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| Disneyland California Adventure |
For decades, The Walt Disney Company wasn't just an entertainment business. It was a cultural institution. Now Disney is facing a lot of headwinds, so many that it may become one of the worst performers for all of 2022 on the Dow Jones Industrial Average.
Disney Plus
The CNN article The magic is gone for Disney investors lays out some of the problems Disney is facing. That includes being one of the worst performers on the Dow Jones. A lot of investor concern is over subscriber numbers for Disney Plus due to what the article calls the "fierce battle for subscribers." Economic concerns are causing people to cut back on streaming, and Disney Plus customers in the UK are dropping Disney+ at a faster rate than Netflix and Amazon Prime Video.
Even though Disney Plus has approximately 130 million subscribers worldwide, subscription numbers aren't growing fast enough to make up for slowdowns in the company's broadcast and cable TV businesses. A JPMorgan analyst quoted in the CNN article says Disney, Hulu, and ESPN+ will be massive streamers but might not ever become big enough to be "as good a business as Disney used to have in TV."
Disney Plus is planning to offer an ad-supported option later in 2022. Time will tell whether or not this cheaper option will boost streaming enough to offset losses from traditional television.
Reedy Creek
Time will also tell how the Reedy Creek debacle will affect the company. The Reedy Creek Improvement District in Florida gave The Walt Disney Company control over the land in and around Disney World in Orlando. Essentially Disney World is the company's private city. Disney provides municipal services like power, water, road repairs, and fire protection. The company benefited from special privileges that competing theme parks like Universal and Busch Gardens don't enjoy. The Magic Kingdom doesn't have to deal with legal red tape like zoning, building permits, or paying taxes for public services. Now that the Florida legislature has passed a bill to dissolve Reedy Creek, Disney World may no longer be an autonomous property.
Critics complain that dissolving the Reedy Creek Improvement District leaves local taxpayers on the hook for the district's outstanding debts and the cost of upkeep. They claim local taxpayers will have to pick up Disney's debt of $163 million per year. That may be beneficial for Disney, if true. However, Florida state Rep. Randy Fine, a sponsor of the legislation that dissolved Reedy Creek, said local governments could create Municipal Service Taxing Units (MSTU). According to Fine, these MSTUs will "pick up the revenue that would be going to pay for the debt" and local taxpayers won't be affected. Democrats claim the debt will fall on local taxpayers while Republicans insist Disney will continue to pay it. Again, time will tell which of these claims is true. It's possible that there will be years of legal fights ahead to determine the ultimate fate of the Reedy Creek special district.
Florida dissolved Reedy Creek over concerns that Disney was meddling in state politics. The company spoke out against House Bill (HB) 1557, the Parental Rights in Education bill, which prohibits teaching kids about sexual orientation or gender identity in kindergarten through third grade.
Not long after, in a leaked Zoom call, a Disney executive producer said her team welcomed her "not-at-all-secret gay agenda" and spoke of "adding queerness" to programming. Disney has also eliminated mentions of ladies, gentlemen, boys, and girls at theme parks because they are considered gendered words. These controversies led to protesters gathering in front of Disney headquarters, calling for a boycott.
Since Disney is a company closely associated with entertainment for young children, it risks losing its reputation as a family-friendly company. According to a poll by the Trafalgar Group, "68 percent of general-election voters say they are less likely to do business with Disney after reports that it plans to include sexual ideology in new content for children." Again, time will tell whether or not parents abandon Disney programming en masse because of these controversies.
Marvel and Star Wars
Another problem facing Disney is concerns about superhero fatigue and Star Wars fatigue. The Walt Disney Company owns the rights to both Star Wars and the Marvel Cinematic Universe. It plans to release a slew of movies and Disney Plus shows based on these brands. The problem, of course, is that if Disney releases too many shows and films based on these brands, fans may get tired of them. Constant new releases onto streaming platforms and into theaters may no longer feel like big events. It may be challenging to build anticipation when Disney continually feeds new content to audiences. Even though absence makes the heart grow fonder, fans aren't given long enough breaks between shows and movies to start missing Star Wars and the MCU. Once again, time will tell whether they keep coming back for more.
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| Disney owns the rights to the MCU |
Theme Parks
Disney theme parks are as busy as ever, but fans are increasingly frustrated by crowding, long lines for rides, and high prices. Disney now charges for things that used to be free. Disney hotels charge hundreds of dollars per night for rooms. That price used to include parking and an airport shuttle. Not anymore. Disney is now charging for both parking and shuttle rides. And, even worse for many fans, they must now pay for formerly free fast passes. While prices are going up, Disney cut costs by reducing portions at Disney theme park restaurants. According to the company's CFO, this will be “good for some people’s waistlines.”
A visit to a Disney theme park could potentially cost thousands of dollars for a family. They can expect one to two-hour waits for many rides for that money. The Washington Post article Disney's $5,000 Star Wars hotel and line-cutting fees, Some fans say the 'magic's gone' highlights many concerns people have about the parks. The article states that a holiday to Disneyland is out of reach for most American families. The amount they can expect to spend could cover an overseas trip instead. Complaints about price hikes and subpar service could turn public opinion against the company. “The Most Magical Place on Earth” is being called “The Most Expensive Place on Earth” by some frustrated customers.
A visit to a Disney theme park could potentially cost thousands of dollars for a family. They can expect one to two-hour waits for many rides for that money. The Washington Post article Disney's $5,000 Star Wars hotel and line-cutting fees, Some fans say the 'magic's gone' highlights many concerns people have about the parks. The article states that a holiday to Disneyland is out of reach for most American families. The amount they can expect to spend could cover an overseas trip instead. Complaints about price hikes and subpar service could turn public opinion against the company. “The Most Magical Place on Earth” is being called “The Most Expensive Place on Earth” by some frustrated customers.
More and more visitors are expressing dissatisfaction with Disney theme parks. Critics say the company used to care about ensuring families have a memorable experience. They complain that current Disney executives only care about squeezing every penny they can out of visitors. Lack of affordability may not be a concern to those executives because Disney is leaning into wealthy customers, according to thestreet.com. For example, Disney is offering extended evening hours but only to those who can afford to stay at their high-priced hotels. Time will tell whether Disney's focus on short-term gain will lead to long-term pain due to reputational damage.
Disney's Challenges
Do investor concerns indicate that Disney is in decline? Not necessarily, but the company is clearly facing many challenges.
- Will the possible dissolution of the Reedy Creek special district significantly affect the company's bottom line?
- Will millions of parents turn against Disney?
- Will fans eventually tire of excessive amounts of Star Wars and MCU content?
- Will concerns about high prices and poor service eventually lead to declines in visits to theme parks?
- Will an ad-supported streaming option boost Disney+ subscriber numbers enough to make up for losses in its traditional television businesses?
Even if Disney's financial fortunes continue to rise, recent controversies may have destroyed its status as a cultural institution.
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