Bob Iger
Having built up the Disney and ESPN brands, we are now able to reduce our level of capital investment and expect to increase cash flow and profitability in the years ahead. Much of that cash flow improvement will come from Walt Disney Parks and Resorts, which should see tremendous improvements in performance when the current world tensions diminish.
The fact is that we've been through this before. Every time there has been a recession or other economic challenge, such as the 1979 gas crisis or the Gulf War in 1991, attendance at our parks, not surprisingly, has dipped. However, once the uncertainty over these issues began to ease, the parks went on to achieve new records of performance. The reason for this is that our guests really don't cancel their Disney vacations. Instead, they defer them. So, when conditions improve, we benefit from pent-up demand. Consistent with this past experience, recent research at our parks indicates that the Intent to Visit has dipped for the period of the coming three months . . . but it is at its highest levels in history for the period of the next 12 months.
Parks and Resorts is where much of our investment has been made during the last five years. We have built Disney's Animal Kingdom and Disney's California Adventure. With our partners in Europe, we have built the Walt Disney Studios theme park next to Disneyland Paris and, working with the Oriental Land Company, we have built Tokyo DisneySea as part of the Tokyo Disneyland Resort. Since opening Disney's California Adventure in 2001, we have already added A Bug's Land and the Broadway-caliber Aladdin stage play, and are constructing the Twilight Zone Tower of Terror, which will open next year. At Disneyland, we are about to open the new Winnie the Pooh attraction. And, this year, at Walt Disney World, we will unveil the spectacular Mission: SPACE at Epcot and Mickey's Philharmagic at the Magic Kingdom, which will offer guests the most ambitious 3D filmed adventure ever created for any of our theme parks.
Further down the road, in the middle of the decade, we will be opening Hong Kong Disneyland, which will further establish the Disney brand in the most populous region of the world.
We should make clear that, while current market conditions prevail, we have undertaken a broad range of cost-cutting initiatives to reduce overhead during these times. -- Thanks to these reductions in our cost base, our margins should be that much healthier when the economic rebound comes.
In managing the wonderful assets at Parks and Resorts, we have developed innovative ways to improve both the bottom line and the guest experience. Our Customer Relations Management and Destination Disney projects allow us to use a computer database to more fully respond to our guests' interests. For example, a family that loves Winnie the Pooh might get an invitation to see the new Winnie the Pooh attraction at Disneyland, along with FASTPASS tickets so they don't have to wait in line on the day they come.
Then there's the brand new Disney Credit Card, which we launched two weeks ago with our partners Visa and Bank One. The card offers Disney Dream Reward Dollars that can be redeemed in a variety of ways, mostly at our parks and resorts, and it has no annual fee. More than 100,000 people registered for the card before they knew any of the details about it! Such is the power and appeal of the Disney brand.
Here's a TV spot that introduces this great new product has going for it.
Michael Eisner
Whereas our parks and resorts make it possible for Disney fans to visit the Disney brand, Consumer Products allows them to bring it home.
A tremendous retail success at Consumer Products that is directly related to the value of our library is our Princess line of merchandise. Ever since "Snow White" made movie history, our company has added to its collection of female royalty, such as Cinderella, Sleeping Beauty, Ariel, Belle and Jasmine. Our team at Consumer Products realized that these characters represented an untapped opportunity and introduced dolls, toys, clothing and other merchandise themed around the Disney princesses. The result is a business that has gone from $100 million in retail sales in 2000 to $700 million in 2002 . . . and is expected to exceed $1 billion in 2003.
Another new business for us is Baby Einstein, a company that we acquired a year and a-half ago. This is not only a perfect fit for Disney and all it stands for, but it also is opening the door to the giant market of educational toys and products.
A non-Disney-branded business that is new to Consumer Products is Power Rangers, which represented $260 million at retail in 2002. We gained the rights to this incredibly popular and durable franchise when we bought Fox Family in 2001. Among the benefits of this line for Consumer Products is that it appeals so strongly to boys, improving our attractiveness to retailers.