Can Disney win over Wall Street with more theme park cash?

September 19, 2023, 12:51 PM · Let's get into why Disney filed a federal report, invited a bunch of analysts to Walt Disney World and dropped that big CapEx news this morning.

In case you missed it, The Walt Disney Company announced that it would nearly double its capital expenditures in its Disney Parks, Experiences and Products segment over the next 10 years compared with the previous 10. That would bring its spending on new capital products at its theme parks and cruise line up to US$60 billion over the upcoming decade: Disney to nearly double theme park capital expenditures.

Now Disney did not take this opportunity to announce any new projects on which it would be spending that money. The company's SEC statement and press releases referenced only previously announced projects, including the Disney Treasure, Disney Adventure and third new ship coming to the Disney Cruise Line, plus the new Zootopia and Frozen lands coming to its theme parks in Shanghai and Hong Kong. For what it's worth, the Fantasy Springs expansion would fall on the Oriental Land Co.'s books for CapEx, and not Disney's.

So why make all this fuss if they're not going to tell us anything new? To start, Disney's intended audience for this announcement was not theme park fans. It was Wall Street. That's why the news first broke via the medium through which Wall Street is supposed to get its corporate news - an 8-K filing with the U.S. Securities and Exchange Commission.

Disney clearly is looking to boost its stock price, which has been sliding for over two years, having hit over $197 a share in March 2021. The stock is trading today at about $82 a share, down over three percent just today. So Wall Street does not seem too enthused with what they are hearing so far today.

In its presentation to investors, Disney reported a operating income margin of 28% for the Disney Parks segment over the last 12 months, with its operating income increasing four times over the past decade, following a three-times increase in aggregate investment. That multiplier - showing that Disney gets a greater return on its investment when it spends more money on the parks - is what the company hopes will drive more analysts to recommend Disney's stock to investors.

Disney has two problems with that message, however. First, Wall Street these days prefers returns that do not require investments. It's unchecked greed that chases unicorns at the expense of companies and management teams that practice slow, steady returns.

Second, Disney isn't just a theme park company. Disney's studio businesses have been having a terrible year, with almost all of its films underperforming expectations. The company's two biggest box office draws this year have been the third Guardians of the Galaxy movie and the remake of The Little Mermaid. (Irony alert there for TPI Discussion Board followers.) But they trail far behind 2023 industry leaders Barbie and Mario.

Disney also is pouring cash into its Disney+ streaming service, which continues to lose money along with pretty every other major studio streaming service. Hollywood severely underpriced its streaming services in an attempt to capture market share. But that strategy requires competitors to fold and cede their market share, which hasn't happened. Meanwhile, actors and writers are striking to demand that they get paid more than pennies in residuals for the use of their work on streamers, which would drive studios' costs higher and widen their losses on streaming if they don't raise prices they charge consumers.

Which... brings us back to the first issue, which is that Wall Street wants returns that do not require investments. That's pushing studios to want to do more production with artificial intelligence (which does not cost nothing, by the way) rather than paying actors and writers. Hollywood labor is pushing back, stopping most production of new movies and TV series. So don't be surprised when box office and ratings crash when the current supply of movies and shows in post production runs out, making Disney's (and everyone else's) studio problems even worse.

Disney's focus on theme parks to Wall Street analysts is a distraction defense. "Please ignore the mess in Hollywood and watch how we're crushing it at our parks!"

That leaves a lot of theme park fans slack-jawed in disbelief, given the current state of the park experience for many. But so long as per capita spending and overall income keeps rising at the parks, that's all Wall Street cares about.

Now $60 billion in improvements sounds like a lot of money, but spread over five theme park resorts and the cruise line, that's about a billion a year for each. That's a substantial additional to each resort, but Disney has other hurdles to clear before it spends that money, at least in the United States.

And that brings us to the second audience for today's announcement - politicians, and the people who vote for them, in Florida and Anaheim, California. Disneyland needs Anaheim city approval to develop attractions on land currently designated for parking at that resort. [See Let's take a closer look at Disneyland's expansion plans for the latest.] And Disney is current in federal litigation with the State of Florida over control of the Walt Disney World Resort property there.

Today's announcement is a reminder to decision makers in Florida and Southern California that Disney stands ready to pour billions of dollars in investment into their communities, if they play ball with Disney.

"We have a wealth of untapped stories to bring to life across our business," Disney Parks Chairman Josh D’Amaro told investors today. "Frozen, one of the most successful and popular animated franchises of all time, could have a presence at the Disneyland Resort. Wakanda has yet to be brought to life. The world of Coco is just waiting to be explored. There's a lot of storytelling opportunity."

