I'd started reading the series on DisneySea quite some time ago - but never got more then a page or so in to it before something came up. I never went back and finished - until yesterday.

WoW!!!

Now I understand why so many people feel they didn't get a complete park (or whatever you wanna call it) with DCA.

I'm amazed at the level of detail and thought that went into it. As just one example, the photo comparison of the two jumpin' jellyfish rides: what a difference! The DCA ride looks like something at the OC Fair by comparison.

I had no idea.

So, while I still like DCA (as I've heard others say - for what it is), I am sooooooo disappointed that it's not anywhere near the same league as DisneySea.

I was better off before I read the article - ignorance is bliss.

Now you see why Disney would benefit from a partner/sponsor in their next theme park venture (Disney had the Oriental Land Company to provide some of the $$$ to build/Imagineer the park), I believe Tokyo Disney Sea cost in the $20 billion+ range. With sufficient funding the 3rd park here in Anaheim, could definetley be even better than TDS.

HB: But who is going to want to fund or be partner on a Disney park in Disney's own backyard? And why would Disney want to have a partner and have to share revenues if such a park was going to be a big moneymaker?

Unfortunately, I think those of us in the US are going to have to settle for the "get the park gates open first and then upgrade the attractions later" philosophy that has prevailed at DS and AK in WDW and now DCA at DLR - fully developed parks will most likely be only the province of well-funded "franchisees" who are willing to take the big risks and expenses on for a "grown up park" at opening day.

Your right, if Disney actually decided to build a park like TDS they could do it all themselves. If they put $20 billion (or about half of their capital) into building the next park and made it better beyond everyones expecations, they should be in the profit zone after about a year.

I wanna go so badly to Tokyo DisneySea I'm having dreams about it -- literally!!!

Disney has always used corporate sponsors to help fund the development and construction of new attractions and parks. What we have to be especially concerned about (I think) is when sponsors jump ship, like FedEx is doing with Space Mountain. Not only does this put more financial burden on Disney now, but it may make it harder to recruit other companies in the future.

It's not that Disney doesn't have the money, but they don't have the time to wait for that return on investment. I am very much looking forward to my trip to TDR next month, but I am also trying not to get too worked up about it. I have found that whenever my expectations get TOO high for something, I am inevitably let down. On the other hand, when I go into something not expecting too much (like I did with DCA, based on all the bad things I had heard), I tend to be pleasantly surprised.

What's with this crazy $20 billion number?? DisneySea cost just shy of $3B, making it the most expensive theme park in history.

And OLC wouldn't touch the American market with 6000 mile long pole.

The total TDR expansion was right at $3.7 billion, including the hotel , the shopping district, the park and monorail upgrades. The park itself was just shy of $3 billion. The DLR expansion cost about $1.4 billion including the hotel, DTD, and DCA. The park itself was about $876 million. These figures are from news reports, because Disney doesn't release actual figures. But remember not only did we get DCA we got Fox Family for $5.3 billion, thats much better than 2 Tokyo DisneySeas. Right?

The Tokyo Disney Resort expansion project cost FOUR point seven billion.

And worth every single dollar.

Hey, a billion here.... a billion there...

pretty soon you're talking about real money.

Well, let's say that the "margin" (or profit) for each guest entering a Disney park is $20 (meaning that out of a $45 admission fee $25 goes to maintaining the park and $20 is left over as profit). Obviously, this kind of information is known only to Disney corporate folks so we can only guess here...........

That means that you would need 250M visitors to pay off a park investment of $5B. Even the MK or DL only draw around 15M each year so you are talking about 17 years to pay that investment back.

Now, that overall impact on the company can be offset by building a couple of hotels for only 50M each which run at a higher profit level and will benefit from the attendance at each park and of course you have merchandise and concessions, but one can see that such large investments do take time to be recovered ........

Take it for what it's worth, but I have heard that Disney pretty much breaks even on theme park admissions, that is if you add up all the APs, multi-day passes, and single-day passes that it pays for operations, maintenance, and upkeep. All merchandise, food and beverage, lodging, etc. is pure profit.

I don't have any inside information, but it seems like you two don't have a clear picture of business economics.


