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  1. #16

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    It might be the best thing for the parks....

    Disney wouldn't sell the parks outright, but would spin them off into a seperate corporation with thier own stock. You could own stock in Disneyland, and not in the Walt Disney company in general. Disneyland could issue stock to raise capitol for long overdue improvements, and the parks would be run by an executive team whose only function is to make the parks better/more profitable, not an executive team that is focused on so many different Business units and media opportunities.

  2. #17

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    The company would then lose synergy opportunities if it were to split off the parks. "NewParkCo" would have to pay royalty fees on every attraction, old and new. That results in no new attractions being made.

    Secondly, Imagineering gets to be a profit center, as it is for the work it does with OLC. Good and bad: since there's no corporate strategery department approving or disapproving every single expense based on what Eisner wants (not how the numbers are, but how the numbers are made), NewParkCo can build top-notch rides and parks not unlike Tokyo DisneySeas.

    Thirdly, "NewParkCo" would likely be cloning attractions like mad, as economies of scale make it irresistible. Not that much different than now, but triple it. Expect every new attraction to be put into every park.

    I would like NewParkCo to be privately held, or at least majority-controlled by the proper people. However, I think the "losing synergy" thing would be very bad. What I would like to see is synergy of the "Lion King Parade" type. With separate companies, each decision like this -- make a parade or attraction out of a Disney asset -- becomes an "I want more out of this than you" negotiation. Prolonged negotiations result in missed opportunity.

  3. #18

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    Quote Originally Posted by tikitone 74
    One question facing Iger,
    says Fortune, is whether Disney should shed its theme parks to boost its
    stock price. (Page 76, Fortune, 4/4)
    I'd rather see the TV networks spun off. That makes more sense.

  4. #19

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    Quote Originally Posted by Yendorb
    It might be the best thing for the parks....

    Disney wouldn't sell the parks outright, but would spin them off into a seperate corporation with thier own stock. You could own stock in Disneyland, and not in the Walt Disney company in general. Disneyland could issue stock to raise capitol for long overdue improvements, and the parks would be run by an executive team whose only function is to make the parks better/more profitable, not an executive team that is focused on so many different Business units and media opportunities.
    Actually, I don't think it would it bring more attempts to cut the bottom line to bring the new company into profit...

    And you will end up with a cheaper looking DL, because you do not have supporting cash flow to improve the park...
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  5. #20

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    I think the real question the analysts on the Street are going to ask is if the company is simply too large now to be managed as is, and it if would be worth more to the stockholders (most of which are institutions) if it was broken up into its various components (parks, movies, media, television, etc). Certainly the Go.com purchase never paid off, and there's still questions about ABC Family, the Disney Channel, et al.

    Of course, if you're a theme park enthusiast, there's certainly a great deal to be concerned about. The parks require a company with large amounts of available, accessible, and affordable capital for investment and maintenance; there aren't as many behemoths out there willing to go this far out on a limb for what can be a cyclical industry vulnerable to current events.

    The threat to "break up the company" has always been there. With Eisner out of the picture, it could easily rear its head once again.

  6. #21

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    Quote Originally Posted by sediment
    I'd rather see the TV networks spun off. That makes more sense.
    Sorry, but in 2004, Media Networks generated 38% of the gross revenue, 48% of the segment operating income, and ONLY 14% of the corporate depreciation expenses (direct reflection on the amount of capital improvement money required to generate that revenue)....

    When 14% of your capital is generating 48% of operating income, you DON'T spin it off..... uness you really want a corporate raider to come in and snap up and dismantel the rest of the underperformaing stuff....

    This makes ABSOLUTELY no sense from a business management PoV.... It is the exact opposite from making sense.

  7. #22

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    Quote Originally Posted by dshimel
    Sorry, but in 2004, Media Networks generated 38% of the gross revenue, 48% of the segment operating income, and ONLY 14% of the corporate depreciation expenses (direct reflection on the amount of capital improvement money required to generate that revenue)....

    When 14% of your capital is generating 48% of operating income, you DON'T spin it off..... uness you really want a corporate raider to come in and snap up and dismantel the rest of the underperformaing stuff....

    This makes ABSOLUTELY no sense from a business management PoV.... It is the exact opposite from making sense.
    I think those numbers are slightly deceptive, dshimel... Because DL is being currently viewed by managment as a content distributor of branded francises as opposed to also being a content provider that it was originally became under the Walt - ABC contract...

    It goes back to being a content provider or a content distributor... The thing is DL was seen as a content provider for years... You see, the parks have stopped being used as a content provider for several years now... the potential is still there if they wanted to use it...
    Last edited by cellarhound; 03-30-2005 at 05:09 PM.
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  8. #23

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    I think the I will just join the "Tar and Feather" crowd on this

  9. #24

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    I would not be surprised to see Disney move harder to become a content distributor which produces their own content, such as Time-Warner is. I REALLY would not be surprise to see a merger/takeover between Disney and one of the Satallite providers.

    Back to the parks - I would be surprised to see Disney sell them, if only because the corprate image would take ANOTHER HUGE hit. As much as well all love Disney there are not a lot of folks who have faith in the company and I am sure, while Iger wants to put his stamp on the company, he would not wish to alienate a lot of the people who purchase Disney products.
    No Disneyland? With the dismantling job they have done to feature animation over the years I would have no loyalty left towards the company (To me, Disney is 1) Animation...2) Theme Parks. They have already stomped on #1).

    To the parks making money - I have not done the analysis, but I know that depreciation (spelling) will help Disney quite a bit. The parks bring cash flow, which, in ways, is more important than showing a profit. Also, the depreciation, while shown on the ledgers, is not a "real" loss such as expenses. By being able to show this "loss" Disney is able to reduce its tax burden as well.

