Some of us were lucky enough as kids to be able to have a trip to Disney World in Florida or Disneyland in California. If you were one of these kids it was probably a cherished memory of fun had with your family experiencing many of the themes you consumed as a child in the form of movies, TV shows and games.
This week I was able to repeat the experience of Disney with my son but was able to experience things through a whole different set of lenses this time and the experience may have turned me into a Disney stick bull.
Media Operations
A quick look at the financials of Disney will show that the company generates about 40% of its revenue from its media portfolio which amounted to $28.4 billion in 2020. This includes networks such as ABC Broadcasting, ESPN and Hulu. Then there is the Disney+ streaming network which has quickly gained subscribers since it’s launch and has been able to pull content away from other platforms such as Netflix and Amazon Prime.
Disney plans to focus on increasing its content spending by up to 350% from 2020 to 2024 to approximately $15 billion, making the content spending second to only Netflix which plans to be spending approximately $23 billion by then.
Yet I noticed an intangible with the Disney model that Netflix or Amazon Prime can’t capture in terms of content: that is the ability to cycle customers through the three divisions of the company while maintaining revenue and a sticky customer base. As a parent, I am able to see this process much more closely and I will give you my own example of how Disney shuffles its customers from films, to streaming to its parks.
Take for example the Disney+ streaming service. The only difference between this service and Netflix is the content and this is where the vast Disney catalogue has a distinct advantage. If my son were to turn on Netflix, he has to search for a movie or show that may or may not be on the platform. If he isn’t looking for something he knows, he will have to try his luck with something new unless there is sufficient “kid buzz” for a show that he hasn’t seen yet and heard about. Netflix is still useful for his entertainment but it’s not always expected to be consistent in terms of what we can get.
In contrast when he puts on Disney+, he already knows what he wants to watch, whether it’s Cars, Shrek, or The Lion King, he usually has a solid grasp on what he wants and he gets to it quickly.
This translates into the box office as well when there is a particular series or movie theme that he follows. If a sequel is to come out, he will be instantly asking me to go. Parents usually cabe to this pressure as it creates an easy win and some time to have their child satisfied by simply showing up and paying. Disney exploits this well.
The Parks
I knew all this prior, yet Disney still didn’t strike me as a long term but until I took that past experience on streaming and their portfolio of movies and shows and then saw it played out via the amusement park, this is where, I’m my view the efficiency, attention to detail and professionalism took it to another level.
Most parents know a trip to any of the Disney theme parks is going to be expensive. For Disneyland, there are 2 parks right across from each other: the traditional Disneyland and the newer Disney California Adventure. The latter is a loosely California themed park which is a bit more oriented towards older kids and adults, allowing alcohol and rides for kids that are a bit taller. An adult ticket will put you back $154 and if you want to go between the 2 parks then it costs $209. The kids discount for those 3-9 is $8 for a total of $201. Throw in a standard parking pass of $25 and you are at $435 for a dad and son to go to both the parks for a day.
This may seem steep, and it was steep but the level of service and efficiency I saw from the beginning was second to none. Although the initial entrance caused a slow moving traffic jam as those who hadn’t reserved parking paid for it, a short delay put us in the parking garage where Disney traffic handlers quickly directed all the cars into spaces in succession, filling the garage in an orderly fashion as we disembarked to walk to the entrance.
Escalators brought us to security, where bags were checked and we passed through metal detectors without much fanfare. After what seemed like a very long walk, we entered some fairly intimidating lines to enter the park which surprisingly moved relatively quickly. It was in the park that the efficiency and the science of moving vast crowds about really came into being.
Every popular attraction had handlers to keep order, whether it was the characters themselves or those that regulates pictures in front of the iconic Disney castle. The Disneyland app allowed us to order food at any of the restaurants remotely, specify the time for pickup and be notified when it was ready.
As the morning clouds burnt off and the Southern California sun beat down on us, my initial concern was of being sunburnt while we waited for the rides, but I had underestimated Disney’s attention to detail. I noticed strategically placed trees and architecture around all the areas where limes for rides formed. Staff seemed to be in tune with a philosophy of keeping people moving, even if that meant creating more rope obstacles for us to traverse. It seemed to be a bit of a mental trick, as long as we were moving, we felt we were getting somewhere, standing still is when the thoughts of “why am I here” start to creep in. Disney cleverly kept these to a minimum, even with large crowds.
I also was appreciative of the fact that my son, at 5 years old was able to get on all the rides, some of which had height requirements that he easily passed. Not only was this fun for him as it made him feel more included in everything but it lowers the age that kids can start to experience all the rides, which likely increases their desire to come back sooner.
I also noticed how many of the rollercoasters seemed to spend a lot of times going in circular motions as opposed to the stomach churning sudden drops that older riders may enjoy but are problematic for keeping smaller children safe when there is space between them and the safety bar. Another sly feature which was likely pre-planned.
The Disneyland side featured many of the staples: space mountain, Thunder mountain, It’s a Small World, etc. but the California Adventure side was where the tie in with the streaming and box office really shined.
In my case, my son enjoys the movie Cars and anything automotive related. Having sat through the 3 movies a number of times I was impressed by the level of detail in which the park had recreated the virtual setting of “Radiator Springs” a one street town of car characters set in the desert. The culmination of which was the Radiator Springs Racers ride, which featured an animatronic tour of the characters followed by a race to the finish line in our sports car shaped vessel. The sheer size of this ride as well as the “realistic” detail of the life size car characters was stunning. The ride along must have cost tens of millions of dollars alone.
It was so impressive, I had to look it up after and was even more surprised to see that the cost of constructing this ride was over $200 million. The ride along accounted for 18% of the estimated $1.1 billion construction of the entire Disney California Adventure park. It’s no wonder that 9 of the top 10 most visited theme parks in the world are Disney parks.
Branding Matters
All this made me think of the power of the brand. That the park was able to charge so much and still left a good impression on me was a testament to their professionalism and attention to detail. It made me think back to how some well off foreign friends I knew would fly their families from the Middle East or Latin America just for the experience of Disney World. Universal Studios or Legoland just doesn’t have the same ring to it as going to Disneyland. This branding of the parks as well as the catalogue of content Disney has is enough to make sure that this company generating income for decades to come, just as when I was a kid.
Even with the stock sitting around $172 after a 100% run in the past year, and a fall of about 15% from its recent high, Disney looks set to benefit from the current reopening as well as the content wars between platform providers that is just starting to heat up. I will save my technical analysis for another post but from where I am standing as a client, the business model seems quite strong and Disney will be going on my watch list.
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