Coronamouseman, there is no way that Disney is clearing that much over the costs of each guest. If they were, our stock certificates would be through the roof! Nor do they calculate it on a per-ticket basis. They have to hire people and pay them all. Regardless of if 1000 people show up on tuesday or 10,000 people. The costs don't change one to one with the tickets sold.

You don't seem to realize that debt payments come out of those tickets sold. How do you think they financed the multi-billion dollar expansion? You think they were foolish enough to pay cash when they could write it off and defer it? Operations is but one of the costs it takes to run a theme park.

And Iceman, how can merchandise, food, beverage and lodging be pure profit? If you sell a Mickey Plush, how is that pure profit? Does Disney get that plush for free? What about lodging? Was Disney given that land and those multi-million dollar hotels for free, and do the staff and cleaning people work as volunteers?

Everyone seems to think that wheelbarrows of cash flow from Disneyland to Eisner's personal vault where he wallows in stacks of gold. While the Disney parks are key to the company's success, take a look at the stock dividends and tell me if you think that half of the admissions of the park, and all of the merchandise and lodging is going straight to the stockholders.

Because that's what the word "profit" means. Profit is dividends payed. It does cost money to run a company.

Just think, how would you pay back billions of dollars in debt?

Okay, Kuzco, I think corona and I are both smart enough to understand basic economics, but we also realize that you have to summarize things on a web board like this--you can't go into huge details. In both our comments, I think we used to word "profit" to mean money Disney takes in as revenue that is left after paying for direct costs. Yes, there are debt payments, R&D for future developments, etc. The plush animal isn't free, but it's cost was paid for by admissions (as I heard it told) so the sales price is all profit. Salaries, consumables, etc. are all paid for, so every dollar Disney takes in other than theme park admissions is "profit". See what I'm saying?

No Iceman, it doesn't make sense to me.

Usually when someone says something like "Disney makes their money back on the ticket sales, so all the other expenses are pure profit," it's a way to paint a company as needlessly greedy.

I admit, if someone told me that, and I believed it, I would start to feel very angry at Disney that my plush Mickey costs $18.00. "Ha, they get these for free, basically, and they charge me eighteen dollars! Those greedy bums! A coke! Two Dollars?!!? Greedy Michael Scrooge Eisner McDuck! I hear all the Cokes are free to Disney! Charge me for my room at the Disneyland Hotel, will you, some NERVE! I know for a fact that it is free to them if I just went to the park!"

That fact is easy to dismiss if one just looks at the room rates across the street at the Hilton. Rooms are $150 a night, and aren't nearly as elaborate as the Disneyland Hotel. In a competitive economy, the Hilton undercuts the prices of the Disneyland Hotels a bit. Let's say that the Hilton makes a 33% profit on their rooms (again, their stockholders WISH there was that big a profit!).

So somehow on 2 park tickets, Disney makes enough left over after expenses to run the park, that all the costs for my stay at the hotel are covered?

Surely you'll see that $90.00 in tickets can't cover a hotel expense of over $100.


Let's look at the merchandising angle.

Why would they subsidize plush doll costs with their Themepark admissions? Doesn't it seem more likely that merchandise sales is a different department than ticket admissions, and that each department has to show a profit without it being subsidized by some other department's revenue?

Isn't it more likely that some percentage of the plush price is to pay for the manufacture of that plush doll?

All companies have internal divisions and departments, and each one is run in a way to maximize internal profit, even if that profit is expressed in soft-dollars (internal charges only). Divisions don't normally operate at a loss for long, otherwise they would get the axe pretty quickly.

Dollars don't normally flow freely from division to division, it makes accounting very difficult, and it makes it very hard to spot inefficiencies. If a division isn't pulling its own weight, you don't cripple another division by forcing it to charge more, or take away its operating revenue.

If nobody's buying the plush dolls, you don't raise ticket prices to fix it. You make better plush dolls, or you find a way to make the ones you have cheaper.

All right, first off I'm not disagreeing with you! Your analysis seems correct, it's just more lengthy than I thought appropriate for our little internet message board. The economics at play in a huge corporation like The Walt Disney Company are far more complex than even your description.

