Mismanaging the Life Cycle of Disneyland as a Product and as a Business

[PragmaticIdealist]

Every product and business has a life cycle, and many executives will attempt to use the generally-accepted basic model to guide them in developing strategies to manage this life cycle.

Products and businesses are introduced, and, then, they usually experience a period of growth before they mature. As they mature, though, the tendency for managers is to maintain the growth by cutting costs and changing prices.

For a differentiated-service company, like Disneyland, the indiscriminate cutting of costs and changing of prices can put the enterprise in an untenable position, characterized by consumers becoming increasingly dissatisfied by paying a premium for an increasingly undifferentiated product or by consumers choosing to only purchase the undifferentiated product when it is offered at a discount. So, these businesses and products often fall into a period of decline before they eventually expire altogether. Michael Eisner and Paul Pressler had charted a course for exactly that result before Matt Ouimet demonstrated through the 50th Anniversary that news of Disneyland's death was premature.

To extend life cycles, many businesses will attempt to use improvements to maintain earnings growth and reinvigorate sales. Walt Disney understood the principle well and stated quite famously that Disneyland would never be complete as long as there is imagination left in the world. He was singularly focused on delivering shareholder value by increasing the worth and longevity of the company's portfolio of assets through near-constant reinvestment. Well-conceived capital improvements would continue to expand Disneyland's capacity while enabling the business to attract new customers and to draw repeat visitors, as well. With each new improvement, Disneyland's offerings would also become more diverse and more satisfying, thereby allowing for further price increases.

Other businesses, however, use reminder advertising to tread water, metaphorically-speaking. They simply use gimmicks as an excuse to advertise. Potentially, though, these promotions leave consumers unsatisfied since there is no real value that is being added to the product, itself.

Jay Rasulo has cast his lot with Michael Eisner and Paul Pressler through the continuation of their mismanagement of these life cycles. A new executive that actually believes in the potential of Disneyland, and the rest of Parks & Resorts, is required to see that said potential is unlocked. Well-conceived capital improvements made by the truly talented members of the creative staff are necessary, as are a commitment to premium pricing and a revival of pay-per-play options.

The operative term is "well-conceived." Guest satisfaction is of paramount importance, and said satisfaction requires that these instances of reinvestment actually improve the guest experience.

[TheDude]

I miss Matt Ouimet... he should take over for Jay!

Very nice post. I agree 100%.

[DeathDealer]

Nice post. Disneyland is a simple concept, keep the quality high, and continue to develope fresh IP's, and DLR will thrive, but if they cheap out on quality they will turn into a household name for garbage, and they dont want that.

[The International]

I'm not sure I see your point. As far as I can tell all you're saying is that Disneyland should be well-managed, guest satisfaction is important, and creative new attractions are necessary?

[fo'c's'le swab]

Well organized thoughts, Prag. It would be an interesting topic of discussion (linked to the 'paying a premium' concept) that dissected the change in Disney's reapportioning of the revenue generation; the shifting of the financial load, in regards to admission pricing and merchandise/services pricing.

I think the decision to 'give Disneyland away cheap' through the adoption of unregulated AP sales was a bold and drastic move that changed the nature of the PArks more than any other decision since the elimination of the ticket book system.

Disney now seems to rely heavily on the merchandise and service sales too much. Turning the Parks into malls. Revenue generated by admission sales has needed to be compensated for by the maketing department. We now see attractions that are designed to sell merchandise, and directly promote the sale of DVDs and other film-related merchandise more than ever before. Whether you agree with this decision or not, it seems foolish to deny this ever-increasing tendency, IMO.

With creative decision-making, now more than ever,inexorably linked to the dire need to 'cross-promote', it is no wonder we see the attractions offered in the Parks that we do, IMO. Even though the attractions are usually thematically corrosive, they are,at the core, entertaining enough to at least survive in the short term, and ,to me, that seems to be Disney's newest 'Achille's Heel':thephilosophy of short-term survivability (if not actaul prosperity). Will the new regime be allowed to look much farther than next financial quarter? We'll see. I'm sure that's what most are hoping for.

[KISSman]

As DL fans, sometimes I think we lose sight of the bigger picture. Even if DL is no longer run as it was when under the guidance of Walt, this company is successful because it exceeds the standards of most other competitors.

Nowhere in America can you find a place that can rival the high-quality experience that you'll find at the Disney resorts. That's why they continue to remain successful and have stayed at the top of the heap in their respective market.

Some people hold DL to an almost unattainable standard that they wouldn't hold for anything or anyone else. Perfection is impossible -- especially for something that constantly evolves.

You can never make all of the people happy all of the time. But Disneyland and Disney World tend to make most of the people happy most of the time. If they didn't, they would need to make major changes. The steadily increasing attendence numbers suggest that people are happy with the experience at the Disney resorts.

Admittedly, the resorts have flaws and are in need of fixes, additions, changes, updates, etc., but I cannot see any evidence that Disney is running these resorts into the ground due to mismanagement.

DL and WDW would both benefit if they were headed by people who have a vested, emotional interest in these resorts instead of folks who are just trying to squeeze as much profit out of the resorts as possible. Even so, the masses are quite happy with the product that they are given and continue to open their wallets for it. That's all that really matters from a business perspective.