    Hmm...the above is my interpetation. I my be off on some things, but I HONESTLY believe this - as long as the parks provide a net positive cashflow which would allow Disney to expand elsewhere, I do not believe they would sell them, even if they are not a "growth" aspect of the buisness.

  10. #25

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    Disney is actually a HUGE content distributor via their Buena Vista division.
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  11. #26

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    Quote Originally Posted by cellarhound
    I think those numbers are slightly deceptive, dshimel... Because DL is being currently viewed by managment as a content distributor of branded francises as opposed to also being a content provider that it was originally became under the Walt - ABC contract...

    It goes back to being a content provider or a content distributor... The thing is DL was seen as a content provider for years... You see, the parks have stopped being used as a content provider for several years now... the potential is still there if they wanted to use it...

    ZOoom.... Right over my head I guess....

    $7.75 billion go into Parks and Resorts cash registers.... Then, $6.627 billion of that flys right out again in the form of employee costs, advertising costs, cost of good they sell, parts, paint......

    This leave them with $1.123 billion... Write off depreciation, interest, other corp expenses.... you break even or losre money....

    How would ANY of this change if they suddenly started thinking of DL as a content provider vs. content distributer.... Would that make more money come into the registers? Would that reduce the wages and healthcare costs of their employees.... Make advertising cheaper?

  12. #27

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    Quote Originally Posted by Gwyren
    To the parks making money - I have not done the analysis, but I know that depreciation (spelling) will help Disney quite a bit. The parks bring cash flow, which, in ways, is more important than showing a profit.
    Actually, they generated negative cash flor for 2005.
    .. $1.123 billion of operating income
    - $1.008 billion in capital improvement expendatures
    = $115 million

    - park's share of the $1.045 billion of the corporate and interest expenses.

    That is not positive cash flow....

    Some of the capital improvement is the building of Hong Kong, but not all that much... $719 billion is inside the U.S. and $289 is HKD and DRP.... Not sure how much that $289 will be able to drop when HKD is complete.... Of course, revenue will go up when that park opens, but so will expense.


    Quote Originally Posted by Gwyren
    Also, the depreciation, while shown on the ledgers, is not a "real" loss such as expenses. By being able to show this "loss" Disney is able to reduce its tax burden as well.
    This is a common misunderstanding of accounting. Depreciation isn't "just for taxes" or just a "paper loss"....

    Companies have two kinds of expenses....

    Some expenses are "used up" within a year or so of when they are paid. Examples are hamburger patties, T-Shirts, office supplies, tires (other parts that wear out), utility bills, insurance, flowers, and wages of ticket takers, painters, and maintenance guys. These are OPERATING expenses and come off profit in the year they are accrued... These are the expenses that are deducted from revenue to determine operating income.... In Parks and Resorts case, $7.75 billion of revenue requires $6.627 billion in operating expenses, netting $1.123 billion in operating income.

    Other expenses aren't "used up" in a year or so. Example of this would be building new rides, major refurb projects like Space Mt and Tiki Room, upgrades like new Splash Mt logs and new Jungle Cruise effects, costs of developing new parades and fireworks, new trains, new monorails, repaved walkways, refurbed restrooms.... etc. These are CAPITAL expenses. These DO NOT count against your profitability in the year you accrue the expense or pay the bills. You pay the bills with cash, but add the costs to assets. The result on your net worth is 0, thus effect on profitability is 0.

    However, those new rides will grow old and eventually need to be refurbed or replaced. Those refurbed attractions will start to wear out again. Those new parades and fireworks shows will grow tired and need to be replaced again, trains will have to be replaced, restrooms refurbed again..... You're USING UP your assets.

    You HAVE to pay for the using up of your assets... It isn't optional... It is required by generally accepted accounting practices. If you don't do it, you not only lose investor trust, but could easily open yourself up to false reporting criminal charges.

    Depreciation is NOT an accounting trick to reduce your taxes.... Depreciation is the REAL expense of using up your REAL assets that you're eventually going to have to refurb or replace again!

  13. #28

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    Quote Originally Posted by fkurucz
    The real question is not if the parks are cash cows, but rather if it is believed that they can grow (revenue wise). Wall St. loves growth. Which is why it is not unusual for a company to dump a slow growing cash cow to focus on its other "fast growth" businesses.

    I think that it could be very positive if say the Oriental Land Company bought out the parks. Under their watch the parks could return to the former glory.

    Disneyland is the anchor company though. It would be like coke selling off the cola division and only selling sprite
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  14. #29

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    Quote Originally Posted by Metal God
    Disneyland is the anchor company though. It would be like coke selling off the cola division and only selling sprite
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  15. #30

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    Quote Originally Posted by dshimel
    Sorry, but in 2004, Media Networks generated 38% of the gross revenue, 48% of the segment operating income, and ONLY 14% of the corporate depreciation expenses (direct reflection on the amount of capital improvement money required to generate that revenue)....

    When 14% of your capital is generating 48% of operating income, you DON'T spin it off..... uness you really want a corporate raider to come in and snap up and dismantel the rest of the underperformaing stuff....

    This makes ABSOLUTELY no sense from a business management PoV.... It is the exact opposite from making sense.
    Hey, it's making a lot of money. Maybe it's valuable to someone else.
    ESPN franchise is making all the money. With all the money from the sale, other companies, companies that are similar to the core of DIS business -- which is making movies and creating/managing vacation destinations based in part off those movies, can be bought.
    (Starts with a P, ends in an R....)

    Or, buy back stock and make it more difficult for someone to dismantle the "underperforming stuff," since buying the stock makes them magically appear overperforming (earnings per share-wise).

    It only makes absolutely no sense if DIS were to sell it at a low price. Maybe someone will overbid for it/them, as Eisner did. Too bad there's only one of him.

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