Analyst's Questions - "No church for Easter Sunday"

[larworth]

Earning’s Call Q&A (Parks only)

Usually they spend a lot of time giving speeches. This time much briefer. Allowed more time for questions. Quite a few about the parks. My synopsis. Some interesting comments on cost reductions and building new parks.

Q. Attendance? A. Adjusting for earlier Easter week; WDW attendance down 8% versus this time last year, DL up 8%. Bookings look good, but still short time horizon, making it hard to predict summer crowds.

Q. International visitors? A. Typically 20% of WDW, today running 15%. Slow signs of recovery in Germany and Latin America.

Q. When will parks turn the corner? A. 3Q numbers will still be down, hopefully by Q4.

Q. Cannibalization from new parks? A. No effect, and not concerned this will happen. TDS, for example, is mostly locals.

Q. Cash flow outlook? A. Parks should be at or better than last year.

Q. Detail on cost savings? A. The number you may remember was $250 million on an annualized basis. A substantial amount of this is VOLUME related. Will try to make as much of these as possible permanent. Probably, no more than half.

Q. Easter impact on results? A. Profit associated with this week has a 10’s of million profit impact.

Q. Plans to reopen hotel rooms and PC outlook? A. We didn’t really close any hotels units just slowed the opening of new ones. Still in a wait and see mode.

Q. What are your plans for tweaking weak attendance at DCA beyond price discounts? (this was all one long answer by Eisner. Wording pretty accurate “” to emphasize some things) A.

As you know we decided with these second parks, with the exception of TDS, not to “build a church for Easter Sunday” but build them with a digestible budget.

The new Bug’s Life play area should fill a gap for kid’s in not being enough to do there. About a year and half later we will open ToT. This will make DCA “a full service, gigantic park”!!

I think that even if you look back at DL it didn’t really take off, from 3 to 10 million in attendance, until Space Mountain was put in. Same thing in Europe.

In Florida we just opened a new “kid’s play area” in the AK which should enhance that park. Will continue to tweak with Mission:Space pavilion in EPCOT, and on, and on, and on.

Just opened a second park in Europe. It was opened on an “economic basis”. Have plans as time goes on to “judiciously” place new attractions there.

We are very comfortable with the way we have learned how to build a theme park, creatively and under a fiscal responsible budget. The company, historically, whether with the original DL, EPCOT, TDL, or DLP built pretty big to begin with and than let the audience catch up. “This time we built it the right size”. Extremely comfortable with the creative content and the business way we did this.

 

[Sarangel]

We are very comfortable with the way we have learned how to build a theme park, creatively and under a fiscal responsible budget.

Too bad that the fans are less impressed with Disney's Theme Park plan than the company is...

Sarangel

 

[Bstanley]

We are very comfortable with the way we have learned how to build a theme park, creatively and under a fiscal responsible budget. The company, historically, whether with the original DL, EPCOT, TDL, or DLP built pretty big to begin with and than let the audience catch up. “This time we built it the right size”. Extremely comfortable with the creative content and the business way we did this.

How self-serving can you get! Both DL and EPCOT were shadows of what they are today when they were built!

Truly spoken like a CEO covering up faster than a cat with diahhrea!

 

[Bob O]

Even with the additions i doubt that DCA will be considered a "gigantic full size park" Typical pr anwsers with the hope that people will just buy it and not think for themselves. Just goes that the new disney will only give you in their new parks as little as possible to get you in the door but will be happy to charge full price for up to a decade till they (might) complete it. Luckily this idea failed in CA.

 

[airlarry!]

The company, historically, whether with the original DL, EPCOT, TDL, or DLP built pretty big to begin with and than let the audience catch up.

Can I shorthand a quick argument here?

Eisner says they have 'learned' how to build the park the 'right size' instead of the way it was done with DL, Epcot, Tokyo, or DL-Paris. (And of course, by extension, he admits earlier in the answer that DisneySeas is also built old-style.)

MGM, DCA, Disney Studios Paris, and AK were all built the Eisner Way.

Of the four, which were successful right off the bat? Only time will tell, but I will submit to you that MGM was the only successful start-up out of the Eisner bunch (and this is juiced a bit because of the very low predictions expected for the park -- if you went there that first summer, they had the smallest parking lot you have ever seen, and had to close it by 10:00 am each morning -- they were overwhelmed). ** And that was when customers were probably expecting another EPCOT, but got only got a half-days park.

I wish an analyst had cornered Cousin Mike and asked him why did he think that their way is the right way when DisneySeas is DOUBLING its first year profit projection?