[fo'c's'le swab]

Originally Posted by KISSman

As DL fans, sometimes I think we lose sight of the bigger picture. Even if DL is no longer run as it was when under the guidance of Walt, this company is successful because it exceeds the standards of most other competitors.

Some DL fans wish Disney to 'top' themselves, not their (sometimes) lackluster competition.

That's all that really matters from a business perspective.

If DL is just a business to you, then you are correct. Profitablity=success. It would seem most share your viewpoint; underscoring the idea that DL IS just a business. Making the Magic=Turning a handsome profit. Seems a shame to me, but that is probably where we find ourselves now.

[Tomorrowland Tourist]

I have to agree with the OP, Jay Rasulo only sees the park in red and black, and the focus must be shifted to someone who continuously reinvests in the park.

The last snippet on premium pricing and pay-per-play options rings loudly in my head. Often times we see Disney put out unrivaled products, and people will pay handsomely for it. Instead, Rasulo has taken his Columbia economics degree and devised a fairly mindless advertising campaign.

That being said, I will also agree that this management isn't running the company into the ground.

[PragmaticIdealist]

The issue is whether or not you (Bob Iger; Jay Rasulo; the Directors; analysts; fund managers; etc.) believe that Disneyland, and its various permutations, can achieve earnings growth through well-conceived expansion. Or, is Disneyland going to continue resting on its laurels while it settles into a period of inevitable decline?

The cardinal rule of strategic planning is to never be caught between being a differentiated service and being a commodity that competes on price. And, yet, Disneyland now finds itself in that position due to this mismanagement. The market for well-conceived Disneyland expansions does exist, but it requires people who believe in it and who know how to make it a reality.

[The International]

The cardinal rule of strategic planning is to never be caught between being a differentiated service and being a commodity that competes on price. And, yet, Disneyland now finds itself in that position due to this mismanagement.

Can you expand on this, perhaps by citing a credible source that supports this argument? It seems like you are presenting your opinions as the facts of the situation.

[KISSman]

Originally Posted by fo'c's'le swab

Some DL fans wish Disney to 'top' themselves, not their (sometimes) lackluster competition.

But some DL fans don't realize when their expectations are unrealistic and unreasonable.

Originally Posted by fo'c's'le swab

If DL is just a business to you, then you are correct. Profitablity=success. It would seem most share your viewpoint; underscoring the idea that DL IS just a business. Making the Magic=Turning a handsome profit. Seems a shame to me, but that is probably where we find ourselves now.

Well, DL IS just a business. I mean, I can't make it out to be something that it's not and invest my hopes into something that it will never be again.

However, when I walk through those DL or WDW gates, I don't think about all that. It's a magical place and I don't let myself get caught up with it's blemishes, who could be managing it better, curse them for not having The People Mover/Mr. Toad (depending on the resort), etc.

Personally, I've never spent a single day at DL and sat there and wished that it could be better or different in some way while in the park. I suppose that if people are going to the park and wishing about what it could be or should be, you might not enjoy yourselves nearly as much. But, IMO, that's not Disney's fault. DL is plenty good enough for most folks.

When Walt created the park, it was the foundation for a company that would eventually grow into the huge, money-hungry monster that it is now. It's no longer run by a man who cares, but by suits and stockholders. It was once the top priority because it was the only priority. Now it's just one componant under the huge corporate umbrella.

It's not that I don't think DL could be run better; it definitely could be. However, unless Disney sells it's two US resorts to an insanely rich owner who cares about the parks beyond their profitability, things are going to be managed generally the same. Without a time machine, we are never going to see DL get managed the way most of us would like to have it be managed.

[KISSman]

Originally Posted by PragmaticIdealist

The issue is whether or not you (Bob Iger; Jay Rasulo; the Directors; analysts; fund managers; etc.) believe that Disneyland, and its various permutations, can achieve earnings growth through well-conceived expansion. Or, is Disneyland going to continue resting on its laurels while it settles into a period of inevitable decline?

Would you say that a $1.2 billion investment into DCA (that didn't even include some projects that were already in the works) is resting on its laurels?

Whether or not DCA was poorly done the first time around is not relevant to this particular issue because this topic is about DL today and beyond. To me, A $1.2 billion investment shows that they are committed to trying to fix and improve upon what is currently there right now because it is essential to the future growth of the DL Resort.

[MrLiver]

Originally Posted by PragmaticIdealist

The issue is whether or not you believe that Disneyland, and its various permutations, can achieve earnings growth through well-conceived expansion. Or, is Disneyland going to continue resting on its laurels while it settles into a period of inevitable decline?

Disneyland Park or Disneyland Resort?

Disneyland Park is done expanding. Expansion at the Resort will focus on second and third gates.

[Tomorrowland Tourist]

^Disneyland expansion can still occur in the area that was once the Festival of Fools arena. As much as it is speculation, we can't truly say DL is done expanding. Nonetheless, you can't deny that most of the expansion will be focused on the Disneyland Resort (2nd and subsequent gates, DTD, hotels).

[MagicKingdomBoy]

Disneyland Park is done expanding. Expansion at the Resort will focus on second and third gates.

Couldn't DL park expand into the vast nothingness called Tomorrowland?? JK