Why Disney Will Never Be Great Again

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Why Disney will never be great againDisney (DIS) appears to be in a good groove lately.

Its 17-year-old animated classic -- The Lion King -- was the top draw at the multiplex in its recent two-week theatrical run. It plans to doll up four more of its classics in 3-D over the next two years.

Disney's theme parks are humming along. ESPN is the undisputed juggernaut in sports programming. The family entertainment giant is in the process of doubling its cruise ship fleet to four premium-priced vessels. Disney opened a new resort in Hawaii this summer, and its Florida parks will get a new Pixar-themed resort with over a thousand family-sized suites next year.

Let's hold off on the "...and they lived happily ever after" finish, though.

Disney's competition is getting smarter -- and the House of Mouse has some obstacles to overcome.

Hitting a Brick Wall

Legoland Florida opens less than an hour away from Walt Disney World this weekend. Will it benefit Disney by bringing more tourists to Central Florida, or will the kid-friendly park eat into Disney's turnstile clicks?

Before you answer, let's introduce the wizardry of Harry Potter.

Closer to Mickey Mouse, Universal Studio's Islands of Adventure opened a Potter-themed realm last year. The response has been unbelievable, with attendance spiking more than 30% last year.

Did having a magnetic attraction just a few highway exits away on I-4 help Disney? No. Save for a marginal attendance uptick at Animal Kingdom, Disney's three larger Florida parks suffered declines, according to the Themed Entertainment Association.

Sputtering Along

Disney realizes that it's been coasting on aging attractions for too long. A Cars-themed land is opening next year at Disney's California Adventure. A Fantasyland expansion in Florida's Magic Kingdom will follow in 2012 and 2013. Animal Kingdom will get a high-tech Avatar attraction a few years after that.

Disney's single-day park tickets are up to a whopping $90.53 in Florida. The Goofy pricing is just insensitive until one considers that the media giant's hook is to sell multi-day passes at lower price points per day. It's a strategy that has helped fill its resorts over the years with guests who can spend an entire week on vacation without leaving Disney's property. That's off the table now, since folks going to Florida will make it a point to check out Islands of Adventure and Legoland.

Is Disney Losing Its Touch?

Despite the success of Pumbaa fart jokes in 3-D last month, Disney's flagship animation studio had a rough 2011. Mars Needs Moms was one of the studio's biggest flops in years. Cars 2 fared well at the box office, but it was the first Pixar release that wasn't universally praised.

Viacom's (VIA) Paramount hired David Stainton this week to lead its theatrical animation. Stainton was heading up Disney's studio until the Pixar buyout. Clearly Disney is vulnerable, and Paramount's success with Rango earlier this year suggests that it will be a force to reckon with when it begins cranking out its own films by 2014.

Acquiring Pixar was supposed to restore glory to Disney's fabled animation studio, but it seems as if the Disney brand has been damaged beyond repair. Years of sloppy direct-to-video sequels and half-hearted originals outside of Pixar releases have gotten in the way of John Lasseter's turnaround.

Eye of the Iger

Disney also has a succession battle brewing in its early stages. Bob Iger -- who helped restore credibility to Disney by orchestrating the Pixar acquisition -- surprised investors this month by revealing that he will step down from his position as CEO in 2015.

Perhaps he learned the lesson of Michael Eisner, who was generally revered early in his tenure but then had to sheepishly move on when shareholders grew impatient with Disney's struggles in both animation and at ABC. Perhaps he actually wants to enjoy his well-earned golden years now that he's 60. Either way, there will be uncertainty at the helm until the new chieftain earns shareholder respect.

A Fan's Lament

This hasn't been an easy obituary to write. Disney is the first stock that I ever owned. I practically grew up in Walt Disney World, and my wife knows -- when the time is right -- we're moving to Celebration (the Disney-planned residential community on the outskirts of its Florida resort that it recently relinquished).

However, I have to be a realist. Disney has been stumbling a lot this year.
  • ABC is struggling, and cascading ratings at Charlie's Angels and Pan Am -- two new shows that the network was counting on this season -- appear to make them likely early cancellations.
  • ESPN is a juggernaut, but it's also a victim of escalating programming costs for content that it doesn't really own.
  • Disney Channel used to be the launching pad for teen idols, but lately that baton has been passed to YouTube and American Idol.
  • The opening of its Hawaiian timeshare resort was riddled with accounting errors, and several Disney Vacation Club executives were let go in the process.
The media giant used to routinely trounce Wall Street's profit targets early in Iger's tenure, but Disney has actually come up short in two of the past four quarters.

There's a reason why Disney shares hit a fresh 52-week low earlier this month. Disney's pixie dust doesn't sparkle the way it used to.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Disney. Motley Fool newsletter services have recommended buying shares of Disney.


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Lancelot

Well they can have my parking space. Disney parks have out priced themselves as far as I'm concerned. $500 for a family of 4 to spend most of their day standing in line is unjust & nothing but a ploy to fill the Worthless Wonder exec's pockets with outragious salaries & bonuses. With unemployment still at 8.5% & with the economy just showing signs of recovery the current pricing structure has lost them at least one customer, Me.

