True-Life Adventureland
Sell Disney World if Oil Hits $160-a-Barrel? Who Makes This Up?
Sell Disney World if Oil Hits $160-a-Barrel? Who Makes This Up?
Posted Monday, June 23, 2008 at 6:05p Pacific Time
I first saw this rumor on Kevin Yee's MiceAge posts, and I've now seen it repeated a half-dozen times elsewhere: Disney's accountants have done a study saying that if oil reaches $160 a barrel, there's no way the company can turn a profit on Walt Disney World. And in that environment, Disney should just sell the resort to a third party, then collect license fees from said third party.
Is this just completely made-up, because the idea sounds, well, preposterous. If it isn’t profitable for Disney to run the parks in that environment, why would it be profitable for anyone else to run them either, given that they’d also be saddled with licensing fees to pay to Disney?
Maybe this makes sense if Disney sells to Exxon. Otherwise, what am I missing here?
54 Comments • permalink • link with comments
Comments
Let's hope so ...
Posted By Spirit of 74 Saturday, June 28, 2008 at 3:50p Pacific Time
It appears as if Busch will be able to fight this takeover attempt, which is good news for the company, good news for theme park lovers and good news for our country.
Posted By sharon2 Saturday, June 28, 2008 at 11:19a Pacific Time
^^^ when I saw him last week he was going to update his resume..looking for a new job sux..
Posted By jvanostenbridge Friday, June 27, 2008 at 3:38p Pacific Time
<I'm really counting on free passes to Sea World!!>
Perhaps, then, you should take a look at this article too...
"SeaWorld's fate uncertain as InBev pursues Anheuser-Busch"
http://www.orlandosentinel.com...91.story
Posted By sharon2 Friday, June 27, 2008 at 12:34p Pacific Time
I really hope Bud doesn't sell..
My cousin-in-law works for Bud & I'm really counting on free passes to Sea World!!
Posted By danyoung Friday, June 27, 2008 at 5:29a Pacific Time
>That's your opinion. I respect that and would ask the same.<
Hey, I'm a big believer in attacking the post and not the poster. I think you and I are good enough online friends by now to be able to take a few shots at each others' writings. I completely respect your right to be wrong, as long as you'll give me a break on those extremely rare times when I'm less than completely right.
;)
Posted By jvanostenbridge Thursday, June 26, 2008 at 6:31p Pacific Time
This conversation couldn't be more timely:
"Markets Plummet as Oil Hits Record"
http://abcnews.go.com/Business...2&page=1
... and ...
"Anheuser-Busch Cos. Rejects InBev's $46B Bid"
http://abcnews.go.com/Business...=5254280
Posted By Spirit of 74 Thursday, June 26, 2008 at 3:31p Pacific Time
>Don't be naive, Danny.<
<<I won't, if you'll stop being a sensationalist.>>
Thanks for the compliment, buddy. I love being called sensational. I hear it's the new fantastic!
<<Look, I agree that our government hasn't made some of the best choices - your Dubai port point is an excellent one.>>
Sadly, it is.
<<But it's quite another thing to say that our leaders are sitting around smacking their gums and giggling gleefully about how much of America they've managed to sell off so far. That's just silly hyperbole.>>
That's your opinion. I respect that and would ask the same. I have absolutely no faith in most all of our so-called leaders. I have witnesses the corruption in our government from both up close and personal and from a distance.
I absolutely believe and stand by my post.
Posted By danyoung Thursday, June 26, 2008 at 12:27p Pacific Time
>Don't be naive, Danny.<
I won't, if you'll stop being a sensationalist. Look, I agree that our government hasn't made some of the best choices - your Dubai port point is an excellent one. But it's quite another thing to say that our leaders are sitting around smacking their gums and giggling gleefully about how much of America they've managed to sell off so far. That's just silly hyperbole.
Posted By fkurucz Thursday, June 26, 2008 at 11:53a Pacific Time
<<Plus speculation on what the Disney Corporation can do to bump up attendance in tough economic times>>
Heavy discounting?
Posted By Spirit of 74 Wednesday, June 25, 2008 at 10:34p Pacific Time
<<Budweiser? :-)>>
No. It was some very good blue slushy stuff with rum. Yum! I still gots me some in the freezer.
<<Kevin Yee has once again written another interesting article over on Mice Chat.
http://miceage.micechat.com/ke...408a.htm
While I don't agree with some of Kevin Yee's opinions, it is an interesting article none the less. If Disney executives actually think this will fly with WDW guest, they are qualified to play Goofy without the costume. I am a little disappointed however, in the fact he did not quote Spirit in this one.>>
I am too. That's why Kevin's knees are being used for batting practice by some scary spirits even as I type this!
