Interesting tidbit from annual report (must be APs)

[dshimel]

Parks and Resorts generated $7.75 billion in revenue.

Under supplimental revenue data it shows:
Segment operating income (in millions)
Parks and Resorts
Merchandise, food and beverage 2,429
Admissions 2,547

Adding these "Parks" revenues = $4.976 billion. That means the hotels and cruise ships generate $2.774 billion.


Now the "interesting part". Amusement Business numbers are 71.8 million visitors for the 8 main parks(MK, DL, Epcot, MGM, DAK, DCA, DLP, DSP).

$2429 million admission revenue / 71.8 million visitors = $34 each

Some of that admission income is from water parks. This further reduces the average per person admission cost.

That means for every person paying $53 at the gate, someone else is getting in for $15 or less (per visit).

Is it any wonder DL APs have gone up 50% in the last year?

[millionairegirl]

Also when people buy 4 day parkhoppers, I don't think they are paying $212. In fact on our trip to WDW this year we are paying $234 for 7 day park hoppers. So that's only $33 a day. They discount the multi-day tickets because they know you will spend more on hotel, food, and junk.

[dshimel]

Also when people buy 4 day parkhoppers, I don't think they are paying $212. In fact on our trip to WDW this year we are paying $234 for 7 day park hoppers. So that's only $33 a day. They discount the multi-day tickets because they know you will spend more on hotel, food, and junk.

Someone paying the average of $33 per day is a wash....

For example....

50, 30, 10 average to 30
50, 30, 30, 30, 30, 30, 30, 30, 30, 30, 10 average to 30.
50, (a million 30s), 10 average to 30.

DL sells the 4 day hopper for $189/$159. $47.25 a day adult/$39.75 a day kids.

That is still above the average... meaning someone is dragging the per guest average down.

DL APs averaging $250 per pass(swag) / 10 visits each = $25 per day. At 600,000 APs x 10 visits each = 6 million visits. This would be 33% of DLR's 18 million annual visitors.

DCA Free with DL purchase = $25 per day However, the year this was introduced, DL admission was flat and DCA went up 600,000. 3% of DLs total admission.

[SuperDisneyDad]

Do they show the net income from this operation? My guess is that the parks and resorts contribute more to the bottom line than the Television (minus ESPN), radio and film (minus Pixar and Miramax) divisions.

After 2005, parks and resorts are the only major steady stream of income for Disney. From a business perspective, Disney isn't a media company, but a park and resort company, because it's primary income will be from parks and resorts.

If I'm right about this, I think they sell off ABC and Fox Family to concentrate on the more profitable divisions. Of course, they should, also, invest more money on the parks.

[sediment]

Parks and Resorts generated $7.75 billion in revenue.

Under supplemental revenue data it shows:
Segment operating income (in millions)
Parks and Resorts
Merchandise, food and beverage 2,429
Admissions 2,547
...

$2429 million admission revenue / 71.8 million visitors = $34 each

1. Er, um, you used the wrong $2 billion number. The resulting implication is still the same, though.
2. Is that a (top-line) revenue number, or an "operating income" (bottom-line)amount? There are some small expenses associated with receiving admissions revenue.
3. Yes, AP admissions revenue, especially from the 610,000+ AP holders of Disneyland, cause a lower admission revenue per visit statistics. Meanwhile, the operating expenses per admit remain somewhat constant. Some AP holders will make up their shortcoming at the gate by buying merch, food, and bev, but most don't. Add the two numbers together, and (2429+2547=4976) and see how much Operating Income per guest is. And you could multiply that by number of guests at DL/DCA to see what kind of income it generates, noting, of course, that the all of the parks are not similar enough to use the average. WDW is probably responsible for about 70% of the total operating income, while some parks are losing money.
4. Increasing the price of APs results in increased visits per holder, which lowers the admissions per visit even more.

Question: what is a reasonable markup for merch, food, and bev? I've heard 100% markup from wholesale (a 50% profit margin), but the difference is not all profit. Some of that goes toward expenses generated from selling these products. I'm guessing closer to 25%. I need this to remind APer's who claim to buy lots of stuff how much they need to buy, each visit, in order for their visit to result in a profit for DIS. I.e, if we to use your number of $34 profit on m/f/b per admit, that would mean spending $136 per visit. (Per person, so include the kiddies as well.)

