customer...
There is still the customer/guest that chooses to pay with another credit card.
(Keys to the Kingdom cards are still a WIDELY underused source of payment)

An enhancement, sure. Interactive, and a selling point in the process of planning the vacation.

It may be an option, but one of the questions that Congressman Markey asked (and many of us have asked as well), what type of disadvantage are people who opt out going to have?

 

[BwanaBob]

The attraction will not interact with them on a personal level (picture Small World not saying goodbye to you by name). You will still be able to experience the attraction.