 

[JeffJewell]

Talk about moving-target subjectiveness

...while I understand what you mean about subjectiveness in that _some_ people _can_ spend a whole day in AK, the reality (reflected in Disney's own guest surveys, referenced in their own press releases) is that _most_ people _don't_ spend a whole day there.

And the only reason "half-day" is even an issue is because Disney _intended_ for AK (and DCA) to be a "full-day" park in the sense that vacationers would buy an extra night in a Disney hotel (or cancel a vacation day spent off-site at a competitor's park, almost as good) to spend the day in AK.

Park-hopping leaves the term "full-day park" virtually meaningless from a guest's point of view... it's only a concern when you step back and look at it from the "numbers of hotel nights sold" perspective.

That's why I can say (with a high degree of accuracy and no subjectivity at all) that AK is a hugely disappointing park: it did not result in more hotel nights sold, and that was its primary purpose.

If you consider the term "full-day park" in a micro sense, meaning whether or not one family can fritter away eight hours there, you're correct, we've got a subjective stand-off. If you use the term "full-day park" in the macro sense, meaning whether or not the addition of the park resulted in the addition of a day to the average WDW vacation, it's not subjective, and it's not a full-day park.

Jeff

 

[larworth]

What is subjective here?

Disney (Disney I say) admits they have changed their approach to building new parks. If the new strategy is to build a park, with the need to add new attractions at a rate above what your mature parks warrant, than it is pretty obvious it wasn't a full park to start with.

No, the subjective part must only be whether this a good strategy?

Seems what they are saying is: They will no longer make the mistake of giving away too much value early on. They used to invest more than was needed, which ended being bad business. Like a grocery store and loss leaders. They built a couple extra E tickets to make sure they got you in the door, and you left happy, but this just didn't generate a good return.

Perceived value (by the average consumer) seems to have been an issue with DAK, but we also have the saturation issue to consider. Perceived value (by the average consumer) seems to have been a problem with DCA, but we have the lower standards issue as well. It will be interesting to see how DSP fairs.

I don't see a problem in questioning the strategy. Is this a rant?

 

[airlarry!]

Let me echo and add on to Mr. Larworth's comments...

Michael Eisner is admitting that the parks are not as 'full' as TDS or MK. But if we still need to argue the point, I would submit that I don't know anyone who considered MGM -- when it was opened in '89 -- to be a full days park. It may be now, it may not be to you. But back then, it was universally called a half-day park.

AK may take a full day to enjoy and appreciate -- I am one of the ones who have banged the drum for AK -- but that doesn't mean that AK truly IS a full day park. It CAN be but is not Necessarily. There is a difference.

By anyone's human experience, Epcot and/or the MK need more than a 1/2 to enjoy and appreciate.

I think that the point is clear enough.

 

[Bstanley]

Animal Kingdom might be 50% of a day for some folks and 100% of a day for other folks, but when it comes right down to it - it keeps people at WDW for ONE MORE DAY.

The fact is AK has been VERY positive for the WDW bottom line - especially hotel room occupancy. According to Disney's Annual reports "Theme Park & Resort" NET income went up 10% in '98 (the year it opened) compared to '97, another 10% in '99 and an even larger 15% in'00. Thousands of hotel rooms were added between '97 and '00 and there is no doubt that AK keeping people at WDW for 1 additional day is a significant contributor to keeping those rooms occupied.

I personally think AK is a great park - it takes us most of a day to enjoy it and really the only reason it gets picked on IMHO is because it is full of critters instead of animatronics...

 

[Another Voice]

Mr. Scoop -

Your analysis seems to include not only mutliple rides on the same attraction, taking in shows that do not appeal to all people (such as Flights of Wonder), and most of all a generous amount of time standing in line or waiting.

Frankly, if the idea of a "full day park" is a place where everyone has to wait in the long lines for the limited number of attractions, then perhaps the California Department of Motor Vehilces should charge a $45 enterance fee. My local DMV office is more "full day" than Animal Kingdom...

 

[JeffJewell]

That's how the scoop family always ends up staying more than 1/2 a day at AK

...delightful itinerary, but I said right up front that some people can spend a full day there; you proved a point that was not in question.

I'm trying to talk about this from the business end, you're trying to talk this from the 'Scoop family's personal vacation end.

If the business reality of AK and your vacation don't match up, that's precisely the same scenario as the business reality of EE and my vacation not matching up. If Disney doesn't care about my experience contradicting their studies and surveys about EE (and by your own arguments, they shouldn't), why would they care about your experience contradicting their studies and surveys about AK?