Posted By jvanostenbridge Wednesday, June 25, 2008 at 5:02p Pacific Time
Possible today with collaboration:
http://www.fuel-cell-bus-club.com
http://www.enviro.aero/EngineM...ers.aspx
Economic conditions will encourage more rapid adoption.
Retreating from the present is not an option. It may take a little time and certainly some focused effort, but changes in energy and transportation are coming.
No one is writing the epitaph for WDW just yet.
And remember...
http://movies.about.com/librar...pubb.jpg
Posted By MPierce Wednesday, June 25, 2008 at 4:28p Pacific Time
I think Greg is up to the task. :-)
Posted By bobbelee9 Wednesday, June 25, 2008 at 4:23p Pacific Time
^^^Not asking for much are you?
Posted By MPierce Wednesday, June 25, 2008 at 4:16p Pacific Time
I would very much enjoy the completion of your review. Also speculation on the effect of a sagging economy world wide, and what it's effect, if any, it will have on WDW. Plus speculation on what the Disney Corporation can do to bump up attendance in tough economic times, that will not adversley effect their average daily guest.
Posted By gmaletic Wednesday, June 25, 2008 at 4:03p Pacific Time
@MPierce:
>Isn't it about time we got another article from you?
Is there a specific topic that you think I should follow up on, or just, "hey, it's time to write something new!" (I know I never did a 2nd part to my WDW review that I wrote last Fall.)
Posted By MPierce Wednesday, June 25, 2008 at 3:57p Pacific Time
>> And though I'm partway on board with the idea of making the TTC a hub, I cringe at the idea of making intra-Disney World commutes even longer. It takes -forever- to get from park to park; I'd hate to see that get worse. <<
I'm afraid that if the TTC became a hub it would look like Epcot on New Years Eve.
Posted By MPierce Wednesday, June 25, 2008 at 3:55p Pacific Time
^^^ Isn't it about time we got another article from you?
Posted By gmaletic Wednesday, June 25, 2008 at 3:52p Pacific Time
Regarding Kevin's article:
- I'm not sure why Kevin thinks that PeopleMover track is less expensive than monorail track. Monorail track is reinforced concrete. Peoplemover track is, well, a lot more stuff.
- Scheduled buses is a good idea. They should have had that years ago, whether it saves them money or not.
- Pay-for buses are, obviously, a ridiculous idea.
- And though I'm partway on board with the idea of making the TTC a hub, I cringe at the idea of making intra-Disney World commutes even longer. It takes -forever- to get from park to park; I'd hate to see that get worse.
Posted By MPierce Wednesday, June 25, 2008 at 3:46p Pacific Time
Kevin Yee has once again written another interesting article over on Mice Chat.
http://miceage.micechat.com/ke...408a.htm
While I don't agree with some of Kevin Yee's opinions, it is an interesting article none the less. If Disney executives actually think this will fly with WDW guest, they are qualified to play Goofy without the costume. I am a little disappointed however, in the fact he did not quote Spirit in this one.
Posted By MPierce Wednesday, June 25, 2008 at 3:32p Pacific Time
^^^ Budweiser? :-)
Posted By Spirit of 74 Wednesday, June 25, 2008 at 1:26p Pacific Time
Sorry for the typos, I'm drinking early today!
Posted By Spirit of 74 Wednesday, June 25, 2008 at 1:24p Pacific Time
<<(Despite the problems that exist today, I'd argue the company is a much better company both under Eisner and Iger than it was during the Ron Miller days. The theme park "product" may be the one exception to that.)>>
That is true in many ways, it's also not true in many others, including fundamental things like quality and caring for CMs and guests.
Posted By Spirit of 74 Wednesday, June 25, 2008 at 1:21p Pacific Time
<<Sorry, buddy, but that's just crap. Do you really believe our government is actively working to sell off the good old USA piece by piece? They may be stupidly allowing it to happen, and some folks somewhere are making huge amounts of money on it. But to say that our leaders WANT the USA to be sold off to foreign investors is just plain silly.>>
I KNOW this what they want. They call in 'investment' but what happens is the only people benefiting is the folks who are institutional investors and Wall Street heavyweights.
Just look at the proposed InBev buyout of Budweiser (not that I drink the swill but it is as American and it gets) ... the only ones who want it are said investors and the talking heads on MSNBC.
(By the way, if it goes through look for major changes on the Orlando theme park landscape.)
Remember when Japanese investors were buying up American landmarks like Pebble Beach and Rockefeller Center?
Or when our government wanted the UAE to run our major ports?