May 27 2012 at 5:33 PM Report abuse rate up rate down Reply
MelindaP

OMG!!! I am laughing so hard at this article! Super slanted, one sided and inaccurate. Particularly when one looks at it 6 months later:

1) ABC programming - Yes, Pan Am and Charlie's Angels were abysmal failures....EVERY network has some failures, every season. But I noticed the writer failed to acknowledge that ABC also had some very, very big scripted (which is rarer) hits this season, like Once Upon a Time and Revenge. Both are really good shows that are a little different and perform quite well.

Generally ABC runs as the #2 network to CBS. Now if you want to talk about a network that's really floundering, I give you NBC (Universal). They're the ones to pity.

Downthread someone mentioned the "mistake" ABC made by cancelling AMC and OLTL---soap fan here, but that wasn't amistake. Soaps don't have the viewership they once had and are expensive to produce. Now that most prime time series have contnuing storylines, anyway (as they have for 25 years), the soap fix is met, anyway. Soaps are dying and this was NOT a mistake by ABC.

2) Theme Park Pricing - Universal Studios is priced very similarly to WDW, actually most large theme parks are. It's long been known that the most expensive possible way to visit either one is for just one day. Not to mention, even 4 days isn't really enough. Do better research next time.

3) Theme Park Competition - Harry Potter Wizarding World might well attract more visitors for the moment, because of the novelty. That said, it's hardly a "world" it's three rides (one for babies), a shop and a quick service restaurant (all totally ripping off Epcot, no less). As noted below, Universal is maybe 8 hours' worth of fun, and not particularly spectacular at that, WDW is a total experience.

Oh and Legoland is competition??????? Dude, for reals???? You're hilarious. The Kennedy Center is bigger competition.

4) Movies - Yes, Disney has helmed a variety of flops (including John Carter), they've also helmed a variety of blockbusters. I'm pretty sure they're all probably at least marginally happy with The Avengers, no??? I'm also mystified when people bash new Disney stuff (some of which is pretty good) and laud old stuff (which is violent, sexist, racist, etc, because that's what was sadly accepted back in the day).

As also noted below, many have routinely predicted Disney's demise and have been wrong. I absolutely adore visiting WDW and much of that has to do with the excellent food, lovely resorts and incredible service.

May 26 2012 at 12:29 PM Report abuse rate up rate down Reply
Steven Lowell

Seriously, as someone who worked for the company, it is easy to take an external view of decisions and say, "Oh thats it for them."

The fact is, Disney has such a strong internal structure, idea of what its brand is, and still beyond all shadow of a doubt...the best customer service on the planet (which in a crappy economy is everything). Disney's power is always making people feel like they own the company. They also have a company that people would love to work for, and believe me, they are perfectionists. And they provide lots of work for everyone around the world from service industry to entertainment to voice overs.

The thing about perfectionists...they always rebound....because they know where they messed up and know how to fix it.

Their stocks may take hits at times, but Disney always seems to prevail. Have you been to Times Square lately?

October 13 2011 at 6:36 PM Report abuse -1 rate up rate down Reply
1 reply to Steven Lowell's comment
Vicky Burnham

You make the assumption that Disney still values perfection.
Based on what we've seen lately:
Attempting to make money on the Navy's Seal Team 6 after Bin Laden was killed;
Raising park rates when the country is at 17% total unemployment, thus driving out many potential customers (You shouldn't have to take out a loan to go to an amusement park.);
Canceling All My Children and One Life To Life and replacing them with crap that is tanking in the ratings;
Rehashing classic TV with the arrogance that they can do better than the original (missing the point that it is great because of the people involved);
Promoting "Kid" TV of which Walt Disney NEVER would have approved;
Allowing divisions (ABC) to treat their people like crap;
to name a few of the more recent examples of Disney's sense of perfectionism.

I don't think Disney knows what they did wrong, because they don't have any idea they have done anything wrong, except when they look at their finacials. They don't care who they abandon or piss off, as long as the money keeps flowing, one way or another. The Disney of today is all about the money and very little about what it's customers really want. They have no vision, nor imagination - the two things that created the dynasty in the first place. Disney may always limp along, but unless things change at a very deep level, Disney will never be great again. Sad.

