Uni Locks Away Patent for Rainy Day

[senor_jorge]

Technology doesn't drive business forward.

Yeah, that whole industrial revolution thing was a hoax.

 

[ford91exploder]

No, I'm not kidding.

Buying, selling and kickbacks. That is what drives business.

You forgot bribing politicians - Campaign contributions in the US, payments in specie and diamonds everywhere else also in the US jobs for retiring Govt employees.

 

[ParentsOf4]

Regardless of what got thrown in under the MyMagic+ (MM+) umbrella, corporate Disney sold to Wall Street the idea that MM+ represented the future of the theme park experience. More importantly, Iger and Rasulo sold to Wall Street that MM+ would improve Parks & Resorts' bottom line significantly.

With an original budget of around $800M, it was possible to come up with internal projections showing a pretty good rate of return on this investment.

However, MM+ has blown through that budget with no end in sight. Rasulo has warned Wall Street that there are steep deprecation costs associated with MM+ infrastructure and consumables. A lot of the high tech investment has a short shelf life.

Beyond that is the additional hiring needed to staff the cursed thing. MM+ is not just grossly overrunning its initial R&D budget, but also looking to be at risk of torpedoing WDW's opex budget for years to come.

Wall Street is nervous about what's happening at WDW right now. They are not stupid. They hear about cost overruns, see that MM+ has been in "testing" for over a year, already have been guided by Rasulo not to expect any financial improvement in FY2014, recall the recent John Carter & The Lone Ranger flops, and are worried.

Wall Street is very worried about MM+.

The thing is, The Walt Disney Company is one of the most financially secure corporations out there. Iger & co. have delivered results year after year. Wall Street thinks Disney hit it out of the park with Cars Land. They are comfortable with P&R moves in the Far East and in DCL. They see the Lucas and Marvel acquisitions as good fits. If Iger & Rasulo say that MM+ is the future, then Wall Street is ready to play along.

All of this is important when considering Uni's next move.

No one on Wall Street is questioning Universal's strategy to build new attractions and hotels. Uni's strategy represents old-school thinking and, given the recent successes at WWOHP and Cars Land, Wall Street is very comfortable with Uni's approach of building relatively inexpensive lands based on popular IPs.

Whether it's Comcast or Disney, spending a few million so an R&D team can dream up new ride reservation systems is chump-change. It does position Uni to move on it quickly, if needed.

However, Universal will not move forward with an expensive new system until they see how MM+ plays out.

Disney is the one taking the financial risk. There is no good business reason for Uni to jump into the fray until their completion demonstrates that it's worth it.

Sometimes in business it pays not to be the leader but a fast follower.

 

[ford91exploder]

I don't doubt what you say is the case now, but the patent itself lines up with MM+ more than what you describe. Maybe UNI had similar plans to WDW and has decided to move in a different direction based on the expense and problems associated with MM+? I don't know why they would have filed it as a defensive patent if they knew all along they had no intention of using it for data mining and ride reservations. If I were UNI observing the problems of MM+, I'd be doing everything I could to diminsh any prior plans to use the patent as it reads.

I think we can all agree that whatever plans they had in the past, UNI will not implement something like MM+ if it doesn't work out well for WDW. If it does work out well, UNI will have something similar up and running not long after. Just like WDW sees how UNI has been successful building new, top level attractions at reasonable budgets and is moving to do the same. Or maybe I just made that last part up.

Defensive patents basically are lawsuit insurance, So if UNI does a virtual tip board, Disney can't come along and sue them for it because MDE also has wait times. Just how regulatory capitalism works.

 

[ford91exploder]

Regardless of what got thrown in under the MyMagic+ (MM+) umbrella, corporate Disney sold to Wall Street the idea that MM+ represented the future of the theme park experience. More importantly, Iger and Rasulo sold to Wall Street that MM+ would improve Parks & Resorts' bottom line significantly.

With an original budget of around $800M, it was possible to come up with internal projections showing a pretty good rate of return on this investment.

However, MM+ has blown through that budget with no end in sight. Rasulo has warned Wall Street that there are steep deprecation costs associated with MM+ infrastructure and consumables. A lot of the high tech investment has a short shelf life.

Beyond that is the additional hiring needed to staff the cursed thing. MM+ is not just grossly overrunning its initial R&D budget, but also looking to be at risk of torpedoing WDW's opex budget for years to come.