I will take issue with one thing you said, that is about getting upset that plush animals cost $18 or sodas $2. Even if they were completely free to Disney, I would not be upset to pay those amounts--that's the miracle of the free market, that I will only pay for items I feel are worth the cost. I frankly couldn't care less what Disney's cost is for an item or how much profit they're making, as long as I feel I am getting good value out of a product.

Also, when it comes to hotel rooms your numbers are a little bit off. I'm more confident here because a friend of mine wrote her master's thesis in hospitality management on the economics of room rates. When you look at an established property like the Disneyland Hotel or the Anaheim Hilton that was built many years ago and so has had the original building cost completely capitalized, the room rate is almost (almost!) pure profit. The hotels only expenses are maintenance, utilities, consumables (toilet paper, soaps, etc.) and labor costs. They gouge on things like parking, phone charges, and the minibar. Where they don't make much money (and this was a suprise to me) is in the bars and restaurants. Hotels would prefer not to have them at all because they are such low-margin operations, but guests demand those kind of services. So a 33% profit on the room itself is drastically underestimating the facts.

Gentlemen:

I guess I should respond since I started this thing going ...........

My comments:

Of course I have no idea what profit Disney makes in terms of each guest, each day, each month or any other measurement one can think of. My only point in the initial comment of "$20 profit on a $45 ticket" was meant to be used as a crude benchmark for simply calculating how long, all other factors being equal or irrelevent, it would take to recoup a huge investment such as a new park.

Of course I would not expect to see Disney pay cash for such an investment - on the contrary, one would think that Disney would want to do whatever they could to defer any cash outlay or round up suitable partners (at least for their non-domestic parks) so that they would not have to come up with that much capital.

You guys probably know a lot more than I do about merchandising or hotel profit margins, but on the outside looking in one would think that hotels in such prime locations as next to DLR or in WDW must be profitable - why else would Disney be in such a rush to continue to open new hotels in WDW or upgrade the ones around DLR? Hotel rates at Disney's prime WDW hotels are some of the highest in the country and yet most of the time those hotels seem to be pretty full ...............

Kuzcotopia, coronamouseman, Iceman

This is an excellent discussion. I think many who post on this site would gain a great deal by at least thinking about some of these issues. In a thread I started meant to praise DCA, I have run up repeatedly against this notion that Disney cheaped out on DCA and could have simply spent another couple of billion dollars and given SoCal DisneySeas. To be truthful, I didn't even know they had built another park in Japan. And I'm sure it's a very nice place. But a far as the economics of DisneySea is concerned, I think some of the people on this site are completely missing the point.

Before my wife and I had kids, I was posted to Tokyo for 3 years. And no, I never visited Tokyo Disneyland. Mainly because of the experiences my wife encountered there on her first visit (all in all, I think she was taken about to Tokyo Disney about 3 times over the course of our stay). One February weekday, she was invited to spend the day at Disney with some OL's (office ladies) from the office where I worked. It was a cold and drizzly school day, so I figured what she was going to miss by going on a crappy day would be more than made up by a largely deserted park. Boy was I wrong. When she got home (late), my wife regaled me with stories of huge lineups for everything. The place was packed with visiting school kids from outside Tokyo. She too was expecting the place to be deserted, but was informed by her hostess's that this wasn't such a bad day and the place often was far more packed. Basically, my wife got on a couple of E tickets and then a few of the dark rides before she pretty much had it with the waiting. Then, when she finally thought they were going to leave, the OL's she was with insisted that they head off to one of the large onsite souvenir shops where each of them rang up over a couple hundred dollars in purchases. (Subsequent visits by wife pretty much went the same way. In fact on the last visit she made to Tokyo Disney, one of the ladies who brought her dropped over 700 dollars on disney themed cookies and candies. I, on the other hand, was supposed to go on this trip but was (at the last moment) fortunate enough to be invited to spend a day in a box seat at Tokyo's Sumo Stadium watching the Goliaths of this noble sport square off. My wife is still angry at this turn of events.)

So, when I was reading your posts and reflecting on some of the comparisons made on this site between DCA and TDS, I couldn't help but come up with way that would ensure that Disney spent the kind of money on DCA that was spent by OCL on TDS.