[TinkPink]

Holy Crap. Now my head hurts. Thanks guys...

[dshimel]

Do they show the net income from this operation?

Parks and resorts: $1.123 billion in operating income.
Media Networks: $2.169 billion in operating income.
Studio: $662 million
Consumer goods: $534 million

My guess is that the parks and resorts contribute more to the bottom line than the Television (minus ESPN), radio and film (minus Pixar and Miramax) divisions.

Sucking out ESPN and Pixar is nearly impossible given the info in the annual report.

Cable is clearly the lion's share of Media's operating income, contributing $1.924 billion compared to ABC's $245 million. Of Cable, again ESPN is the lion's share, but ABC family, Disney Channel, Toon Disney, SOAPNet, Lifetime (50% ownership), E! (39.6% ownership) do contribute.

So, $245 million operating income for ABC and maybe $500 million for non-ESPN cable networks?

You're up to $745 million.

Studio's $662 million is... ummmm... a lot Finding Nemo DVDs and international theater. How much? Don't know.

After 2005, parks and resorts are the only major steady stream of income for Disney. From a business perspective, Disney isn't a media company, but a park and resort company, because it's primary income will be from parks and resorts.

What will happen to ESPN and Disney Channel in 2005.

Yes, Studios will take a major hurting when they lose Pixar, IF they continue to put out products as (un)sucessful as Home on the Range, Brother Bear, Hidalgo, Alamo, Ice Princess, The Village......

If I'm right about this, I think they sell off ABC and Fox Family to concentrate on the more profitable divisions. Of course, they should, also, invest more money on the parks.

But those are the areas with potential for growth. ABC is bouncing between 3rd and 4th in the ratings, and still manages to show $245 million in operating income. Imagine if they continue to improve thier offerings (If they ever dtop firing guys that produce hits!) and eventually manage to break into the #1 or #2 spot.... Then, they'll actually have shows to re-run on ABC Family without having to buy them from WB... ABC Family becomes a money maker too.... Imagine! Serious growth potential.


Compare this to parks. They're already pulling 50+ million visits a year at the 6 domestic parks. They're collecting $60-70 off each person walking through the gate. How much can they really expect this to grow.


AND:
If you look at either cash flow (parks suck a lot of capital) or net proft (mass capital spending drives mass depreciation) the parks are squaking by... not even able to pay the interest on the debt incurred building them. But there is a whole other thread dedicated to the effect the parks have on the company..... Started by a comment in Forbes about Iger possibly dumping the parks to increase the stick price.

This thread was really intended to be about the average $33 or less that each person is paying for admission, and how APs must be dragging that down.

[sediment]

Holy Crap. Now my head hurts. Thanks guys...

Maybe a "business section" forum could be added.

[sediment]

AND:
If you look at either cash flow (parks suck a lot of capital) or net proft (mass capital spending drives mass depreciation) the parks are squaking by... not even able to pay the interest on the debt incurred building them. But there is a whole other thread dedicated to the effect the parks have on the company..... Started by a comment in Forbes about Iger possibly dumping the parks to increase the stick price.

Well, blaming all the parks on a few recent creations (DCA, DSP, AK) doesn't seem fair to the ones that do generate income. Dumping all the parks would mean someone having to buy those, and I think any price would consider the work required to fix those up to a reasonable and profitable standard (or bulldozing).

[SuperDisneyDad]

Parks and resorts: $1.123 billion in operating income.
Media Networks: $2.169 billion in operating income.
Studio: $662 million
Consumer goods: $534 million


Sucking out ESPN and Pixar is nearly impossible given the info in the annual report.

Cable is clearly the lion's share of Media's operating income, contributing $1.924 billion compared to ABC's $245 million. Of Cable, again ESPN is the lion's share, but ABC family, Disney Channel, Toon Disney, SOAPNet, Lifetime (50% ownership), E! (39.6% ownership) do contribute.

You're right! I just got the annual report and I looked through the income portion and I agree with what you said. I should have read the whole annual report before posting.

However, I still feel that the parks represent a significant part of revenue/income going forward. If you exclude Hong Kong and Euro Disney, things look very good. Euro Disney was a horrible mistake. Hong Kong Disneyland may be a dude, as well. If I were CEO of Disney, I would try to spin off Euro Disneyland and get it out of the Disney company, or liquidate it if it couldn't be sold. I'd consider halting Hong Kong Disneyland. As a new CEO, you can take big charges like this.

