3RD Quarter Conference Call

Good news is that Disney is still making money, even though Earnings Per Share (EPS) is off from $1.87 to $1.29 from this time last year.  Likewise, Bob and Tom both noted that the economy, and therefore the business, feels like it’s stabilizing.  They aren’t ready to call it out of the woods yet or even a return to anything normal, but at least something akin to stable. 

Biggest issues still continue to be that people are making financial decisions closer to travel/ad placement, etc., and the overall video sales market continues to essentially be in decline.

You can listen and read the press releases here:

http://corporate.disney.go.com/investors/earnings.html

One downside of course was NO MAJOR announcements, not that we expected any.  My guess is Disney is keeping some of those for D23 and then the typical announcements as we move into their new fiscal year in October.  That’s the normal mode.  Basically, as I’ve expressed in my own opinion before, the day-to-day operations of the company are on auto pilot now.  At least for the rest of the summer anyhow, while heavy planning is going on for next fiscal year.

Prepared Remarks

- Studio off a lot, especially home video sales off the most due to weaker slate than last year.

- Summer theatrical slate doing well however

- Q3 licensing off 14% YOY due to generally poor economy

- Interactive Media better

- Ad market improving at media networks, but 26% decline in local markets which are soft

- Slightly lower national ad revenues due to lower program rating

- ESPN off due to timing of revenue

- Increased subscriber rates seen as offsetting slightly lower ad revenue however

- Ad placement window has been getting shorter as well, with buyers waiting to place orders until close to when ads will run

- P&R Promotions attendance UP 3% due to Easter, mostly at Disneyland (up 10%), while Florida was basically flat.

- Overall off about 6% over last year

- Guest spending and overall per room spending also down year over year.

- Room reservations for Q4 are up this year over last, but due to extra week in accounting calendar are actually down 7% year over year

Question Highlights

- P&R still has good margins, where do we see things going over the next several months?   Tom doesn’t see much difference to bottom line impact in the Buy 4/Get 3 Free or Free Dining (i.e. costs to Disney for both are about the same).  To date almost all costs that have been taken out of the P&R system have been ‘back of house’ and they feel comfortable that most of those costs will stick (my words).

- Tom is feeling good about capital expenditures going forward and is hoping to renew share repurchases as a method for returning capital to investors soon.

- Bob mentioned in one answer that they are very pleased with where Disney XD is going and growth has been strong, though he admits off of a low base of comparison.

- First of new cruise ships will be in service first part of FY 11, which will be about a year from now.  The 4th ship will be a year later.  Design expected to be shown in the fall… stay tuned.

- Bob feels good about who P&R is attracting, and is happy that many people are getting to come who’ve never come before.  He’s confident that they’ll be able to wean the public off of big discounts as the market improves.  

- Bob also noted that consumer taste is changing slightly as people move to a price to value ratio for the way they look at their purchases.  It’s no longer enough to just make a movie and throw it out and hope it makes money as everybody scrambles to buy it in a value market.  Instead, the company is much more focused on quality content at a excellent value to the customer, whether that be as a rental or ownership or viewership via on demand (i.e. Hulu, etc.)

MiceAge discussed videos

I’m not sure exactly why Al Lutz over at MiceAge didn’t feel comfortable with pointing directly to the two videos he cites in his recent post.  I on the other hand have no such qualms, since Jack Lindquist was a master park operator and now Disney Legend.  Plus, he’s a darn good story teller too and had me tied up in knots.

The other is a speech Walt gave to his employees at Disneyland on the 10th Anniversary.  And while it contains a few words like ‘Hell’ and what not, it’s nothing more than you’d hear on any ABC show these days.  Fact is I think you’d hear a lot worse on some late night shows! 

It’s a great windows into what was going on at the time.  I wonder if Marty was in the room? 

Disney Cruise Line updates site

Sometime in the last few days Disney Cruise Line has updated its site.  The new site now looks much more like the Walt Disney World website.  It has a nice Flash intro along with a more streamline user interface. 

The cruise search and online checkin systems have been updated with the latter now offering options to upgrade your cruise right online which wasn’t offered before.  The site now has several new virtual tour functions that work pretty nicely as well to show what the rooms look like, where they are located, etc. both in pictures, 360 views and a virtual ship.