Don't be naive, Danny.
The folks in Washington just love selling our country off piece by piece. Just like how they've stolen our constitutional rights (you should have witnessed what I just did at my local bank because the government now feels it has the right to know everything about YOUR money under the absurd guise that it is for security.)
What scares me is the ignorance and the apathy of 'we the people' because no one seems concerned with what's going on. If this were Europe ... nevermind.
Posted By jvanostenbridge Wednesday, June 25, 2008 at 1:17p Pacific Time
On both matters, whether the concern is corporate management remaining devoted to the identity of the company and overcoming economic challenges faced by consumers and operational realities or the lacking adeptness of our political leaders to maintain a viable economic stake on the world stage, I believe it is even become more clear to me that this is more a matter of leadership than anything else.
If we take a walk in Bob Iger's shoes for a moment, do you put WDW, one of the most visible corporate resources and an industry benchmark on the auction block just because of an immediate economic challenge? I really don't think that another corporation would take up the mantle of operating WDW under license or in any other capacity without mandating significant compromises on operations to meet a purely economic bottom line. Seeing as every other domestic amusement or theme park operator has not, at least as yet, matched the offering of the Walt Disney Company, who could Disney turn the reins over to with any measure of confidence? The OLC? Um, no.
If executive management makes a decision like this, I would also anticipate Wall Street to interpret it as selling the farm. And at the point you've started to offer up your core assets, you might just as well sell off the rest.
I expect that the Walt Disney Company will find another way.
Since it's not too far fetched to anticipate that the Federal Government's Energy policy paralysis will do little or nothing to change the economics of oil, I also suspect that rethinking the situation and creating a compelling clean energy implementation would change the game. Such a pursuit might just allow Disney to transcend the issue, get a firmer grip on operating costs and leverage the matter to tell a story that everyone can participate in.
If Disney did that for their own sake, published their patterns, and encouraged us to come to the parks to see it first hand, would that offer you an example that you would be interested in following?
Posted By Spirit of 74 Wednesday, June 25, 2008 at 1:11p Pacific Time
<<< I think it's always a relevant concern. They do a great job now, but what about in twenty years when the original OLC founders are all gone? They might continue to be great...they might not. >>>
<<I agree, except that I'd replace "OLC" with "Disney." >>
Thanks, SD.
You beat me to it.
When Disney goes back to living up to its own standards and legacy of amazing creativity, quality and show ... well, then I'll start looking more closely at how TDR is managed.
The Disney parks brand has been degraded over the past decade and it has nothing at all to do with anything happening in Japan.
Posted By fkurucz Wednesday, June 25, 2008 at 11:36a Pacific Time
<<Sorry, buddy, but that's just crap. Do you really believe our government is actively working to sell off the good old USA piece by piece? >>
Their policies sure make one wonder.
In reality, they have no choice. As long as we run 800 billion dollar trade deficits this has to happen. What are our "trading partners" going to do with all those dollars? They will buy income generating assets with them, that's what they will do.
We might be dumb enough to sell off our country to buy junk we don't need, but they aren't!
Posted By gmaletic Wednesday, June 25, 2008 at 11:18a Pacific Time
>I agree, except that I'd replace "OLC" with "Disney."
Which just goes to show that it can happen with any company. (Despite the problems that exist today, I'd argue the company is a much better company both under Eisner and Iger than it was during the Ron Miller days. The theme park "product" may be the one exception to that.)
Posted By danyoung Wednesday, June 25, 2008 at 10:49a Pacific Time
>Ah, but that's what our leaders want ... so that foreign interests can come in and 'invest' (i.e buy up) the good, old USA.<
Sorry, buddy, but that's just crap. Do you really believe our government is actively working to sell off the good old USA piece by piece? They may be stupidly allowing it to happen, and some folks somewhere are making huge amounts of money on it. But to say that our leaders WANT the USA to be sold off to foreign investors is just plain silly.
Posted By SuperDry Wednesday, June 25, 2008 at 2:01a Pacific Time
<<< I think it's always a relevant concern. They do a great job now, but what about in twenty years when the original OLC founders are all gone? They might continue to be great...they might not. >>>
I agree, except that I'd replace "OLC" with "Disney."
Posted By gmaletic Tuesday, June 24, 2008 at 11:21p Pacific Time
>Considering that the OLC does a better job of maintaining the Disney standards than Disney does itself, I view the entire point as moot.
I think it's always a relevant concern. They do a great job now, but what about in twenty years when the original OLC founders are all gone? They might continue to be great...they might not.