Your arguments seem to flip-flop from "personal vacation POV" to "business reality POV" quite a bit... and always in service of whatever your current point might be. The only reason I have to ambush you is because you're never shooting from the same position.

Jeff

 

[OnWithTheShow]

My entire group of friends as well as myself also enjoys conservation station/rafiki's planet watch.

I also believe Animal Kingdom to be a full day park, in fact I often spend more than a full day there.

Just weighin in!

 

[airlarry!]

Scoop, I am laughing with you here, I think.

Are you really arguing that AK is by the sheer objectivity of the number AND quality of attractions, a full day park? And if you are, are you saying that when it opened (the standard we are using to look at TDS and DCA, and EPCOT, and MGM in '89) it was a full day park?

How 'bout this. If Animal Kingdom is a full day park, then is MK a four day? Epcot a six day?

I would answer thusly....yes, you CAN spend four days of your week's vacation at MK (been there done that), but in reality, most people would PLAN for two days at MK, two days at Epcot, close to a day at MGM (I can) and, last but not least, alllllllmmmooooooooooost a full day at AK.

Hey, it's almost, but not quite. And I'm a fan of AK. Imagine how Bob O feels about AK. It's a full park for him and his family...a full hour.

Oh, one more sneak shot at you Scoop. You would agree with me that the addition of Fastpass at the back area attractions justifies spending nearly a whole day now. I know we can get a fast pass for Kilminjaro, and then enjoy the Trail at our leisure, and do the same thing for the Raft Ride and its complementary trail. But before? Most people would just not take the time to explore the trails and stay a whole day, like they would hitting every attraction in Adventureland, or Futureworld.

 

[OnWithTheShow]

You guys have really struck a nerve with me now...

If you take the time to actually explore the trails, (Pangani Forest, Maharajah, Tree of Life, and the Oasis) and enjoy the beauty and wonder of nature and the animals you can easily spend more than a full day at Animal Kingdom. Unfortunately the mentality of today's society and more specifically the mentality of theme park goers is "get on all the rides" no one stops to notice the details or explore the more thought provoking attractions. Some people seriously believe that the only place to see animals in Animal Kingdom is on the safari. In a town where long lines and extreme thrills are becoming the standard Animal Kingdom dares to be a different breed of theme park. Animal Kingdom is a park that combines classic theme park attractions with live animals in realistic natural settings and is truly unique in my mind (cannot be compared to Busch Gardens). Unfortunately the general public and apparently some people on this board have rejected this daring concept. Instead of saying "there is not enough to do at Animal Kingdom" what you are all really saying is "there are not enough rides in Animal Kingdom". Well guess what, that is not the vision for the park!


This view of "no time for looking at things" and "hurry up and wait for the next ride" is what has destroyed EPCOT over the past 5-10 years. It is amazing how no one stops to explore the wonderful exhibits at Wonders of Life, Innoventions, or The Living Seas, in fact I find it shameful. You all complain about the new attractions (Test Track and Space) being built without the post-show exhibits and innoventions has been replaced by video games, but why build creative, educational experiences when only 5% of the guests stop to enjoy them? In fact I would dare to say that the same people who think Animal Kingdom is not a full day park are the same ones who do not bother with exhibits in Future World.


I believe of all the parks at Walt Disney World (perhaps with the exclusion of Magic Kingdom) Animal Kingdom would have been Walt's favorite (sans Dino-rama). It is a wild departure into a new concept that was very brave and not cheap. It brings one of Walts favorite topics, nature, into a detail filled theme park environment in a way unequaled any where except in the actual homes of the majestic creatures that call the park home.

 

[kenjean]

This is my first quote from another post, I will have to learn how to do it.

Quote: "Seems what they are saying is: They will no longer make the mistake of giving away too much value early on. They used to invest more than was needed, which ended being bad business."

What a sad thing to see in print. And I am not attacking the poster, I think he is right on the money. What a complete and total opposite of what Disney used to stand for. Give them just enough so that they won't feel cheated when they leave. Tell everybody upfront that this is a half day park so they won't be disappointed that there is really not much to do.

I don't think the real issue is whether DAK is a half day park, but the loss of the mentality that Disney should WOW guests with their new experiences. This current attitude is like being in college, and taking the mindset that getting passing grades so I can get a mediocre job is good enough, vs going for a 4.0. Disney used to go for the 4.0.

And no arguments that its not good business. It is Disney's past 4.0 report card that made them what they are today, not the current mediocre crap. So, therefore, I say that exceeding guests expectations is a good business move.