Unfortunately it also looks like they went to press just a little early as there are more than a few niggly issues with rendering and some strange wording in a few places.

If I was king of the Disney Cruise Line website for a day, here are the things I’d change:

1. Add more fun and interactivity to booking your cruise.  The current process is nice if somewhat pedestrian.  
   
   A couple of possible examples:  Have Donald ‘lead’ mom through the process of booking with small movies that highlight different parts of the booking process.  Donald can play the part of the curmudgeon in the group (yeah, that’s you Dad) while leading us through setting up our cruise.
   
   Also, if you want to get the whole family onboard, then add the capability for the kids to login and see activities and stuff too (with minimal help from Mom and Dad).  
   
   Feel free to add your ‘blue sky’ thought to the comments section!
2. The website it technically executed well and all of the graphics are very well designed, polished and presented.  However, the whole thing lacks a certain cohesiveness and simplicity.  I’m a tech guy and I like knobs, but my dad nor my in-laws are and they don’t. 
   
   The option and checklist screens when you search for a cruise are exceptionally drawn, but they lack the intuitiveness and simplicity that ‘leads’ you through the process of making all the choices necessary.  That’s why it should tie to number 1 above and leverage the strong characters and others to build a ‘story’ about going on a cruise as the adventure that it is. 
   
   People need to be able to tie that adventure together as a family, both nuclear and extended, to have as much fun planning and planning together from the initial cruise booking to setting up shore excursions as possible. 
   
   Social interactivity has a place here whether it be through Skype or Disney brokered meeting services or similar.  Take the EPCOT dream and move it forward by allowing families to interact in conference with a Disney travel agent in voice or better yet, as EPCOT had in the 1980’s by video! 
3. On the branding side, the Magic and the Wonder have the only ships whistle’s in the world that play ‘When You Wish Upon a Star’ vice the more typical ‘foghorn’ signal.  Yet the beginning of the Flash intro movie uses a ships bell’s, more common in the Navy and the Coast Guard, then the Disney whistle.
4. On the technical side, I should be able to ‘associate’ my cruise to my login so I don’t have to enter my cruise information every time I log on.  If this ‘feature’ is because of security (which I applaud, being the security conscious engineer/architect/system designer that I am), then maybe allow me to put in a PIN or something similar to cut down on the login process. 
5. The website should be able to handle multiple cruises for one family.  I should be able to have my profile show more than one cruise and the details about it.  This would be handy if I booked a further out cruise while I’m onboard or just in anticipation of one of the longer cruises when they offer a good deal.  I shouldn’t have to log in again to switch from one cruise to another.
6. TEST, TEST, TEST…  especially with IE7, IE8, Firefox and at least WebKit browsers (i.e. Safari, iPhone, Palm Pre, etc.).  Opera would be nice too, to make sure formatting and placement are correct. 
   
   Here is one example below or formatting gone awry.  See that ‘hanging’ Save a Cruise? link in the top right?  Looks like part of the sentence no?
   
   
7. Check and double check your English. 
   
   Here’s one example of strange punctuation and sentence structure:
   
   ‘Imagine being able to extend your dream vacation by staying in or near your departure or arrival port to soak up more of the excitement! Pretty soon, Disney Cruise Line Guests with 2010 sail dates can add to their cruise package a stay at Walt Disney World Resort—for the ultimate Disney experience—or in the enchanting European cities of Barcelona and London.

   Return to this page this fall for all the details—coming soon!’

8. Fix the website so that it either runs entirely in SSL mode (i.e. HTTPS) or fix it so I quit getting pop up errors when the website pulls graphics from a HTTP site when I’m on a HTTPS page looking at my reservation.  Most people don’t understand this error dialogue, and think it’s a problem with the web site.
9. If we are going to have a ‘Castaway Club page’ (and go through the effort of moving it to the new format) then we should probably update the information from the 2008 info that their now:

   The Castaway Club Compass, Fall 2008 Issue:
   "2010 Passage to New Disney Magic in Europe"

10. Add back the ability to ‘mute’ the sound on the main page.  I like the Flash movie, but every time you surf back you get the full on movie as if you’d come to the site for the first time.