[dshimel]

1. Er, um, you used the wrong $2 billion number. The resulting implication is still the same, though.

My bad,
$35.57 vs. $33.78

Still, after water parks and Disney Quest and mini-golf are subtracted....

2. Is that a (top-line) revenue number, or an "operating income" (bottom-line)amount? There are some small expenses associated with receiving admissions revenue.

Top line revenue.

3. Yes, AP admissions revenue, especially from the 610,000+ AP holders of Disneyland, cause a lower admission revenue per visit statistics. Meanwhile, the operating expenses per admit remain somewhat constant. Some AP holders will make up their shortcoming at the gate by buying merch, food, and bev, but most don't. Add the two numbers together, and (2429+2547=4976) and see how much Operating Income per guest is.

Again, this is top line revenue.
Parks and Resorts have $6.627 in operating expenses off $7.75 billion revenue, but unlike revenue, the report provides no info on how to separate the parks' operating expenses from the resorts'.

14.5% operating margin is not good.

Increasing the price of APs results in increased visits per holder, which lowers the admissions per visit even more.

How you figure? I bought a DAP for $140ish last year and went about 10 times. Yesterday I bought a DAP for $210. I expect to go about 10 times.

How does "how much I paid" directly effect "how much I go"?

Question: what is a reasonable markup for merch, food, and bev? I've heard 100% markup from wholesale (a 50% profit margin), but the difference is not all profit.

Your case is way too simple as you're ignoring labor costs...

So happens, my current job is writing software for retail merchandise management...

Dedicated clothing stores (Gap like) do generally have a 50%-ish markup. But you're only going to sell a thousand dollars or so of merchandise an hour per open cashier for a typical location. And you have to do end-of-season clearences, so your real mark up is closer to 40%. $1000 revenue - $600 cost of good = $400 now subtract labor, utilities, facilities, loss by inventory (shop lifting).... Maybe $100 profit an hour per cashier for a typical clothing store.

At grocery stores, there is a 20-25% markup on average... But they can sell many thousands of dollars worth of goods per employee hour. Per cashier: $5,000 an hour - $4000 cost of goods = $1000... minus labor, utilities, facilities, loss, etc....

For restaurants, the mark up is VERY, VERY high. Like 500% and up. It costs $1.50-$2 to make a pizza, but Pizza Hut charges you $8-10. It costs McD about $.50 for a Big Mack, but they charge you $2... LABOR eats you alive. Per cashier you're brining in a couple hundred an hour... When I worked at Sizzler, a good day was in the $6,000 - $7,000 range. $3,000 in labor costs, $1,000 in cost of goods, minus facilities, utilities, etc. 600%-700% mark-up, and you're still struggling.


Back to Disney....
Their markup has to be way over 100% f0r clothing. Probably 300-500%. $5 for a T-shirt they sell for $20. $20 for a jacket they sell for $60.

But, labor costs are eating them alive too.

Their operating margin for all of parks and resorts is only 14%. If merchandise was really clearing 25%, then that would account for ALL of parks and resorts operating income.

[sediment]

How you figure? I bought a DAP for $140ish last year and went about 10 times. Yesterday I bought a DAP for $210. I expect to go about 10 times.

How does "how much I paid" directly effect "how much I go"?

First, I am enjoying this conversation immensely, and the rest of your post was delicious.

My numbers reflect my view of the trend of an average AP holder. Your experience may vary.
If an average (say, Economics' rational) consumer's unlimited visits cost 50% more than before, it is likely that visits would increase so that the per visit cost will remain flat or possibly decrease. (Or, he chooses not to buy -- the optimal scenario.)
Perhaps your price point ( > $21) hasn't been hit yet.

[sediment]

Their operating margin for all of parks and resorts is only 14%. If merchandise was really clearing 25%, then that would account for ALL of parks and resorts operating income.

So, it's even lower? (Lower is better for my argument.)

There must be other financial statistics that are favorable, especially in light of it being only part of a very diversified company. It's possible that the parks are not worth as much apart from DIS as they are part of DIS.

[sediment]

Is the annual report online?

[dshimel]

First, I am enjoying this conversation immensely, and the rest of your post was delicious.

