When Success Isn't Enough: What's Holding Back the Disney Parks
Disney's U.S. theme parks are discovering the flip side of being part of a massive media conglomerate.
Typically, being one division of a big company delivers a lot of benefits for theme parks. They have easier access to the characters and franchises from their owner's movies and TV series. They can promote themselves on their company's TV shows and cable channels, too. And big companies have access to a lot more money to pay for big new attractions, hotels, and other expansions than independent parks can raise.
But as the rest of the company gives to the parks, the rest of the company can take away, too. That's what appears to be happening at Disney now.
Let's be clear. Disney's U.S. theme parks — at the Walt Disney World and Disneyland resorts — are doing very well. Attendance and revenue are up, according to the company's latest financial reports, driven in part by the new Star Wars-themed events at Disneyland and Disney's Hollywood Studios. Disney's movie studio is doing great, too, thanks to the latest episode of Star Wars and a string of other hits in the past year.
So what's the problem? The parks outside the United States in which Disney owns a stake aren't doing nearly as well. Attendance at Disneyland Paris is down, and Hong Kong Disneyland posted an annual loss. (Disney does not own the Tokyo Disney Resort, which is owned and operated by the Oriental Land Co., under license from Disney.) And building Shanghai Disneyland continues to drain money from Scrooge McDuck's vault.
(By the way, here's an interesting little note buried in that story about Hong Kong Disneyland — it appears that park will be getting the Hyperspace Mountain overlay of Space Mountain that debuted at Disneyland last fall, too. Maybe that will help attendance, like it did in California?)
But Disney's bigger problem is ESPN. The company's former cash cow has been losing subscribers as more and more television viewers "cut the cord" and give up their cable subscriptions in favor of streaming services. ESPN has a streaming deal with Sling TV, but I tried that service last year and it was terrible — delivering little more than buffering warnings during popular events. (I cancelled.) Analysts are concerned that Disney doesn't have a plan to replace the revenue it used to earn from ESPN during the peak of its popularity, despite all the money that Star Wars is earning at the box office, and Disneyland and Walt Disney World are taking in from their operations.
That's why the company's stock has been down over the past few months, and now cast members in the park are buzzing over leaks that Disney will be cutting hours and slowing hiring in the U.S. parks to save money to help plug the gap between earnings and expectations created by the underperforming foreign parks and ESPN.
Basic economics would suggest that when a company is doing well — bringing in more customers, who are spending more money — the company would be more profitable and able to afford to increase its spending, wages and investment... and not have to cut back. But with companies as large as Disney, nothing about their operations or finances is that simple anymore.
Wow thats actually fascinating, thanks Robert
Basic economics don't support the payouts Disney must make broadcast the sports for the NFL, NBA, and colleges. I still subscribe to ESPN to get college football. There's no other way to see the college football playoffs and Top 25 games, and Monday and Thursday Night NFL games. The only reason I still have cable service is the bundle package that makes getting it a $30 a month extra cost to my Internet bill.
I know a lot will say, "Who cares about the short-term? Star Wars Land is coming!" And to that I would say, Disney (and the communities built around DLR, WDW) stand to lose a lot of locals, employees, and all-around respect in the process.
Yeah. They already announced they were cutting the two water park operating hours this summer, and closing many of the Epcot Future World attractions at 7:00 PM. And as you said, the Disney oriented internet sites are buzzing with rumors of imminent cuts in employees, freeze on replacing employees, hours worked, manning of attractions,stores and restaurants and theme park hours. One WDW Magic poster jokingly said they were going to sell off the Animal Kingdom Safari animals & replace them with cardboard cutouts on the Kilimanjaro Safari attraction. Very sad rumors in the face of record attendance and earnings at the American parks. It's being attributed to the ESPN situation, the international parks bleeding money, and the new theme park head Chapek (he of no theme park background) re-instituting a Paul Pressler concept of running the parks. The American parks would probably be better off as a stand alone company. They do quite well on their own merits.
I don't know. Slingbox works pretty well in the good ol Midwest.
There's usually really good deals in the UK that encourage people to travel to WDW & Universal Orlando, at least according to the many UK posters on OU.
The dollar is not down and hasn't been for quite awhile. In fact, part of the problem with the price of oil is the strong dollar. Sorry to get off topic but the poster above is referring to an economic situation that existed 3 years ago and is totally opposite now.
China's economy is slipping, I wonder if that bodes badly for Shanghai Disneyland.
As Disney decides to cut its hours of operation, Universal will continue to gain ground. The gap gets smaller and smaller.
This is why amusement park chains such as Cedar Fair, Six Flags, Seaworld Parks and Entertainment will continue to survive and thrive despite the naysayers out there who feel they cannot since they lack the budgets to build immersive lands and attractions.
"....I happen to think ESPN was horribly mishandled. Disney constantly asks for subscription price increases every cycle to the point that cable companies don't want to carry it anymore...."
So the parks are booming, ticket prices keep climbing and the crowds have all impacted the quality of our theme park vacations.
IMHO, Shanghai will follow in the footsteps of Hong Kong Disneyland and Disneyland Paris and have a disappointing if not disastrous debut for the following reasons:
How can you say that ESPN is the reason Disney's stock price and ignore the fact that the stock market in general has seen a major drop since January 1? Disney's stock price is down more so from the market decline, not the issues with ESPN.
Disney sold its soul to Wall Street back in the 80's. Now the chickens are coming home to roost.
This lose of revenue could be solved if they would just charge for parking at their resort hotels!
Wait good princess happy yahool
Having replica theme parks all over the world dilutes the magic, spreads it too thin. Cutting losses might be a good strategy, bringing travelers back to the US to get their Disney fix.
I personally think the biggest problem for Disney is that they may have over-saturated their product. Simplistically, it's like having a CVS or Walgreens on every corner. Why haven't they kept the exclusivity of their product to the Orlando and Anaheim markets? Expansion isn't always a good thing. Foreign tourists still like coming to the United States and experiencing all that Disney (and Universal offer). Even though they have less of a reason to travel here, they still choose to visit the United States and I think that hurts the expansion of the Disney product in Europe and Asia.
BOB IGER. A terrible CEO for the theme park division.
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