Magic Kingdom: Disney Is Still Playing Mickey-Mouse Games With Its Business

Last Updated May 12, 2011 3:03 PM EDT


Can we count on more of an Epic Mickey?
Walt Disney (DIS) is showing some worrisome signs of continuing weakness. In the six years since the departure of mercurial but successful CEO Michael Eisner, the company has seemed a bit adrift. Sure, Disney has installed new bosses for its movie, TV and theme park divisions. Yet many problems remain. Parks are a particular issue because rising prices may be cloaking dropping demand. Further, Mickey and company are still having trouble figuring out what to do with a little thing called the Internet.

Disney's recent announcement of a 1.2 percent dip in quarterly earnings just highlighted these weaknesses.

Movies: Sucking wind
Movies took a huge hit thanks to two turkeys. Mars Needs Moms cost $265 million to make but only did $81 million in box office. Far less costly, but perhaps more worrisome, was the failure of Prom. It was supposed to be a big screen version of Disney TV's mega successful (and mega cheesy) High School Musical franchise. Its disappearance at the box office is raising questions about studio head Richard Ross, who cut his teeth in Disney TV.
The company will do better because of two huge summer sequels -- Pirates of the Caribbean 4 and Pixar's Cars 2. But the slow opening for Thor may indicate that the forthcoming Captain America will be a tough sell, especially abroad which accounts for 50 percent of studio revenues.
Parks: Charge more, earn more... for now
Parks are struggling despite an ostensible increase in profits. Disney said the improved parks income was driven by higher guest spending and hotel occupancy. However, that spending was a reflection of higher ticket prices and room rates -- not more people coming through the gates. Further, CFO Jay Rasulo said on a conference call that advance bookings at the parks are down 2.5 percent from a year earlier.

Disney's substantial annual increase in park ticket prices may be costing it, despite all the brave talk of the improving economy. In the last five years the price of one-day adult ticket for the parks has far outstripped the inflation rate by rising 23 percent, according to the authoritative website AllEars.net. The company has also regularly been raising prices on cruises.
Internet? What's that?
Finally, the company apparently remains baffled by how to successfully monetize its web offerings. Disney's interactive media unit is in no danger of breaking even: Losses for just the first quarter grew to $115 million, from $55 million a year earlier.

While you can attribute a good chunk of those losses to it acquisition last year of Playdom, a maker of simple online games, Disney has still been struggling to turn around the division for years. In 2009, it shuttered Virtual Magic Kingdom, an big multiplayer game very popular with younger kids. And maybe only kids would have believed the spin the company tried to do about the closing, "Don't look at VMK ending as a bad thing - think of it as a new beginning, a chance to explore something fresh and new!"

A recent round of broad management changes so far has offered little indication that this is about to change. Another overhaul of Disney.com is expected within months.

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    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.

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