Posted By Spirit of 74 Tuesday, June 24, 2008 at 10:22p Pacific Time
<<I certainly hope so, but I don't see any reason for this happening anytime soon. As long as the Fed keeps increasing the money supply the dollar will continue to tank.>>
Ah, but that's what our leaders want ... so that foreign interests can come in and 'invest' (i.e buy up) the good, old USA.
Posted By Spirit of 74 Tuesday, June 24, 2008 at 10:20p Pacific Time
<<If Disney decides to sell, anybody want to go halves with me?>>
Count me in. But you buy the pizza.
Posted By Spirit of 74 Tuesday, June 24, 2008 at 10:19p Pacific Time
<<I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney.>>
Considering that the OLC does a better job of maintaining the Disney standards than Disney does itself, I view the entire point as moot.
Posted By fkurucz Tuesday, June 24, 2008 at 9:26p Pacific Time
<<but I think it's fair to expect that the dollar will bounce back>>
I certainly hope so, but I don't see any reason for this happening anytime soon. As long as the Fed keeps increasing the money supply the dollar will continue to tank.
Posted By MPierce Tuesday, June 24, 2008 at 4:33p Pacific Time
If Disney decides to sell, anybody want to go halves with me?
Posted By SuperDry Tuesday, June 24, 2008 at 1:30p Pacific Time
<<< ///I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney.///
Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing. >>>
Disney has over 100 people back stage at TDR to oversee every aspect of the operation. OLC owns and manages the park, but everything they do must pass muster with Disney. So, there's no risk of things not being done the "Disney way." There's no reason that another Disney resort (existing or new) couldn't be run the same way if someone other than Disney were to own or manage it, with no risk to quality standards.
Posted By gmaletic Tuesday, June 24, 2008 at 1:25p Pacific Time
>Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing.
Agreed in principle...but how is that actually supposed to work? The next day, the park has to be called "Oriental Land Company Land?" The Winnie the Pooh ride has to be ripped out? The simple idea of "revoking a license" doesn't seem to be sufficient in this case.
My completely uninformed guess is that Disney might be allowed to buy the property off of OLC at a discount, but only if certain, very specific conditions are met.
Posted By barboy Tuesday, June 24, 2008 at 1:02p Pacific Time
///I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney.///
Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing.
I remember years ago working for a very well known pizza chain franchise. The franchisee wasn't playing by the rules(we employees concluded that the franchisee was not paying royalties to the head office around the great lakes area, honoring advertised discounts, tarnishing the name with sex and drug episodes inside and outside the store) and guess what?
The corporates came in one day and audited the books and took the store back.
Posted By jvanostenbridge Tuesday, June 24, 2008 at 12:56p Pacific Time
While there are economic realities that Disney Parks and Resorts has to deal with, I would have to agree with most of the perceptions here that selling the parks would be a disastrous option to pursue. I strongly disagree with the notion of selling the parks based on an arbitrary mark in the price of oil because the condition is at best temporary and at worst backward-looking. It might be some time, but I think it's fair to expect that the dollar will bounce back. Also, I presume if OPEC offers any further encouragement, there will be slews of alternative energy solutions on the market before long. Just look around. It's already happening.
That said, there might be some great opportunities for Disney Parks and Resorts to partner more overtly with green energy solution providers to better manage energy-related operating costs and, possibly, provide a strong public example of what energy looks like in an achievable and not-too-distant future with technologies that are available today. Sure, revenue will be needed to transition from the Parks' current oil-consuming infrastructure and fleet of vehicles, but where there is a combination of interest and motivation, solutions can be found. Perhaps it is really time to take further action on the premise of Epcot.
From my point of view, I expect the Walt Disney Company has too strong a reputation of innovation and leadership, even in difficult times, to give up such revered properties as the parks. Presented with a challenging problem, I would expect Disney to be proactive in finding a solution rather than running in fear from a barrel of oil.
Will we follow where Disney leads? I bet we will if they choose to lead.
Posted By gmaletic Tuesday, June 24, 2008 at 12:36p Pacific Time
>The risk to the brand would indeed be the greatest danger. Of course, they already have this arrangement with OLC.
You're right; I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney.
>But what might Disney do if WDW became chronically unprofitable? Shutter it and sell off the land? Or maybe partially shutter it? Perhaps the exit costs are astronomical and Disney will have no choice but to limp along, cutting costs wherever possible.
I think you're right; they'll keep it open, no matter what the conditions. (Shuttering underperforming portions of it would certainly be possible, as it would be under any circumstance.) That said, the economic conditions we're facing now are the very same ones that were faced when the park opened in 1971 (today's are probably not as severe, though we don't know that for sure), and the park performed well.