First off, almost everybody has to cash in their AP's. No more visiting DL and DCA unless they pay the full daily admission. Now, there are AP's at Tokyo Disney (at least there were back before 1996), but not many people use them. Apparently most Tokyo residents only go a few times a years and this doesn't pay for the cost of an AP
Second, somehow ensure that Disney is crowded everyday of year. Sure, there will still be peak times for attendance on weekends, holidays and school vacations. But the parks should never be empty to point where queue times for all the major attractions drop below 40 or 50 minutes.
Third, everyone who visits the DL or DCA must spend at least a hundred dollars on merchandise. And they must do this every single time they come.
Lastly , no more bringing food onsite, or dashing out for a bite at cheap place on the strip. Since there is no strip outside Tokyo Disney, Disneyland and DCA guests must purchase all their food onsite. Oh, and they shouldn't complain or stop buying lunches and dinners when the price for these rocket past the already steep levels they are currently charging. (Though food is almost always expensive in Japan, my wife tells me that the prices she was faced with in Tokyo Disney bordered on criminal.)

In other words, give Disney a compelling business reason to drastically improve DCA and I bet they will. (Not that I think DCA needs it, but it would sure soothe the hypersensitive nerves of a few angst ridden Disney lovers.)

Related to this topic but an as aside, the thread that gives me the most chuckles is the one calling for a boycott of the Disneyland resort. Reading through it made me think of the conversation just such an action is supposed to generate among disney exec's:

Disney Exec 1: Hey Mike, I was just going over the latest attendance figures and I couldn't help but notice that we are down a miniscule amount.
Disney Exec 2: That means our revenues will also drop by a miniscule amount. Wait a second, do you think that boycott on Mouseplanet.com had anything to do with this?
Disney Exec 1: Gee Mike, you're right. What are we going to do?
Disney Exec 2: I thought I'd never live to see the day, but I am authorizing you to take a few billion dollars out of our secret slush fund and spend it on a massive array of improvements to both parks.
Disney Exec 1: But Mike, that will only leave 6 billion dollars in the fund. You know we need that money to pay for inflated bonus's and outrageous stock option plans for senior executives.
Disney Exec 2: Not only that, we will never recoup this kind of investment. Not even if those mouseplanet rabble rousers sign up for another AP. We'll be running in the red for decades to come. But dammit, it's about time we gave something back. And something tells me that the shareholders won't mind one whit.

The question is not that Disney should have spent 4 billion in Anaheim, but that they should have spent enough to at least create a product people wanted to see in this marketplace (they didn't):

By cheaping out on DCA, what kind of expenditures are we talking about that they have since lost compared to unrealistic cynical projections, - - you know... losses, make-goods, discounts and unexpected upgrades to DCA? I'll bet we're in the billion range already...

I'd wager that their losses are significant enough that they would have been far more savvy to invest that cash in the intial investmernt to make DCA something special and wrth seeing. How sad and shortsighted that fear and greed guided them on this project instead of pride and abundance.

But even with the money, sadly, the vision wouldn't have been there with this leadership and we'd likely still have an ugly loser here in Anaheim.

How much did the wonderful, Disney quality Islands of Adventure cost?

...And how can anyone justify the 5 billion spent for Fox Family instead?

I know that merlinjones like to stir the pot and isn't open to changing his mind, so I post the following for other members who may be more amenable to other viewpoints.

They obviously did create a product people want to see in this marketplace--the very existence of guests proves this. And the variety of opinions on DCA ranging from love it to hate it and everywhere in between may be exactly what they wanted--a different experience that's not for everyone. I think Islands of Adventure sucks, but know other people who love it. Universal didn't try to please everyone, and neither did Disney with DCA. Think of it like a radically new car design--it will polarize the marketplace, and at the very least generate buzz if not create a very profitable sensation. I'm getting kind of tired of defending the park, but what really bothers me is not when someone says "I don't like DCA" (it's fine to share their opinion) but when they make untrue blanket statements like "DCA sucks" (again their own opinion but presented as "fact").

I don't agree with every decision Disney leadership makes, nor would I expect to. People have different opinions on how to do things, and the suits have a lot more objective information at their fingertips than I do sitting here at my computer. Just because I didn't like the movie Forrest Gump, for example, doesn't mean that everyone involved in making it was an idiot. If I was a studio executive I would not have green-lighted that film, but it obviously did very well in the marketplace. Just because YOU may not like the new park doesn't make current Disney management somehow wrong for approving it.