 

[Peter Pirate]

KenJean, why sad? It's jut a business philosophy and Walt himself adhered to the same philosophy with DL...Yes Walt probably would have went that extra mile with what was given but remember Walt was charting new terriitory. There were no exit surveys or past history to refer to. I believe this philosophy has been well served at WDW...Certainly DCA was a misguided, ill-concieved and unsuccessful attempt at this philosophy (they really got greedy & blew it).

Show, your description of AK is great. Walt would love AK the way it is & were he here today I believe he'd even smile at DR...I'm not saying he'd have green lighted it but then he wouldn't have green lighted Epcot, MGM or the Water Parks either (they are all too pedestrian). But were he here AK would be his favorite & I'll bet more passive than it is now - given his love of nature & wildlife & his reluctance to 'reinvent the wheel'.

1/2 day, full day...This is moot. Obviously the go, go, go set (which is the majority) thinks AK is not a full day park but those who truly take the AK theme find it easily a complete day. Now, AK is never open very late and given that, Disney realizes that AK will always be a part of a guests 2 park day...On the other hand we (the Pirate clan) NEVER spend a whole day at ANY park since park hoppers & annual passes...Never. The question is has the Park (AK) extended peoples vacations (not do people buy one day AK passes), and I think they have...

 

[Another Voice]

Walt stopped only because he ran out of money. He even put his own personal money into the park. He knew that if built a place that the captured the public’s imagination then the financial returns would be there. He didn’t believe in “value imagination”, that’s a recent invention for those that can demonstrate neither. Walt's business philophsy proved out to be true, Eisner's is turing out to be disasterously wrong.

This whole corporate line about “we intentionally build them small and fill them in as the audience builds” is nothing but a flat out lie. Disney/MGM Studios was built complete. Animal Kingdom was the way it was not because it was a phased development – they just didn’t want to put in more money so they hacked a few sections off. And California Adventure, the “filling in” there seems to be a panic reaction to its failure rather than a planned expansion due to its popularity.

This half-day, full-day discussion is off the topic. The real issue is that Michael Eisner has finally spoken his true intensions. He will give you as little as possible because he knows people will suck up anything he plasters with DISNEY®. He’s not interested in your enjoyment, he’s not interested in your child’s – he wants money. And he’ll do the least amount of work as he can for it. And some people might actually be blinded by the logo to think that Walt would approve of this tactic.

Fortunately people understand that attitude. And that’s why we stay away from California Adventure by the millions. So much for "knowing how to build economically viable parks".

 

[Bob O]

So how did people get Walt's opinion, did we go to a psyhic medium of maybe talk to him on the crossing over show???
And of course i would agree with AV!!!! Its seems some people will buy whatever disney throws are way and call it steak, even if they know its dog food!!! Disney is happy under eisner's regime to sell the public a inferior product knwoing that people will lap it up and say thanks at the end, unwilling to hold the company to any type of standard, take the pr lock/stock and barrell!!! If the parks had been run this way from the start we wouldnt have had wdw at all. Just think what Walt would have done if he had eisners money at his disposal.
And how can a park with very limited hours like AK be a full day park??? Then what would you call MK or EPCOT, supersized full days parks??? It may be a full day park for some when busy but when i have went(offseason/early Dec) we had little to no waits at all and no need for fastpasses.
Speaking of visions for AK what of BK??? That was most defintely part of the vision, the part they always talked of, of animals that never were and featured Unicorns in early pr shots and i think on the main entrance they have depicted fictional animals. But the cheap disney company doesnt care about vision if it gets in the way of making easy money, because they know a certain segment will always bend over for them and sing their greatness!!!

 

[larry_poppins]

Current Disney Management has broken my heart. I used to love Walt Disney Attractions and sing their praises day and night. Living in SOuthern California I would serve as a tour guide for friends and relations who would visit. I was at Disneyland weekly. Buying towels, dishes, clothing, etc..

With the dumbing down of Disneyland and DCA I know longer visit weekly. I am no there no more than once a month. When I visit I barely buy anything. I no longer feel a proud spending my money at Disney or that they are following in the glorious traditions of Walt and his Imagineers. I no longer feel that Disney is connected with being AMerican. Afterall the Oriental Land Company felt that the Japanese public was worthy of better attractions than the Disney Co. originally wanted to build in Japan; they splurged on DisneySea and the rest is history.

Lately, I am saving my pennies to visit Tokyo and Disney in 2004.

Larry

 

[OnWithTheShow]

The limited hours of Animal Kingdom doesnt even factor into it. You should judge the full-day half day park issue on the basis of available park hours. And don't start complaining about the short hours at AK because it is completely based on the care of the animals.