Posted By fkurucz Tuesday, June 24, 2008 at 12:26p Pacific Time
<<And none of this is to mention the enormous negative effect of having the resort tank under the aegis of another manager. Disney couldn't let it happen.>>
The risk to the brand would indeed be the greatest danger. Of course, they already have this arrangement with OLC.
<< What I mean to say is, "why anyone bothers to give this any credence.">>
I agree that the probability is very low.
But what might Disney do if WDW became chronically unprofitable? Shutter it and sell off the land? Or maybe partially shutter it?
WDW's business model is predicated upon upper middle class Americans (and some foreigners) dropping a bundle on a vacation. I know that they have been courting the Joe 6 Pack demographic lately, but that demographic will certainly be under economic duress into the foreseeable future. The fixed costs are huge. What happens if they can't get the breakeven number of guests to come?
Perhaps the exit costs are astronomical and Disney will have no choice but to limp along, cutting costs wherever possible.
Posted By gmaletic Tuesday, June 24, 2008 at 12:13p Pacific Time
>I'm saying, "this makes no business sense whatsoever," which makes me wonder where this rumor came from, and why anyone bothers to repeat it.
Of course, I'm repeating it. What I mean to say is, "why anyone bothers to give this any credence."
Posted By gmaletic Tuesday, June 24, 2008 at 12:07p Pacific Time
And none of this is to mention the enormous negative effect of having the resort tank under the aegis of another manager. Disney couldn't let it happen.
All of which goes to show: this idea is insane.
To be clear, I'm not attacking this from the perspective of, "wouldn't it be terrible if Disney didn't own the resort." I'm saying, "this makes no business sense whatsoever," which makes me wonder where this rumor came from, and why anyone bothers to repeat it.
Posted By fkurucz Tuesday, June 24, 2008 at 11:51a Pacific Time
<<But divest to whom?>>
A greater fool? Granted, with the global credit cruch it would be hard for a prospective buyer to raise the cash.
<<I can't imagine who would think they could make this scenario work.>>
One would think that this would be the case. Yet history is rife with questionable acquisitions. Like when Daimler bought Chrysler. I recall wondering "what are they thinking?". And when Cerberus took off Daimler's hands (for a song) I again wondered "what are they thinking?".
Posted By gmaletic Tuesday, June 24, 2008 at 10:24a Pacific Time
>if Disney management does not believe that they can continue to earn an acceptable return on investment on the resort, then it could make sense to divest, especially of they can get a royalty income stream as part of the deal.
But divest to whom? Disney should be able to accept lower returns on the resort than any other prospective owner, given the synergistic effects on sales of other Disney assets. Considering any other owner wouldn't get those synergistic effects -and- they'd have to pay license fees...how in the world could this deal happen? I can't imagine who would think they could make this scenario work.
Posted By fkurucz Tuesday, June 24, 2008 at 9:46a Pacific Time
isky -> risky
Posted By fkurucz Tuesday, June 24, 2008 at 9:46a Pacific Time
Maybe OLC would buy it?
There is a strong tendency in modern American business to not be a "bagholder", which is to say, the owner of a depreciating or isky asset. This is why all the subprime and other junky mortgages were securitized and sold to investors. The banks collected huge commisions and someone else was left holding the bag.
Now I'm not saying that WDW is the equivalent of a subprime mortgage, but if Disney management does not believe that they can continue to earn an acceptable return on investment on the resort, then it could make sense to divest, especially of they can get a royalty income stream as part of the deal.
Posted By fkurucz Tuesday, June 24, 2008 at 9:40a Pacific Time
^^^But he only buys at a heavy discount
Posted By trekkeruss Tuesday, June 24, 2008 at 9:21a Pacific Time
<<What would be the asking price? Who could afford it?>>
I can think of one person who would be interested: the Oracle of Omaha, Warren Buffett.
Posted By Disneymom443 Tuesday, June 24, 2008 at 7:24a Pacific Time
The first thing I thought was what the heck is he talking about. Then I relized that he was just to far feched that it was crazy.
To think about how much Disney owns and if that fell, how many other things would fall too. Just crazy.
Posted By Elderp Tuesday, June 24, 2008 at 4:14a Pacific Time
Miceage is really going over the top. WDW may have some cut backs, but they are not going to sell off.
Posted By cheesybaby Monday, June 23, 2008 at 11:08p Pacific Time
<<sell the resort to a third party>>
What would be the asking price? Who could afford it?
Posted By Mrs ElderP Monday, June 23, 2008 at 10:42p Pacific Time
I do agree that with expensive oil it's going to be harder to make a profit, but I'm with you: sell WDW, good grief!
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