Disney teams up with Harvard

This just popped into my mailbox today:

Waiting on the new year (fiscal that is)

There has been a lot of continued speculation and rumor lately on the inter-webs about additions to this park and that park, upcoming moves to RFID, World of Color presentations, etc. etc. etc.

My guess is all of this is still rumor and only mostly approved since much of what we are seeing won’t be officially announced until late September or early October as Disney moves into it’s new fiscal year.  Most of you Mouse watchers will remember this time of the year as when Disney usually makes some of its biggest announcements for the upcoming year. 

I think most people’s perception because of that is that the Disney business calendar runs with the regular calendar, when it fact it runs from October 1 through September 30.  They’ll announce what’s coming in 2010 in an effort to try and build excitement to get people to plan those trips next year and to book them before the end of 2009 as Christmas presents, or whatever. 

It’ll be interesting to see if the booking window that Disney cites quite often has moved back out to make that more of a predictor of future bookings or not.

Regardless, I doubt we’ll hear anything about much of this rumor and conjecture for another couple of months.  It takes that long in a big organization to collect all the required signatures and to get things moving.

I bet they’ll ‘announce’ something early at the D23 conference the first week of September however.  Too big a moment to pass up. 

More travel woes for the summer and fall

NBC News had the following report posted on MSNBC this evening about the rapidly slowing travel industry with unemployment in the mid 9% range and poised to go higher before getting better.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Also, this video about more high unemployment in other states, some of which I posted about yesterday in the state article.

Visit msnbc.com for Breaking News, World News, and News about the Economy

This is the economic environment I think we’ll hear more about from Bob and Tom later this week and how it’s effecting Disney, especially Parks and Resorts. 

State crises part of Disney’s problem?

The boards and several other blogs have been a light lately with the seemingly poor year-over-year attendance at Disney parks, especially those in Florida. 

Len Testa over at the Touringplans.com blog for instance has posted earlier in the last week about rumors that Disney would bring back the 7-for-4 deal or extend the free food deal until well into December (rumor is that they are already doing free food until December for some lucky folks who get a PIN invitation via mail or e-mail).  Len also noted in that post that he and Fred are figuring that Disney attendance has dropped year over year about 1% a week since late June.  I’ve seen similar comments show up in other blogs and message boards as well, some with pictures of very short FastPass wait times in the Magic Kingdom.

If that’s true, then Disney’s 3rd quarter conference call this coming week is going to be very bad indeed.  The strong showing of Up! non-withstanding.

The question of course is why?  Why is attendance continuing to dwindle despite offers.  One reason of course is that the food deal doesn’t start until August, but it’s been running at a minimum of a 5 night stay plus one day worth of park tickets for everybody in your group to get the free food. 

That deal also leaves out most season pass holders (which is nothing new for free food), DVC members and Florida residents.  In the past the free food deal required only as little as a 3 night stay, which also maybe affecting things, especially in the peak back-to-school and hurricane months of August and September.  Not to mention that it’s usually miserable hot in Florida that time of the year, especially for Northerners.  You won’t find a Canadian in the park until at least November.  ;)

Like most macro economic trends, I’m sure the factors that are affecting Disney are many and varied.  I also read an article on CNN.com this morning about the budget crises in several states and how it’s affecting people.  California, Pennsylvania, Connecticut, Illinois, North Carolina and Ohio have all had huge budget issues according to this article at CNN.  California has been issuing IOU’s and furlough days to both people the state does business with and it’s employees respectively.  Pennsylvania won’t pay any state employees who have time on the books from July 1 on until their budget shortfall is fixed.  Connecticut and North Carolina according to the article are under emergency spending measures, and Ohio and Illinois just got their budgets passed this last week.

That got me to thinking about how all of this mess is effecting Disney in a big way.  Just look at California for instance.  If a state employee has no money and is suddenly eligible for food stamps and assistance payments many businesses aren’t getting paid, doesn’t leave much money for Disneyland trips no?