Buying the Fox Family channel does seem to me like an overpriced, unnecessary indulgence at this point, but I'd like to think that Michael, et. al. have a long-range plan for capitalizing on this asset. I'm sure they were thinking in a strategic sense, just like when they bought ABC in the first place. I guess the reason that I, as a Disney stockholder and huge fan, am not up in arms with the current leadership is because I still have faith in their overall vision. Even if we aassume that Pressler is trying to kill the theme parks, I have rock-solid faith in the run-of-the-mill cast member or middle manager who will not let the Disney magic be snuffed out. Eventually Eisner, Pressler, etc. will move on, Disney will bring in new talent with fresh ideas, and the core brilliance will shine even more brightly.

There is just no way to judge the financial success of either park in the short term. (Or judge any other Disney initiatives for that matter.) You could say that OCL is risking an awful lot by pouring so much money into their new park. My guess is that they had huge cash reserves to back them up. Some of the more successful Japanese companies have found themselves in the enviable position of having lots of cash with no where to put it. And there is no more successful revenue generating property in Japan than Disneyland. The place truly is a gold mine. The problem for OCL (like many other Japanese companies) is where to put all their profits. Once the economic bubble burst in the early 90’s, Japanese companies have shied away from socking their cash away in traditional repositories (land and stocks). The markets were just too volatile. Ultimately, though, you have to put the cash somewhere. So many of these cash rich companies have had no choice but to expand and upgrade existing facilities. (This is also tied up in how Japanese tax laws work.)

Luckily for OCL, though, there is still a booming market for all things Disney. That being said, I don’t think OCL could have used the strategy that Disney has employed in Florida and (now) in California. Namely, builiding a half day park then spending the next 20 years or so fleshing it out. Unlike Florida and (to a lesser extent) California, almost all of the visitors to Disney are day-trippers. You have to remember just how small the country is in terms of size. TDL is able to pull in something like 40 to 50 million potential customers who only need come for the day. (This is because people will travel up to 3 hours each way to spend a day a Disney.) Yes, there are some who come from further away and spend more then a day in Tokyo. But Japanese for the most part take very short vacations. They might come to Tokyo for 3 or 4 days, but are only likely to spend one of those days at Disneyland. Now, if you were to give these people a half day park like they did originally for Animal Kingdom or like they have for DCA, absolutely nobody would go. Why would they. You have spent a lot of time and money to get to the park and you are only going to be there for one day. With limited time, you would want to make sure and experience only the best the resort has to offer.

So, I think OCL used it mighty cash reserves and built a park that actually rivaled the original. Why? Because that was the only choice open to them. I doubt very much if any other theme park operator could take this kind of risk. And I also bet that despite the acclaim the DisneySeas is getting, it is still not known whether this investment is going to pay off. And OCL won’t know for years to come. Though not privy to any of the numbers, the sheer scope of the place suggests that OCL is banking on creating customers visits over and above what they are already receiving for the original park. And furthermore, these new visits need to be maintained for a couple of decades to come. But like I said, OCL probably had no other choice: it had to spend it’s money on something, and it knew it couldn’t deliver a product that was in any way inferior to the original park.

Could Disney in California have done the same thing? I don’t think so. Unlike OCL, Disney in the US relies heavily on vacationing multi day visitors and AP holders. Everything I’ve read suggests that what Disney was looking for was to get these out of town visitors to spend another day at the resort. And to that end, DCA works pretty well. Trying to copy what was done at DisneySeas would probably been disastrous. The debt payments alone would have been crushing. And I think Disney knows that no matter what park they put into Orange County, you were never going to double the total number of visits to the resort as a whole. So from a shareholders perspective, Disney is just following a tried and true method of resort expansion. Give the rubes from out of town something more to stick around for. Pump these free-spenders for a few more hamburgers and a couple of more T-shirts then slowly add attractions so their attentions don’t wane on subsequent visits.