Wall Street is nervous about what's happening at WDW right now. They are not stupid. They hear about cost overruns, see that MM+ has been in "testing" for over a year, already have been guided by Rasulo not to expect any financial improvement in FY2014, recall the recent John Carter & The Lone Ranger flops, and are worried.

Wall Street is very worried.

The thing is, The Walt Disney Company is one of the most financially secure corporations out there. Iger & co. have delivered results year after year. Wall Street thinks Disney hit it out of the park with Cars Land. They are comfortable with P&R moves in the Far East and in DCL. They see the Lucas and Marvel acquisitions as good fits. If Iger & Rasulo say that MM+ is the future, then Wall Street is really to play along.

All of this is important when considering Uni's next move.

No one on Wall Street is questioning Universal's strategy to build new attractions and hotels. Uni's strategy represents old-school thinking and, given the recent successes at WWOHP and Cars Land, Wall Street is very comfortable with Uni's approach of building relatively inexpensive lands based on popular IPs.

Whether it's Comcast or Disney, spending a few million so an R&D team can dream up new ride reservation systems is chump-change. It does position Uni to move on it quickly, if needed.

However, Universal will not move forward with an expensive new system until they see how MM+ plays out.

Disney is the one taking the financial risk. There is no good business reason for Uni to jump into the fray until their completion demonstrates that it's worth it.

Sometimes in business it pays not to be the leader but a fast follower.

Especially in tech, The first mover advantage only works if you have superb execution.

 

[ABQ]

....Wall Street is very worried....

Concerned may be the better term. If Wall Street were worried you'd have Oppenheimer, UBS, Argus et al setting their recommendations on DIS to sell. None have done that. In fact trends from 27 separate brokers all have DIS at Strong Buy, Buy or Hold. Zero recommend selling. That doesn't come off as very worrisome. Perhaps this leads back to prior posts, not sure by whom, I apologize, stating how the media side of DIS still raked in 6.8 billion while the parks are 2.2 billion and even with failures at the theatres, a few successes like Frozen keep people from being truly worried on Wall Street.


Edit, thanks for the clarification below by @danlb_2000 ,the perpetually happy dragon.

 

[danlb_2000]

So, what percentage of Disney's current business is theme parks?
I'm fairly certain that the Media Networks division of Disney made up the largest share by a large margin in the most recent financial release. I want to say the media division brought in 6.8 Billion in profit, while the parks brought in 571 Million.

Seems to me they might need a media focused CEO, which they have.

Year ending Sept 28, 2013 (all numbers in millions):

Media Networks: $20,536 revenue (45% of total), $6,818 income (65% of total), 33% profit
Parks and Resorts: $14,087 revenue, (31% of total) $2,220 income, (20% of total),15% profit.

 

[pmaljr]

I only hope that we don't lose sight of one thing - that it was all started by a mouse.

Walt Disney

 

[lazyboy97o]

I'm wrong. Your right. Like I said (and so did you) Disneyland and Disney World are failures.

They started making money way later than predicted and they had huge cost overruns. I bet that the overruns were much much larger than MM+ too! So Disney Parks have failed for decades.

Happy?

It is fascinating how so many, when challenged on MyMagic+, jump right to sarcastic dismissal. Such verbal eye rolling appears to contain a lot of projection.

Not to mention that Universal would benefit from the troubleshooting and R&D Disney has already done.

Disney themselves could have learned from the trials and tribulations of similar vendors at IAAPA.

I do agree with you that these objectives have not been met. I do think it's a little short-term thinking in a long-term game.
The budget has been overrun, the initial timelines have been missed. That does not mean it will not be a long-term success. IMO it will. It will change guest behavior. It will make money. It will allow additional features that further enhance the guest experience. It just isn't ready for it yet. So it's been a short-term boondoggle. Hopefully it will remain as that, and historically it will be looked at as being a good product that had a shaky launch.

My favorite part of the argument against all of this is that they spent a billion on wristbands and door locks. Not on the underlying internal IT systems that the entire company relies on. Not on any of the data analysis to try and find inefficiencies, not on any of the other thousand things that likely were a part of the project under the covers. $500 million on wristbands, $500 million on door locks. Nothing else.

Technology for technology's sake is silly. Technology to keep the systems viable into the future and to drive the business forward is not.