Same with Florida.  Look at that list of states east of the Mississippi again:  Pennsylvania, Connecticut, Illinois, North Carolina and Ohio.  If you visit WDW often, you don’t have to think to hard about all the people you run into from these states.  But if their employees aren’t getting paid, that takes a big economic ‘pump’ out of action which affects everybody.  Chicago is the only city that Disney currently has a remote DVC sales site and special planning setups to help families plan their vacation to WDW for instance.  New Englanders in general are huge travelers to Florida.

I’m not saying it’s the only factor, but I gotta think it’s somehow a major contributing one.  We’ll see what the numbers look like this week.

Congrats to Marty

Many congrats to Marty Sklar today on his retirement from the Walt Disney Company.  As one of the few remaining folks at Disney who actually knew and worked with Walt, I’m sure he’s both looking forward to retirement and yet leaving with some sense of sorrow. 

Marty has been a great help to me over the last several years as I’ve worked to get through the pretty thick walls that surround Imagineering.  We’ve only exchanged a few written letters and even fewer e-mails, but it’s because of him and his generosity that I know more people there today than I did two years ago.  Like all things in these days, progress has been slow, but it has been progress on some level no doubt!  Those letter and e-mails are of course now even more cherished in my small collection of Disney related artifacts.

I hope all of you will join me in both congratulating Marty on his well deserved retirement, but as I also said to him earlier this week in the last brief e-mails we exchanged before his retirement:

‘I certainly wish I had more of a compelling reason for us to stay in touch post retirement, if for no other reason than to hear some of the great stories I’m sure are still floating around out there over more than a few decades at WED and Imagineering.  I certainly hope if we don’t, that you find some time to keep adding and filling in the background of a fascinating story and the lives surrounding it.’

From the guy in the front row of the upper balcony, ‘Bravo Marty, bravo…’ and Good Fortune! to you as well.

Disney Cruise Line adds two special 2010 holiday cruises

I haven’t seen this in a press release yet or any place else for that matter.  The folks over at Disney Cruise Line have added two special late 2010 cruises to the Disney Magic’s itinerary.  The first is a 10 night Southern Caribbean Cruise and the second is an 11 night Southern Caribbean Cruise.

The 11 night runs 12/18 – 12/29/2010 and the 10 night runs from 12/29/2010 until 1/XX/2011.  So you can spend Christmas on the first one or New Year’s on the second.

Here are the details for the 11 night:

11-Night Southern Caribbean Cruise

Ship: Disney Magic®

Ports of Call:	St. Maarten Guadeloupe Barbados Martinique St. Thomas/St. John Castaway Cay

Day	Port	Ashore	Onboard
Saturday	Port Canaveral	—	4:00 p.m.
Sunday	At Sea
Monday	At Sea
Tuesday	St. Maarten	7:45 a.m.	6:30 p.m.
Wednesday	Guadeloupe	8:00 a.m.	4:30 p.m.
Thursday	Barbados	7:30 a.m.	7:00 p.m.
Friday	Martinique	7:45 a.m.	5:30 p.m.
Saturday	At Sea
Sunday	St. Thomas/St. John	7:15 a.m.	4:30 p.m.
Monday	At Sea
Tuesday	Castaway Cay	9:45 a.m.	4:30 p.m.
Wednesday	Port Canaveral	7:30 a.m.

And here is the planned 10 night:

10-Night Southern Caribbean Cruise

Ship: Disney Magic®

Ports of Call:	Nassau St. Maarten Antigua Tortola St. Thomas/St. John Castaway Cay

Day	Port	Ashore	Onboard
Saturday	Port Canaveral	—	4:00 p.m.
Sunday	Nassau	9:30 a.m.	4:30 p.m.
Monday	At Sea
Tuesday	At Sea
Wednesday	St. Maarten	7:45 a.m.	6:30 p.m.
Thursday	Antigua	7:15 a.m.	4:30 p.m.
Friday	Tortola	7:30 a.m.	5:30 p.m.
Saturday	St. Thomas/St. John	7:15 a.m.	4:30 p.m.
Sunday	At Sea
Monday	Castaway Cay	9:45 a.m.	4:30 p.m.
Tuesday	Port Canaveral	7:30 a.m.