My numbers reflect my view of the trend of an average AP holder. Your experience may vary.
If an average (say, Economics' rational) consumer's unlimited visits cost 50% more than before, it is likely that visits would increase so that the per visit cost will remain flat or possibly decrease. (Or, he chooses not to buy -- the optimal scenario.)
Perhaps your price point ( > $21) hasn't been hit yet.

2 years ago I had a PAP that I bought for $225. Went about 15-20 days since it was my first ever year with an AP. $10-15 a trip.

Last year, I could renew the PAP for $205 or get the DAP for $140ish.... Hmmm... I only went on 2 blockout days, and didn't enjoy them becuase it was so crowded.... Went with the DAP... Since second year with AP, visits dropped to 10 or so. (2-3 days spiring, 2-3 days June, 2-3 days Aug, 2-3 days Oct). The cost of the AP had nothing to do with the number of days I went. The $75 gasoline round-trip, the $70 a night hotel, the amount of vacation time..... These are what affected my decision. We wanted to go in Dec, but just couldn't spend the money (I got charged with reckless driving but it was later reduced to failure to control speed after I hired a PI to interview the only witness).

This year, we were planning 2 days for Aug (bats day) and 2 days for Christmas(anniversary).. as a minimum. Two 2-day hoppers = ~200. DAP = ~$200. Heck, let's buy the DAP and plan an Oct and Spring Trip, and start them the end of June so I can do late June 2005 and early June 2006 on the same DAP! (I have a duaghter that live in CO. I get her for June every summer, plus this Oct and next Spring.) Again, I'll be going about 10 days on a $209 DAP.

If the AP was $250, I'd still probably have spent the extra to get the DAP vs. 2 2-day hoppers.... $300... pushing it. $350... probably would have gone to Disney for 4 days and Sea World and or Universal for a couple days.



The only point is this....
If people are staying away from Disneyland because it is too crowded, and those people that are staying away would have spent ore than an AP spends per visit, then the AP is driving away revenue. They can continue to increase AP prices until the park starts to drift below capacity and that capacity isn't filled with new guests paying full (nuch higher per visit) price.

[dshimel]

Is the annual report online?

http://corporate.disney.go.com/investors/annual_reports.html

[SuperDisneyDad]

Synergy

Their operating margin for all of parks and resorts is only 14%. If merchandise was really clearing 25%, then that would account for ALL of parks and resorts operating income.

This kind of misses the whole point of the synergistic relationship of the park to merchandise sales. A great deal of the retail wouldn't exist if it weren't for the strong image of the park itself. The Strategic Planning Department failed to realize the intangible, but complex synergistic relationships between the all the various parts of the company. You can't plug these elements into a spread sheet and get an answer.

[MickeyMan]

Oh my I have a spinning head ahhhhhhh

[sediment]

The only point is this....
If people are staying away from Disneyland because it is too crowded, and those people that are staying away would have spent ore than an AP spends per visit, then the AP is driving away revenue. They can continue to increase AP prices until the park starts to drift below capacity and that capacity isn't filled with new guests paying full (nuch higher per visit) price.

The AP is an inelastic good.
Dumping the PAP would allow guests to pay for and enjoy the most demanded days.

[dshimel]

The AP is an inelastic good.
Dumping the PAP would allow guests to pay for and enjoy the most demanded days.

You lost me on this? What do you mean by "inelastic"?

I don't understand your comment about dumping the PAP. Personally, I'd like to see the PAP continue to rise in price until the majority of people switch to DAP. Of course, I think they should also add the 10% shopping discount to the DAP....

The DAP at $209 really limits their ability to sell hoppers, I think. It is $1 less than 2 2-day hoppers and only $9 more than the 5-day hopper.

Then again, maybe that is the point. If someone is going to come and stay for 5 days, get them to buy a DAP so they'll come back and spend another 3 to 5 days later that same year. If they're coming for at least 2 2-day stays(like me this year), get them to come for 3 or 4 3-day stays instead.... Worked for me as I just ordered 3 DAPs yesterday.

I think there is another $100 or so that they can raise the DAP before I'd quite buying it... Or maybe just take a year off...

If the DAP does go above $300, then I hope they open up the next level down (current So_Cal) to non-So-Cal-residents... I'd pay $200 for a pass with So-Cal Resident type block out schedule if the DAP went much above $300.