"Where does the money come from?"

December 6, 2016, 12:31 PM

The question was poised in a different thread – asking where Disney would come up with the funding for a 5th gate to complete against Universal’s 3rd and 4th gate in Orlando.

Since I didn’t want to hijack that conversation, we are opening a new conversation to thoroughly answer the question.

To start off, we need to fund the expansion at Hong Kong Disneyland – which I remember being 800 million (I can’t re-find the source, so let’s just go with that for now).
Then we need to fund the Epcot makeover – again, I can’t find the source, but I think it was somewhere around 2.5 billion.
Then we will be able to fund the 5th gate – let’s call it 5 billion, roughly the cost for Shanghai Disneyland.

So what is that? 8.3 billion dollars that need funding.

Let’s knock off 1 billion right off the bat for merchandising profits. Star Wars alone does this in a year.

Then let’s talk about what is in the movie pipeline.
Rogue One – 1 billion
Guardians of the Galaxy 2 – 1 billion in its sleep
Cars 3 – 800 million
Incredibles 2 – 500 million
Toy Story 4 – 1 billion
Star Wars 8 – 1.5 billion
Han Solo movie – 800 million
Indiana Jones movie – 500 million
Thor: Ragnarok – 500 million
Avengers: Infinity War Pt1 – 1.2 billion
Avengers: Infinity War Pt2 – 1.2 billion

And there you have more than your budget. This doesn’t even include properties that are new like Black Panther and originals from Disney Animation and Pixar….these are just movies with track records. And I low balled the returns on these to cover production costs.

Thoughts?

Replies (3)

December 6, 2016, 1:27 PM

I can't imagine Guardians 2 making 1 billion, 800 million seems about right. And I'd switch the figures for Incredibles 2 and Cars 3.

December 6, 2016, 7:37 PM

Those numbers are gross figures, to be divided between the cinemas and Studios. Once you factor in production costs and marketing, the studio is lucky to see 1/4-1/2 of these figures.

Whilst their movie studios are going gangbusters, they don't make quite that much (even though I recognise some of these figures are low-balled, you have to factor in the occasional flop too).

The other thing is the fact that their parks are doing very well currently, Disney could afford to build a 5th gate, even more than Universal could a 3rd. The demand is there, Disney could find the investors.

The only issue is the looming issue of ESPN, and what money may need to be invested to fix that. My thought is they should buy a streaming service like Hulu and diversify their distribution. People still want to watch sport, so Disney just needs to figure out how to distribute it to them as clearly cable is not the medium of the future.

Edited: December 6, 2016, 10:46 PM

Corporations seldom dig into cash reserves to pay for major projects. Cash is used to run the business and pay executives bonuses and stockholder dividends and kept as reserve to make the business look profitable as an investment. They finance to reduce exposure and spread the risk to lenders. Then they write off the loan payments against revenue to reduce profits to reduce taxes. Disney likely isn't going to do the fifth park until their projects like Avatar, Star Wars, and Epcot are finished. Then there's the business case for the new park. They need it to make money or the whole thing collapses.

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