"Throughout our history, we've created enormous growth by investing the right amount of capital into the right projects at the right moment," Disney CEO Bob Iger said. "We are planning to turbocharge our growth yet again with a robust amount of strategic investment in this business."

* * *
To keep up to date with more theme park news, please sign up for Theme Park Insider's weekly newsletter.

And to help support Theme Park Insider while saving money on discounted theme park tickets, please follow the ticket icon links our Theme Park visitors guides.

Replies (14)

September 19, 2023 at 12:58 PM

Company does big announcement meant to push up stock price.

In related news, water is wet.

September 19, 2023 at 1:14 PM

The youtube channel Modern MBA recently made a great video about how seasonal theme parks have been a poor investment because they require huge amounts of capital investment just to keep the same attendance levels. In Orlando Disney has been able to substantially increase their attendance over the years as global tourism, Florida, and the south in general have been growing, but they made the parks so crowded that people starting disliking them, so they changed strategy to manage the crowd levels but get higher spending people there. Now its so exorbitantly expensive to visit with all of the price increases and upsells that has angered many people. In both scenarios Universal has been the biggest winner.

Disney has been in this pickle for a long time on how to manage prices, crowd levels, and guest experience. So now what do you, go back to what you were doing before by allowing the parks to be packed to the gills? Disney has reached insane pricing levels and pretty much tapped out the low hanging fruit ideas like selling front of line access, more hard ticket events, more alcohol, and now they are even offering an upscale real estate "storyliving" design service. I think its possible that they continue to raise the attendance caps over the years to the point where they're pretty much useless except for the really insane weeks (Christmas/New Years, 4th of July etc). Six Flags has pretty much already abandoned their strategy that they were so confident about a few years ago.

September 19, 2023 at 1:39 PM

Good article, Robert. Consider too that this announcement is fabricated in the sense that Disney was already going to spend big on theme parks in the next decade. They're making news simply to make it.

But that's good business, because as you say, it's a signal to the street that Disney is starting to turn the ship. In recent years this announcement would have concerned Disney+, but now that streaming is a sinkhole, they are smart to turn the focus back to their core business.

Watching Hollywood wake up to the reality of streaming is a hoot. For years they had it so good with cable, and then their own avarice drove them to forsake that established form and lure people to a business model that just doesn't hold up, and actually undermines their theatrical business. I've always thought streaming was a scam on the consumer and I look forward to its continued failure. If you want to see the street react positively to an announcement, publish the 8-K that discloses Disney's retreat from streaming.

September 19, 2023 at 2:17 PM

another great breakdown, Robert. you're on a roll.

September 19, 2023 at 2:27 PM

Robert, good analysis...I watched CNBC this morning, but have not had time to read the report, but I have a question that may have been asked before. How much of the spending is actually already "encumbered," but not necessarily allocated or expended? (I am not using actual numbers, just some numbers for ease of math). Let's say that the new cruise ships will cost $10 billion, they haven't already spent $10 billion on the ships, but that $10 billion is part of the $60 billion, right? Same with the new lands in multiple foreign parks (Frozen, Hong Kong and Zootopia in Shanghai -- please, for the love, this is not a post about a war with China and Fox News). Take some portion of this capex spending out of the total because it has not been expended. Other posts have pointed out the costs of maintenance and repairs have soared due to inflation. It is a big number, but it might not be such a big impact. Remember the large cost associated with the development of Genie and Genie+. But, any new spending is good.

September 19, 2023 at 2:46 PM

The Disney panic over Universal's success since the HP expansion is fun to watch. Epic Universe sent them into a frenzy, and now it's only a year and a half away from opening.

Disney+ losing subscribers left and right (20 million from a peak in Q4 2022) and the downward trend is continuing.

Stock had dropped $3 a share today, and over $100 a share from March 2021.

September 19, 2023 at 3:07 PM

And when Universal finishes forcing Disney to buy out its share of Hulu, Disney will have paid for Epic Universe, too.

September 19, 2023 at 8:58 PM

"And when Universal finishes forcing Disney to buy out its share of Hulu, Disney will have paid for Epic Universe, too. "


September 20, 2023 at 5:14 AM

Its a throw away and ultimately meaningless figure - most of which has already been allocated and probably includes the increased costs to do anything new/keep the same in the current climate. Doesn't look like the market was fooled by this and it shouldn't have been!

I think the market would have reacted differently if actual details of new expansions were listed and a plan for a 5th gate was actually discussed for WDW. ...