Part of what makes people doubtful of the future prospects is that very last sentence you wrote. A significant contributing factor regarding the massive initial budget for NextGen was Disney putting off maintaining their systems keep them progressing into the future. Everything was put off until it the last minute and Disney was forced to do everything all at once. In order to sell this new massive price tag the technology was sold not as back-of-house improvements with some guest enhancements, but an entirely new theme park paradigm that would almost immediately begin generating double digit growth. If you want your boss to buy you a new company laptop because yours is old and slow you might point out how better speed and new features could help you be a bit more productive. You'd never tell your boss that it will completely change how you get your work done and will instantly see massive gains in your performance. Given Disney's history it is hard to believe that they will continue to properly invest in their NextGen systems because that is not what they did beforehand and not how they have sold NextGen.

 

[Pumbas Nakasak]

I only hope that we don't lose sight of one thing - that it was all started by a mouse.

Walt Disney

So was the plague.

 

[sshindel]

Part of what makes people doubtful of the future prospects is that very last sentence you wrote. A significant contributing factor regarding the massive initial budget for NextGen was Disney putting off maintaining their systems keep them progressing into the future. Everything was put off until it the last minute and Disney was forced to do everything all at once. In order to sell this new massive price tag the technology was sold not as back-of-house improvements with some guest enhancements, but an entirely new theme park paradigm that would almost immediately begin generating double digit growth. If you want your boss to buy you a new company laptop because yours is old and slow you might point out how better speed and new features could help you be a bit more productive. You'd never tell your boss that it will completely change how you get your work done and will instantly see massive gains in your performance. Given Disney's history it is hard to believe that they will continue to properly invest in their NextGen systems because that is not what they did beforehand and not how they have sold NextGen.

I do understand that. But, since I work in the IT field, I have come to realize, and this is something taught at seminars as well as learned through experience, is that business will never pay for a straight up IT upgrade. IT projects, no matter how necessary, will never get budget dollars without showing business benefits outside of their current daily business.
"We need to fix XYZ system because it is broken, or will break catastrophically soon" -- Sorry, no budget for you. Here's a KTLO (Keep the Lights On) budget

"We want to implement this system, which will give you an entirely new way to do business and oh by the way save us from catastrophic failure." -- You've got a tiny chance you might get $.

 

[sshindel]

Year ending Sept 28, 2013 (all numbers in millions):

Media Networks: $20,536 revenue (45% of total), $6,818 income (65% of total), 33% profit
Parks and Resorts: $14,087 revenue, (31% of total) $2,220 income, (20% of total),15% profit.

Thanks,
I was pulling the numbers from 2 different articles, one here, one here. I don't doubt I biffed in comparing apples to oranges or something similar in financial speak.

 

[jakeman]

I do understand that. But, since I work in the IT field, I have come to realize, and this is something taught at seminars as well as learned through experience, is that business will never pay for a straight up IT upgrade. IT projects, no matter how necessary, will never get budget dollars without showing business benefits outside of their current daily business.
"We need to fix XYZ system because it is broken, or will break catastrophically soon" -- Sorry, no budget for you. Here's a KTLO (Keep the Lights On) budget

"We want to implement this system, which will give you an entirely new way to do business and oh by the way save us from catastrophic failure." -- You've got a tiny chance you might get $.

Up until last year we had some folks in our company still running Office...2000. Until that computer broke or your boss's boss provide a direct business justification they wouldn't upgrade you.

 

[Buck]

There's no way they would try this after seeing what a failure MM+ turned out to be.

Lol. Jump the gun much?

 

[ABQ]

In order to sell this new massive price tag the technology was sold not as back-of-house improvements with some guest enhancements, but an entirely new theme park paradigm that would almost immediately begin generating double digit growth. If you want your boss to buy you a new company laptop because yours is old and slow you might point out how better speed and new features could help you be a bit more productive. You'd never tell your boss that it will completely change how you get your work done and will instantly see massive gains in your performance. Given Disney's history it is hard to believe that they will continue to properly invest in their NextGen systems because that is not what they did beforehand and not how they have sold NextGen.

Where is the proof in this claim that "in order to sell this massive..." I'm not trying to be argumentative nor call you a liar. I'm just having trouble finding any solid statement released by TWDC of that the promised ROI was on this project. So many are dismissing it as a failure due to its lack of paying for itself today. Again, I've stated the cost overruns are something I myself would put in the failure column. But I also will not ever look at this as a short term project. Still, I wish other currently on hand attractions would get the capital allocated to them that they warrant for ongoing maintenance but probably won't due to the extreme funds thrown at MyMagic+, but again, I don't think anyone was promised this would be bringing in massive revenue during it's rollout and testing phases, were they?

