Yesterday, The Walt Disney Company released its quarterly earnings report and, as expected, the company touted the amazing performance of its film properties during this quarter, which included a record-breaking run by Finding Dory at the box office.
However, though Disney had some really great news from its films division for shareholders, CEO Bob Iger didn’t mention that much about Disney Parks and Resorts during the investors call and presentation. And after a quick look at the press release detailing the financial results (which you can read in full here), it’s not very hard to see why, as the news out of Disney Parks, especially in the US, isn’t immediately spectacular. It's not all doom and gloom either, but let's get the obvious out of the way first...
1. Domestic attendance at Disney Parks is now confirmed to be down year over year
Surprising absolutely no one who has been to a Disney park in the past three months, Disney has confirmed that attendance, specifically at the US theme parks, is down year over year during the third quarter. As expected, Disney didn’t confirm by what percentages specific parks were down during this time, instead simply saying that Disney parks were down 4% during this period in attendance overall. We’d imagine that the vague wording here was purposeful, as drops at Walt Disney World in particular are likely pretty big, with Disneyland potentially still seeing gains (or at least staying flat) due to its (ending) 60th Anniversary celebration as well as the Season of the Force event.
It’s also worth remembering that the fiscal quarter to which this report is referring only covers the period from April 1 to June 30, 2016, which means that lower attendance in July and August will be reflected in the next quarterly report, which could be substantially worse than this one.
Though the attendance drops aren't exactly surprising, it will be interesting to see what happens in the fourth quarter and beyond, especially if further drops give rise to a period of substantial discounts, similar to 2009/2010, which saw free ticket giveaways and unprecedented deals for guests in the wake of a US recession.
While we don't exactly know how Disney will push back against these drops in the future, the resort has confirmed that it is making some adjustments in the short term to try and stem revenue losses from lower attendance.
2. Budget cuts are already happening everywhere, and more might be coming
Though Disney does not typically confirm when budget cuts occur in its Parks and Resorts division, they did concede in their earnings report that “cost efficiency initiatives” (a fancy term for budget cuts) are currently underway at both Walt Disney World and Disneyland Resort . That matches up with recent reports that have said massive layoffs have hit the company recently (particularly in the Imagineering department) and rumors that more cuts will be coming in late August and early September (including the end of Paint the Night and Disneyland Forever at Disneyland).
Unfortunately, this summer has been a disappointing one for Disney, and it looks like the company is going to try and run their parks as trimly as possible for the next few months while they recover in the short term. However, it's not all bad news...