November 02 2011 at 3:57 PM Report abuse rate up rate down Reply
orltalent

With all respect to the author of this article... it appears that he has forgotten, or wasn't alive, during the time when Ron Miller led the company. After Walt's passing, and with his brother Roy gone as well, son-in-law Ron took over the helm and almost ran the Disney ship aground. And then, Michael Eisner, Frank Wells, and Jeffrey Katzenberg came along, and a second golden age of Disney growth, quality entertainment, and soaring profits emerged. This triad of leadership refilled the creative and business void left by Walt and Roy, and in a delicate balance of a 3 legged stool, the Disney company was re-born. So, I think this author may be a bit presumptuous about the demise of the mouse just yet. Who knows what leadership is around the corner? One thing is certain though - as long as they rely on MBA business theories to purge creative talents from their ranks, and inevitably send them to the competition for employment, they will be signing their own death warrant by teaching the next generation of animators, entertainers, and "imagineers" the secret formula, and then giving it away to their business rivals to come back and beat them at their own game. Need more evidence? Just look to Jeffrey K's Dreamworks success of Shrek, Universal's Harry P., and Royal Caribbean and Norwegian cruise lines now reaching into the DCL play book to trounce them in the family market. Disney was great because of the combination of creative vision and business skill combined. And, until that balance is restored their return to greatness may be postponed, but not beyond possibility.

October 13 2011 at 5:43 PM Report abuse rate up rate down Reply
kristin

I live in Florida and was obsessed with Disney as a kid. I even got a job at Disney World. They have gone to crap. Over the last 10yrs the parks have fallen apart. The woman who runs the parks does not spend money to update or build anything new. Paint is chipping there are wholes in walls of the rides. They look very outdated. She is a cheap useless person she cares about her bonus then what Walt created. All the cast members the have been there 20 plus years say it is not not the same at all. it was not until HarryPotter at universal that disney realized they need to put a little work into the parks again. Very little work! They raise the price every year for what more of the same outdated crap. epcot turned 30 this yr nothing, they dont care anymore to make disney what it used to be. Epcot has several abandon attraction that have not been used and They have not opened a new country in years. why bc they think of it as food and a shopping district. Hollywood studios still has honey i shrunk the kids play area but they dont even use that name anymore. They could change it too A bugs life area? We are the only parks that dont have an Indiana Jones ride. ABC and their other networks are not that bad and their movies are getting better again bc of John Lasseter. If Walt Disney could see his theme parks now he would be Sick! His dream has been destroyed.

October 13 2011 at 11:05 AM Report abuse rate up rate down Reply
1 reply to kristin's comment
Michael Nokes

The chairman of the Disney Parks division is a man. And EPCOT doesn't turn 30 until next year!

October 13 2011 at 11:18 AM Report abuse rate up rate down Reply
essgee

No mention of the Gay Lesbian Homosexual agenda that Disney keeps promoting. My family will NEVER pay a DIME to visit any Disney property and if given a FREE PASS, we will DESTROY IT. Disney/ABC needs to change the Family Channel to the Gay/Lesbian Channel and market their properties to Gay Only groups, see how far that will take them. JUST SAY NO TO THE GAY MOUSE!

October 13 2011 at 9:27 AM Report abuse rate up rate down Reply
1 reply to essgee's comment
Michael Nokes

What the hell are you talking about?

October 13 2011 at 11:15 AM Report abuse rate up rate down Reply
Hey their Boski

While competition is growing, Universal can't hold a candle to Disneyworld. You would need a month to experience everything at Disney and you can experience everything that Univeral has to offer in about 8 hours, and thats for both parks. I have been going to Disney for over 20 years, and have done the Univeral thing about 5 or 6 times, recently to see Harry Potter, while it was enjoyable, I see no need to visit again any time soon, but will be at Disneyworld in just a couple of weeks.

October 13 2011 at 7:59 AM Report abuse rate up rate down Reply
Lord Jamey

Disney is not that expensive people. We go every other year with the food plan and I buy any thing the kids want while we are there. The key is whether you can afford the highest priced resorts or not, stay at a Value Resort and spend the difference in the parks while you are there or just save the money that way. We never go for any less then 8 days and it is always within our budget. To those looking back on the old disney cartoons and saying they are not as good, of course they do not seem as good, it is called nostalgia. Just like when you are a kid things seem bigger then when you grow up.

October 13 2011 at 7:00 AM Report abuse rate up rate down Reply
Michael Nokes

This article is riddled with factual errors, biased reporting and claims that can be contested with a little knowledge. For example, Mars Needs Moms, while backed by Disney, was actually made by Rob Zemeckis' motion-capture film studio. The films Disney Feature Animation has been making under John Lasseter, such as The Princess and the Frog, Tangled and the recent Winnie the Pooh, have enjoyed critical acclaim and varying degrees of financial success; they have been on the upswing from the bland content being produced before the Pixar merger. And while Cars 2 was not lauded, it was still very profitable, and Pixar has a strong slate of upcoming films. Furthermore, Stainton's removal as head of animation at Disney was almost universally regarded as a good move by those in-the-know about the animation scene, as he was a failure by pretty much all counts. Between his new residency at Paramount and the fact that Paramount had NOTHING to do with the production of Rango, which was handled by ILM, it's hard to claim that the upstart studio really stands to poise a threat to Disney/Pixar.

October 12 2011 at 11:24 PM Report abuse +1 rate up rate down Reply
savemycountry911

Walt would roll over in his grave if he knew what they have done to his World.

October 12 2011 at 9:46 PM Report abuse rate up rate down Reply