My point being, Disney would have been negligent in the extreme if they had followed the OCL model, just as OCL would have been if they had followed the model Disney uses for resort expansion at it’s US properties. I still think DCA has the better shot of paying off financially in the long run. But I shouldn’t underestimate the draw Disney holds on the Japanese masses. Though the risks for OCL are higher, there certainly is the potential for a home run. They already pulled it off once (when they built the original TDL and no one could believe the astronomical land costs associated with getting that project completed), maybe they will pull it off again.

The press has already delighted in OLC's recent performance and highest revenues and profitability ever. The investment in DisneySea has brought them gold in reputation and stock growth - - as well as unpreceedented gate. This can only affect them positively going forward.

I'm sure Disney would like to have had the same effect... but they didn't build a quality product, but cynically relied on brand marketing exclusively to carry them through. Didn't work - - bad word of mouth, bad press, no big spenders. Product still matters.

Disneyland has always been a day-tripper park. The best way to keep people for an extra day would have been to give them something equally cool - - a real draw. Not a soggy side dish that might keep them away from Knotts for a few hours if lucky. This isn't Orlando where people have few choices once on property. Ignoring the locals and regionals - - always the core of Disneylands profits - - was a huge mistake in the conception of this project - - and the management involved should fess up to their mistakes and pay the piper in reputation.

Also... why wouldn't people with so much power and money want to BUILD something worthwhile for posterity just because they can? That's what Walt did... and the money followed (just as it is for OLC). If this worldwide multi-billion dollar conglomerate truly can't AFFORD to be Disney anymore... then that's a choice (out of a rainbow of choices) made by the directors and executives of the company - - who should be replced by people who can imagine themselves out of that box, not dig a deeper hole like the current burnouts.

I live in Washington state and get to califonia about ever 4 years or so for a vacation. The last time i went was 1998 and construction on DCA was only in the early stages so we looked and thought cool were gona have a kicken new park when it opens. So i looked into it last year and said it looks ok but it din't look near as good as disneyland so we din't bother with a vacation there last year and wen't to visit family insted. Now ask me if it would have looked half as good as disneysea and i would have found away to have been there last year and stay longer then usual. If the park was as good as the repot i read here says it is we be going yearly for awaile. now there is your bottom line economics the consummer is a god to disney and they don't get it! there lossing buckets of money with DCA when they could be breaking attendece records is the U.S. their closing the park early.

Also most people know if you can do something without a partner as far as economics are concerned you do. OLC was most likely brought in to boost relations with japan and the ease of constuction codes are strickly regulated there so that helps disney just to bild the park. Now disney will be paying them intrest on the investment for the long term when they could of brought a park to Califonia were people are urgent for some of disney's best work and are getting a short stick from the empire they helped build.

I'm sure Disney would like to have had the same effect... but they didn't build a quality product, but cynically relied on brand marketing exclusively to carry them through. Didn't work - - bad word of mouth, bad press, no big spenders. Product still matters.

Actually, they did build a quality product that has gotten good word of mouth, good press, and plenty of big spenders. The product matters, and it is a good product. We've got differing opinions here--just thought I should balance out your Chicken Little approach once again.

Disneyland has always been a day-tripper park. The best way to keep people for an extra day would have been to give them something equally cool - - a real draw. Not a soggy side dish that might keep them away from Knotts for a few hours if lucky. This isn't Orlando where people have few choices once on property. Ignoring the locals and regionals - - always the core of Disneylands profits - - was a huge mistake in the conception of this project - - and the management involved should fess up to their mistakes and pay the piper in reputation.

Funny that you keep ignoring all the people here who have said they actually prefer spending time in DCA over DL or at the very least see it as more than a soggy side dish. And if you think that in Orlando there isn't much competition to Disney, well, I don't know what to say to that. Has it occured to you that maybe turning Disneyland into a destination resort isn't something that's going to happen overnight? Perhaps they are trying to build a bigger base of out-of-town tourists so they don't have to rely so much on the locals for profits. It will be decades before we see how well the new strategy is working, but you already dismiss it as a failure because the new theme park isn't what YOU want. As for catering to locals, as far as I know the old park hasn't closed its gates. And Downtown Disney is enjoyable for locals just as much as it is for tourists.

For someone who claims to have an open mind, merlinjones, you sure are dead-set in your views on DCA and current Disney leadership.