NOTE: You can view the transcript from a number of places online, but this is the one I used: https://seekingalpha.com/article/4238411-walt-disney-company-dis-ceo-robert-iger-q1-2019-results-earnings-call-transcript?part=single. Also, the quotes below are from Bob Iger.
The first quote will come as no surprise to anyone who’s been following Disney Parks, Disney has tried to get more money from each of their guests (and, apparently, it has):
Growth in operating income at our domestic parks business was driven by higher guest spending at the park and higher occupied room nights at the hotels. Attendance at our domestic parks was comparable to the first quarter last year. However, per capita spending was up 7% on higher admissions, food and beverage and merchandise spending. Per room spending at our domestic hotels was up 5%, and occupancy was up 3 percentage points to 94%.
Again, no surprise to anyone that follows this stuff.
This next quote talks about how Disney feels that Star Wars: Galaxy’s Edge is, essentially, going to market itself:
And I would say, by the way, on the marketing expense side, don’t expect much. I’m thinking that maybe I should just tweet, “It’s opening,” and that will be enough. I think we’re going to end up with incredibly popular and in-demand product with these two new lands.
They’re large. They’re beautiful, and they’re extremely innovative. And they obviously leverage the popularity of the Star Wars brand. And I think that we’re going to have absolutely no problem gaining attention for them or to them, and it’s not going to take much marketing to do that. That’s a signal that I just sent to our parks and resorts people to keep that budget really low.
Iger says that now, but I can’t imagine we’re not going to see a decent amount of advertising as the opening of the land gets closer. Maybe not for the holiday season (which would be popular anyway), but leading into 2020 and the “slower” periods of January and February.
This next quote combines pricing with everyone’s (no one’s?) favorite topic: IP in the theme parks. For better or worse, Disney seems to be saying that part of the reason for the increased popularity in the parks is the additional IP that Disney has been adding to them. Relatedly, Disney is using this increased popularity to raise prices:
Steve, on the first part, we’ve been witnessing, over the last few years, a substantial increase in the popularity of our parks. A lot of that has to do with how well they’ve managed and the kind of investments that we’ve made not just operationally but in expansion and the use of IP that’s extremely popular.
In doing so, what we’re also trying to do is to use that popularity to manage guest experience a little bit better in the sense that – and we know that crowding can be an issue, and that when our parks are the most crowded, the guest experience is not what we would like it to be.
And so we’re leveraging the popularity to obviously increase pricing and to spread demand, to get much more strategic about how we’re pricing. So the parks are still accessible, but in the highest peak periods, we’re trying basically to manage the attendance so that the guest experience isn’t diminished by the popularity.
And I think, because of the nature of the investments we’re making, we’ve been fairly vocal and transparent about those investments, the two big Star Wars, Toy Story Land that just opened up in Florida, the work that’s going on in Hong Kong and in Paris and Shanghai and in Tokyo and all the great expansion and IP that we’re putting in. That popularity is going to continue, and with that’s going to come the, I guess, enviable task of balancing that popularity with guest experience and price elasticity.>
Again, for better or worse, new attractions at Disney parks are going to based on popular IP while the current crew is running things. That seems pretty clear.
As to using pricing to “manage attendance”, I think the unique nature of Disney parks, specifically destination parks like Disney World, undercuts that argument. As I’ve said (and heard others say) since Disney went to seasonal / surge pricing, some people can only take vacations during “peak” Disney times. For those people, the pricing isn’t a discouragement, it’s just an increased cost for their trip that they have no choice but to pay. People with the flexibility to travel when they want were alredady factoring in the crowd levels when making their travel decisions, but people who are constrained in their travel choices by their kids’ school or their jobs may not have those options. Though I doubt Disney would ever admit it, I bet the increased pricing over peak periods has done nothing to crowd levels, but has simply increased Disney’s profits for those periods. That’s “fine” if that’s Disney’s goal, but to say the goal is to “managed attendance” seems disingenuous.
AUTHOR’S NOTE: I added in the two sentences above that are in italics to help clarify my original point, namely: some people are constrained by their life circumstances into when they can travel, and, frequently, those constraints force people to travel in Disney’s “peak” periods. For those people, they are forced into paying the extra cost of a trip, without any real option to travel at a “less expensive” time.
This last quote comes from earlier in the call, but ties the theme parks into Disney’s upcoming streaming service:
As I mentioned earlier in my prepared remarks, we have an event on April 11 when we’re not only going to demonstrate the app, but we’re going to talk in great detail about our strategy, the impact of our current businesses and the impact on our bottom line. And so I think we’ll answer a lot of the questions then.
But what we’re basically trying to do here is invest in our future. And the investments that we’re making in both the technology side and in creating incremental content are all designed so that long-term this business will become an important part of Disney’s bottom line and long-term strategy So I think you have to look at this.
It’s almost the equivalent of deploying capital to build out our theme parks when we could have deployed the capital in a variety of other directions. This is a bet on the future of this business. And we are deploying our capital basically so that long term, the growth of this company is stronger than it would have been without these investments.
It seems like Iger is saying that the build out on theme parks was a bet on the future (which seems to have paid off so far) and the build out on the streaming service will be much the same. Personally, I’m interested to see what the whole Disney+ experience will be like, especially initially when Disney still has content deals keeping some of its in-house content on other services. Of course, if Disney’s original content is ready then the service might really hit the ground running.
With all that money, can we get a night time parade back?