In light of all this Comcast stuff, I thought this was a particularly interesting comment, from a New York Times article -

What about Mr. Disney's complaint that the company has neglected its theme parks, which along with animation was a cornerstone of the old Disney brand? Even analysts who criticize Mr. Eisner say the parks are probably not a good place for Disney to put its capital. Mr. Disney has demonstrated "naïveté about a lot of this stuff," said one Wall Street analyst, who spoke on the condition that he not be identified. "You're underinvesting in the theme parks? Well, a lot of people don't want you to invest in theme parks."

Full article at http://www.nytimes.com/2004/02/15/business/yourmoney/15disn.html

Investors are generally fickle. They only care about what makes money. Theme parks aren't making that much money relative to other Disney divisions.

While many individual investors care about Disney's theme parks, most larger investors are just looking for a good return on their investment. I'll bet you that if the theme parks were raking in the bucks, they'd be singing a different tune!

They don't like investments that can't show, unequivocally, a return on investment.
DCA's Tower of Terror, for example, cost $100 million or so. Well, will it return that investment, and if so, how? It's possible that it will return the investment, but it might not ever be verifiable.

How it might return the investment:
1. More people buy one-day tickets for DCA. (Verifiable.)
2. More people buy multiple-day park-hoppers, for the express purpose of riding ToT. (Less verifiable.)
3. More people buy or renew APs, in order to ride ToT. (Less verifiable.)
4. People buy ToT-related items. (Verifiable.)
5. More money is spent at DCA. (The most verifiable.)
6. More people attend DCA. (Not relevant, though this will be touted in some way as proof of success.)
7. More money is spent at Disneyland, due to ToT across the Esplanade. (Less verifiable, but relevant.)

Now, when the majority of DCA guests are AP holders with a major grudge against DCA, I would expect less of #5 than an investor would like. But, those same AP holders might increase #7. Analyzing DLR first, then analyzing the parks and DTD up later might be good steps to take.

What investors don't realize is that the $100 million or so should be depreciated or amortized over about 20 years or so, so that the annual cost of building the ride is more like $5 million per year. Can ToT pull in some $10 million or so more per year in revenue (assuming av average 50% margin) for the next 20 years? Maybe. that's the risk that investors don't like.

I guess what's sad is that this quote was a really good example of how the parks are run these days. It would be nice to get a management structure that didn't so much care about every pickin' little penny to the stockholders, and more for the original purpose of the parks, which was to provide a special place where families can enjoy an outing together. Find a way for the investors to make money, but at the same time keep up the properties that got you here in the first place.

Well, it was a lot easier to run the parks when:
1. Only one person (well, two) actually ran the joint, instead of it being split 2 BILLION SHARES apart. Back in the olden days, The Disney Brothers borrowed money and paid it back, but kept the company to themselves. Even after they sold shares, they kept controlling interest to themselves.
2. There wasn't pressure from other poorly run subsidiaries, bought at the wrong times for the wrong reasons.

So here's what happens now:
1. I, an investor, am trying to maximize return, given certain risks.
2. Theme parks are nice to own, but there are other investments that will provide a greater return for similar risk.
3. When I invest in other places, the market value of theme parks drops.
4. If the price drops low enough, then, assuming return dollars are constant, the return percentage will rise to a point where I might invest in theme parks.

Now, replace "me" with Bill Gates, Warren Buffett, Comcast, millions of investors, etc., where "I" could buy the whole place, lock, shock (sic), and barrel.

This is what has happened to DIS, to much grander scale.

This is why CEOs have to watch stock prices and coddle Wall Street instead of running their businesses however they want. Sad, but true.

Not everything is about the ROI. Some things are about building brand loyalty, brand recognition, added value, etc.

Anyway, I was under the impression that the theme parks were very profitable for Disney. Otherwise I don't think Disney would be building new parks over the world and building new resorts at WDW.

I would guess that they are profitable, but not VERY profitable.
The profitablility probably also swings with the economy. Variable, which means risk. And, of course, there is the risk of not getting it right. There is also competition, which might make a better product.

Brand loyalty does not appear on the books. It is a long-term, but unmeasurable, profit source. As it is unmeasurable, then any idea that makes profit AND is measurable will be preferred.

Case in point: New rides. Build a ride and people will come, right? More gate revenue, more APs sold, more food sold, etc., right? SPB's (sharp-pencil boys) say, "No, that can't be measured. We can't simply believe that every incremental increease would be due to the ride."
Measurable alternative: the gift shop that guests must walk through to get back to the walkways.

Coming Soon: Ten "Believe!" ODV carts pop up out of nowhere following the fireworks spectacle to sell Believe!-related items. Because, the SPB's see no measurable profit in fireworks shows.

The vacation destinations and the film studio would be much better off in a LLP. Small group of people creating, making decisions, and making money without concern to ROI.

People looking for a VERY profitable company with little risk of a downturn during hard economic times should invest in Anheiser Busch, not Walt Disney Company.

ROTFL, that's not bad advice. Now comes the question: which way do you think the economy is headed? If it's heading up, well, you could still invest in A-B, but, being an inferior good (to, say, wine or fancy beer) it will not benefit as much from the upturn. If you think the economy is headed back down, then, being the inferior good that it is works in your favor, as more wine drinkers will leave off their merlot and pop open a can of Bud Light.

Mind you, there's little room for expansion in the beer market, especially with an established brand like Anheuser-Busch. Their quality is not such that they can be terribly competitive in foreign markets, so you'd better grab that one for income (dividends), and not plan on growth (in value).

Sediment said it very well - many times the measurement of return will drive an investment - if that's the strategy the company is using to manage itself. Where I work lots of projects want hard dollars - either someone writes us a check or you have a list of people already identified to be laid off. There is not desire to speculate on possibilities because there is too much risk...

Maybe Eisner can use this as his excuse for managing the company into the ground - "It's not my fault, the analysts were so demanding and set up this scenario for me.." - if you've ever heard Tommy Lasorda complain about Al Campanis (old tape) you'll know what I mean...

Not that I support Eisner or anything like that. However, it's one reason why those that only look at pieces of a company as assets (and concessions) are "darlings" of wall street, but the public at large hates them.