The BLOG FLUME - Thirty Percent or Bust
Eisner has promised the world a 30% increase in profits this year. A lot of indicators point to problems. Will they make it? Plus, a light dawns in Vegas, but not at Six Flags.
Written by Kevin Baxter
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With that Eisner promise of 30%, I thought I would check out how the big three Disney divisions were doing.
THEME PARKS - Now I have reported here about Disney having problems with Euro Disney, which could cost them $120M. And Walt Disney World isn't filling its hotels during its busiest period. Well, California Adventure isn't helping matters. Apparently the new Tower of Terror isn't improving attendance at all. Visitor levels are in the same ballpark as this time last year and there wasn't a massive new ride there then. This means all the new thrill ride is doing is getting Annual Passholders to visit for a ride or two before racing back to Disneyland. Things only promise to get worse next week when Universal Studios Hollywood opens the highly anticipated Revenge of the Mummy coaster.
TELEVISION - Notice how Eisner seems to only mention ESPN? That's because the Disney Channel doesn't make a ton and the rest suck. ESPN could never make enough to offset the disaster that is ABC. And things just keep getting worse. ABC was recently demanding rate increases from advertisers of five to six percent for the upcoming television season. Few were buying, though, and ABC came away as the only network unable to sell all of its primetime spots and will hold out until later in the year, which many analysts think is a huge gamble. After all, this is the network that lost 16 percent of its viewers last year in the important 18-49 age group.
Then there is the disastrous purchase of Fox Family. The newly named ABC Family has been a major loser for the company, right from the get-go. Disney itself figured out it overpaid for the channel by two billion dollars. Disney wondered whether they should inform shareholders of the drop in value and to adjust the company's books. They unsurprisingly decided against that plan. Ever the cockeyed optimist, Eisner claims things are looking up for the channel and that its problems lay in the changing economics of television and not due to failures of management. Yeah, right. The whole thing happened because, once again, Eisner was reacting to outside occurrences, namely the AOL Time Warner merger. But then the entire board was behind this, so they should all pay.
MOVIES - Do we need to repeat how horrid this year has been for Disney films? Around the World in 80 Days has just opened and it appears as if it will follow this trend. On its opening day it finished SEVENTH, behind crap like Garfield, Stepford Wives, Riddick and - get this - The Day after Tomorrow. I thought that movie was gone already! Day Two ended the same way. Now we have Dodgeball and The Terminal opening on Day Three and this movie will be a laughingstock on Monday morning. With each new movie, Disney keeps hoping for this year's Pirates of the Caribbean and ends up with a curse instead.
We aren't the only ones noticing this. McDonald's franchisees are having huge problems with their longterm Disney deal. They are tired of being forced to advertise their Disney-licensed merchandise when Disney has turned out so many turkeys. If it isn't a bomb, like most of Disney's non-Pixar animated films, then it's yet another direct-to-video film or a buzz-free rerelease. Disney is reportedly looking into nonexclusive arrangements itself, which might be wise. McDonald's is desperately trying to rid itself of the kiddie image and being forced to hype Disney films a dozen times a year isn't helping matters. But analysts see the likely demise or restructuring of this contract, which expires in 2007, as a costly mistake for Disney, as McDonald's is known for spending more marketing a film-related promotion than Disney does on the film itself.
So what does this all mean? Many analysts believe this year won't actually be a good one for the Mouse. But they also believe Disney will hit that promised 30%. HOW? Third Quarter profits should be out soon, and they could be scary, but they would have to be really scary to damage Disney this year. The first two quarters garnered a 250% increase in profits over the same time last year. And that is where the secret lies. Last year was absolutely wretched for the company, with the film division basically saving Eisner's ass.
But that isn't all. While profits increased so mightily, revenue has only risen 15%. Which is pathetic considering how poorly Disney did last year. AND considering how spectacularly Nemo and Pirates did when they debuted on DVD. So where is all that money coming from? Budget cuts, of course! And we already know much of those cuts have happened at our beloved theme parks. Our experience is being hampered so Eisner can keep his job. Once again, I must demand Disney spin off the theme parks so they aren't being used to support this poorly-run behemoth!
The Fool has jumped on the TPI bandwagon of badmouthing Six Flags Magic Mountain! At issue are the FastLane passes, which are basically Disney Fastpasses for a $17 fee. The passes can infuriate the have-nots and only make already horrible lines even longer. And this was the year SF was supposed to be spending money on making the guest experience better. HA!
What wasn't expressed - and I think it should have been - was that SFMM may actually be encouraging people to buy FastLane passes by keeping the lines artificially long. Instead of running the maximum number of trains, many coasters are running the minimum. Which creates longer lines. Which MIGHT create more FastLand sales. It also might create a bunch of pissed-off guests who choose never to return to the park. With Knotts focusing more and more on thrill rides, this isn't a very smart strategy.
The Fremont Street Experience, the canopy of lights that was supposed to encourage people to leave the glitz and excitement of the Strip and spend some time downtown, never really worked too well. It got people downtown, all right. Once. Then after they saw the shows, they went back to the Strip or the stripclubs.
So $17M later, the Experience has been upgraded. Out went the bulbs and in came the more impressive diode lamps. It's way too early to know if such high-definition will do the trick, but early word has been good. Unfortunately, there are now only two new light shows to showcase the work. Still, it seems anything will work up there, as the premiere of Fox's reality show, The Casino, was broadcast on the canopy. LG is sponsoring the Experience, which means its products will most likely appear up there too. If downtown wants to get serious about this, they need to give up on repeating the light shows and film something interesting, like concert footage. Sports events would work also. I'll be in Vegas for the fourth and I'll try to drag my butt out into the wretched heat to check it out.
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