 

[ShookieJones]

I do understand that. But, since I work in the IT field, I have come to realize, and this is something taught at seminars as well as learned through experience, is that business will never pay for a straight up IT upgrade. IT projects, no matter how necessary, will never get budget dollars without showing business benefits outside of their current daily business.
"We need to fix XYZ system because it is broken, or will break catastrophically soon" -- Sorry, no budget for you. Here's a KTLO (Keep the Lights On) budget

"We want to implement this system, which will give you an entirely new way to do business and oh by the way save us from catastrophic failure." -- You've got a tiny chance you might get $.

Come on dude...I just took a minute break to get my mind off of work and come in here and you're spewing this incredibly accurate\insightful, but hitting too close to work jibber jabber...I think I may have just died a little.

 

[Prince-1]

Universal is a horrible theme park. Every time I go there, I feel like I am taking my life into my own hands, much like when I go to the local fair and ride a carnival ride operated by a guy with greasy hair and no teeth...same feeling at Universal...Who cares what they are doing? Of course they are going to try and copy Disney...let's hope Disney never tries to copy them. I've not used the magic band, but I do like my little card that my annual pass is converted to...however, I am not sure that it shortens lines at the main gates....ALSO Fastpass takes away the good old days where every ride (even the lame ones) had a 2 hour wait....Long live Figment!

Uh....sure...ok?!?

 

[Disneyhead'71]

I only hope that we don't lose sight of one thing - that it was all started by a mouse.

Walt Disney

That what I was thinking as I walked out of AMC CityWalk after seeing Saving Mr. Banks.

 

[lazyboy97o]

I do understand that. But, since I work in the IT field, I have come to realize, and this is something taught at seminars as well as learned through experience, is that business will never pay for a straight up IT upgrade. IT projects, no matter how necessary, will never get budget dollars without showing business benefits outside of their current daily business.
"We need to fix XYZ system because it is broken, or will break catastrophically soon" -- Sorry, no budget for you. Here's a KTLO (Keep the Lights On) budget

"We want to implement this system, which will give you an entirely new way to do business and oh by the way save us from catastrophic failure." -- You've got a tiny chance you might get $.

You're right. I think the concern with NextGen has been just how much potential has been sold. Not only are the people ultimately calling the shots on the project not really all that familiar with the technology (no matter how much of a tech guy Iger fancies himself) they are also not familiar with or interested in the division to which the technology is being applied.

Up until last year we had some folks in our company still running Office...2000. Until that computer broke or your boss's boss provide a direct business justification they wouldn't upgrade you.

And what would happen to somebody who radically undersold the cost of upgrading Office and also oversold new growth generated by the upgrade?

Where is the proof in this claim that "in order to sell this massive..." I'm not trying to be argumentative nor call you a liar. I'm just having trouble finding any solid statement released by TWDC of that the promised ROI was on this project. So many are dismissing it as a failure due to its lack of paying for itself today. Again, I've stated the cost overruns are something I myself would put in the failure column. But I also will not ever look at this as a short term project. Still, I wish other currently on hand attractions would get the capital allocated to them that they warrant for ongoing maintenance but probably won't due to the extreme funds thrown at MyMagic+, but again, I don't think anyone was promised this would be bringing in massive revenue during it's rollout and testing phases, were they?

@ParentsOf4 would be better at answering questions about specific numbers and already has many lengthy, detailed posts on the subject. Also remember, that is MyMagic+ is a success to Disney it significantly diminishes their interest in new attractions and maintenance of physical infrastructure because NextGen is also about avoiding doing those very things.

 

[sshindel]

Up until last year we had some folks in our company still running Office...2000. Until that computer broke or your boss's boss provide a direct business justification they wouldn't upgrade you.

I'm currently typing on my company issued "Next Generation Desktop", which was an upgrade from XP to Windows 7. It was a multi-year, multi-million dollar project that I do not believe is even fully finished rolling out to all of our employees.
My past few years of work have been spent trying to convince people that we need to start working to get off of a 30 year old mainframe database. One of the very small projects I worked on this year had the result of saving our company 7 million dollars, just by helping to analyze and plug a gap in the way that business HAS to be done because the mainframe system is outdated. That was on a pilot program not yet rolled out nationally. We're holding things together with chicken-wire because saying "We need to build a system to replace that mainframe because it does not function with the way business is done today" produces a number of years and dollars that is too scary for business to comprehend.