Universal build Volcano Bay and then Epic in such a relatively short period of time in Florida - everyone is now looking over and asking what have Disney doing in comparison - other than growth from increasing prices rather than expansion (which has a limit). How would the market have reacted if Disney were honest and said they are not planning any concrete expansions in Florida - due to Epic bringing in extra footfall which they will benefit from?

Streaming has destroyed cable and cinema, as well as being unprofitable. So many things Disney has to correct and throwing this figure around without details is pretty much meaningless.

September 20, 2023 at 5:32 AM

It would be difficult to overstate the importance of the D23 2024 event to be held in Anaheim (August 9-11). The parade of PowerPoint promises almost has to end. Definitive, detailed expansion plans (with opening target dates [at least years]) related to parks and cruise ships need to be unveiled. Promises made to Norman Peltz (dividend payments) probably need to be kept. Continued good stewardship regarding the management of debt (post-Hulu) must be maintained. And, I dare say, the identity of Mr. Iger's successor (or successors) should be all-too-apparent.

Less than a year after D23, Epic Universe will open. And I suspect, before that D23 event, Universal Orlando will announce new attractions planned (2026/2027) for USF and IOA -- although I have zero inside information and I have heard no whispers about any such expansion(s).

The next twelve months will be interesting ... Assuming, of course, we don't go to war with China.


September 20, 2023 at 10:25 AM

the_man3: "Disney has...pretty much tapped out the low hanging fruit ideas like selling front of line access, more hard ticket events, more alcohol,..."

Oh, I doubt that. The Halloween and Christmas parties have been very successful, so much so that I'm would expect more hard ticket events with overpriced alcohol in the future for about every American holiday on the calendar.

September 20, 2023 at 10:34 AM

I concur with TwoBits ... The workshop/classes that they ran during Food & Wine were very popular upgrades as well. They should absolutely bring them back.

September 20, 2023 at 1:36 PM

@TH - I understand why those F&W experiences weren't offered immediately following the pandemic closures, but I'm absolutely shocked Disney has not brought those special events back. I mean Disney was charging $12+ (they were free LONG ago when the Festival was still in its infancy) to attend a 30 minute wine/beer/spirit tasting where the winery/brewery/distillery provided all the samples - the only costs to Disney was for staff to hand out the samples, manage the lines and tasting area, and administering the tickets. It was easy money, so it has absolutely baffled me that Disney has not brought these back. The exclusive dinners and other accessory events didn't have the same margin because they were far more elaborate, but as a comparison, I recall that Victoria & Alberts hosted a F&W Festival event that was very much like the traditional Chef's Table, yet they were charging $500/person, when you could reserve a standard Chef's Table experience for I believe $275 (plus $100 for wine pairing) at the time. Now, reserving V&A's Chef's Table is nearly impossible, so perhaps the F&W Festival event was giving guests a chance to get in without going through the regular reservation system and allow multiple parties to get into a room typically reserved for just 1 per night, but they were definitely getting a better margin from the F&W Festival event than they were from a normal service.

At the very least, Party for the Senses with tickets at $150+ had to rake serious money for Disney, particularly when they could get outside chefs/restaurants and wine/beer distributors to manage some stands instead of Disney staff. I know it was a massive undertaking in terms of planning, coordination, and customer service, but there's no way Disney was not clearing 25-30% of pure profit from those weekly events during the EPCOT F&W Festival.

September 20, 2023 at 4:12 PM

As impressive as $60 billion sounds, I would guess probably a quarter of that at most will actually go toward new attraction development. Split that evenly across five resorts, and that pretty much means each resort gets two or three developments on par with Galaxy's Edge (or around a half dozen stand-alone headliners), which is not all that different from how things have been recently. Think about it like this: In the past decade...

-Magic Kingdom has added two major attractions and two minor attractions, as well as made upgrades to existing attractions here and there
-Epcot has added two major attractions and one minor attraction, overhauled four existing attractions, created a new nighttime spectacular, opened a new premium restaurant, and significantly expanded their seasonal events
-Hollywood Studios has added two entire themed lands and refreshed a couple of their shows
-Animal Kingdom has added an entire themed land and updated many of their entertainment offerings

That probably represents ~$7 billion in investment at todays prices, and while I have no idea how everything will be allocated, it wouldn't surprise me if less than that goes toward brand new experiences. Instead, I'd expect each resort to get about ~$3 billion in genuine new stuff and another ~$2 billion in major refurbishments/overhauls/upgrades, with the rest going to non-park development and/or general infrastructure upkeep. Could a new park be included in that $60 billion? Yes, but if it is I'd suspect it would be planned for one of the international destinations rather than as an additional gate in California or Florida.

This article has been archived and is no longer accepting comments.

Park tickets

Weekly newsletter

New attraction reviews

News archive