Prices:

The latest pricing as of July 12, 2009 are:

Two adults on the 11 night start for category 11 at just over $7300 (that’s about $3500 a person).  The 10 night runs about $300 cheaper.

Not cheap, that’s for sure, but if your interested I’m sure they will be great fun and chock full of lots of memories as you and your family run out the end of the first decade in our new century.

Disney updates ‘Adventures’ website

Sometime in the last several weeks Disney has updated their website for the Adventures By Disney offering. 

The site has the new Disney header that’s on most of the other sites now and features a much more streamlined (and less ‘Flash’-y version of the site) that seems to work pretty well in both IE 7 and the latest versions of Firefox (I’m a PC, so you Mac users will have to fend for yourself in Safari, though I’m sure it works fine).  Unfortunately it looks like (*&!@& if are using IE 8 in the new default standards mode. 

A quick click of the Compatibility Mode button takes good care of that problem, but frankly I’m surprised that it’s even necessary.  I’ve seen this with a number of Disney websites lately, especially in the Parks and Resorts group.  Why they can’t get the appropriate one line of HTML into their web headers to fix this until they are ready (or able) to embrace IE8’s new standards mode I’m not sure I understand.  Microsoft only spent over a year telling people what they had to do. 

Apparently not enough people visit Disney.com from IE8 to make it an issue yet?

In case somebody at Disney is reading this, here are the two optional lines of code for a per-site or per-page basis to fix this for the moment, straight from MS:

There are two ways to implement this tag:

• On a per-site basis, add a custom HTTP header

X-UA-Compatible: IE=EmulateIE7

• On a per-page basis, add a special HTML tag to each document, right after the <head> tag

<meta http-equiv="X-UA-Compatible" content="IE=EmulateIE7" />

Monorail investigation

I’ve chosen to stay on the side with respect to the unfortunate monorail accident that happened this past weekend at Disney World.  This is especially important to me as an engineer, since most things in the world of accidents are not always what they seem at first glance. 

That’s why it takes folks at the NTSB so long to issue final reports on accidents, since they do their best to be very thorough and systematic about it.  The same can be said for most accident investigations.  Other notable ones that garner a lot of media headlines are ones that NASA has done in the past.  For instance, the NASA accident team on the 1986 Challenger accident published no fewer than 5 volumes an over 600 pages of findings and facts.  The same can be said for the more recent Columbia accident where NASA published over 300 pages in the core report on the accident.  Who knew that a smallish briefcase size chunk of otherwise unremarkable foam could do such ballistic damage at high speed?

So I was heartened when Disney publically noted that they were happy too cooperate with the NTSB and other federal, state and local officials on the accident investigation.  That means they are both proud of their operating history and ride safety but also knowledgeable enough to let someone else lead the investigation to help them figure out what happened and what were all the contributing factors.

The reason I hate speculation is it already appears from AP reports just out today that preliminary data appears to confirm that the switch is in working order.  It also appears that Austin Wuennenberg, the pilot of monorail purple who was killed also attempted to reverse his train and leave the station to avoid impact.  No system that has humans in it can completely take human error out of the loop, no matter how good the safe guards are. 

So the real question seems to be coming down to procedures and operations modes.  Why was monorail purple so close to begin with?  Why didn’t the pink operator realize they were not on the spur?  How many hours does Disney have operators work and is it reasonable?  Likewise how often to they provide and mandate training?  These are all questions I’m sure the investigation folks will look at and attempt to address.

Our prayers also go out to the Wuennenberg family.  I hope that Disney and the investigations teams are able to come to some solid conclusions that make sure this system continues to function flawlessly as it has for the last 30+ years. 

Until then, we need to deal with the facts as they present themselves and not pure speculation on what may or may not have happened.  You never know until everything is on the table.

Disney Internet Media Group on Twitter

Disney’s Internet Media Group recruiting team has joined Twitter.  You can keep up with their tweets and such at:

https://twitter.com/DIMGrecruiting

Likewise DIMG has established their own mini-portfolio highlighting their brands at:

http://disney.go.com/disneycareers/dimg/index.html