Disney may have the keys to the Magic Kingdom, but revenues don't magically renew by rubbing a brass lamp. Disney's crawled out of the recession much the way other retail and entertainment behemoths have: incrementally. Revenues for 2010 increased just 5 percent, or $1.9 billion, to $38.1 billion. Net income attributable to Disney increased 20 percent, or $656 million, to $4.0 billion; and diluted earnings per share (EPS) increased 15 percent to $2.03.
Betting over 10 percent of annual revenue on a single venture seems about as naÃ¯ve and hopeful as expecting an evil stepmother to change her menacing ways.
It's particularly risky when revenues at Disney's other expensive gamble abroad are flagging. Euro Disney's current concession runs until the year 2017 and covers an area of 1,943 hectares just outside Paris. A new agreement signed last fall will extend the concession until 2030 and expand the park to 2,230 hectares.
Just because it's Europe's most popular tourist attraction doesn't mean it's profitable. In 2010, a 3 percent drop in attendance to 15 million translated to over $2.7 million loss of revenue. Disney did sell a shopping mall on the property for $68 million, but it's still struggling to repay its â‚¬1.9 billion debt, which accounted for a net loss in four of the past five years.
Euro Disney is also being scrutinized by the French stock market's watchdog after the price of its shares doubled over a 10-day period in February.
Disney drew plenty of fire when it opened the gates to its Parisian theme park in 1992. Indeed, the company's PR machine went into overdrive trying vainly to connect dots between Disney's heavy appropriation of European fairy tales and royal traditions.
Unfortunately, Disney didn't stick to its formula of changing original stories to suit the tastes of the American scooter set. Just as Ariel bears little resemblance to Hans Christian Andersen's Little Mermaid, the Parisian Disney was essentially American, with little regard for continental tastes. It took Disney a decade to figure out that by adding alcohol sales and reworking its menus, it could best the annual tourist traffic of the Eiffel Tower.
A not-so-small world
Unfortunately, Disney execs are still slow learners. Nearly six years after the company's first Chinese theme park opened in Hong Kong, the project is still a work in progress. Critics took note of every misstep, from initial plans to include controversial shark fin soup on wedding banquet menus (now gone) to complaints about the park's overall size and lack of attractions (expansion with three new themed lands is planned).
But the biggest problem is the brand, which fails to resonate with generations of mainland Chinese tourists unfamiliar with Disney stories and characters. Disney says it plans to address Chinese demands to incorporate more cultural references (think more Mulan, less Mickey) that appeal to locals.
If Disney the brand can get out of its own way and steep the new park in its local culture, it could be a win-win for both. Just think of how many new characters and stories might emerge from Chinese history -- good fodder for new movies and merchandise. And then they can all live happily ever after.
Image via Disney