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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...

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Comments

I used to visit WDW every year, however the last time I visited the parks looked dirty and in need of a face lift.For the money you pay to get into the park you should see chipped paint on railings and gum all over the sidewalk. I actually saw a pile of human poop outside a bathroom in Hollywood Studios!

In the past ten years, I have taken my 4 grandkids to Disney World two or three times a year. We have also taken three cruises. This year I have not taken them. The prices for tickets have gone up so much, I just can't afford it. Just lower the prices and you will see the increase in attendance.

Part of what I think is what's a drop in attendance is their inability to bring enough new stuff for a diverse crowd. Sure Star Wars in Hollywood Studios, but what if you aren't a huge Star Wars fan? And Frozen ever after is cool, but if you don't have a fast pass, have fun waiting 1 and 1/2 hours. When they did their 50th Happiest Celelbration in 2005, they brought in a new attraction and new characters for ALL 4 Disney parks, plus NEW fire works and new parades. This last few years They sank their money into Shanghai Disney, and FL keeps just being the same ol' stuff. (Mostly) in comparison to 05' with the huge party today's parks in Florida looks like small improvements nothing big.~~ plus the rise in prices~~

I read the comments and the bottom line is Disney is a business however when you start to increase prices on a yearly basis sometimes twice a year you are going to lose people. I'm a DVC owner and when I first bought in the perks were pretty good then they slowly started to take them away or changing them. I no longer buy annual passes and when I do come to Disney I buy a 2 or 3 day ticket and enjoy the resort the other days. I believe that is why the attendance is dropping and resorts are doing well. If Disney continues on its current path things will probably get worse before better

This is typical short-term thinking that is the cause of Disney's problems and the reason Walt would be ashamed of what the company has become.
Raising prices while making cuts that impact service and attractions is exactly the *wrong* way to correct this in the long term. In the very short term you might have some minimal impact that looks good on paper, but Disney will continue to hemorrhage money in the long term while following this policy. If Disney doesn't see in these reduced numbers that they have pushed the price increases *way* too far in too short of a time, I don't know what will make it sink in. The answer is to drop prices to get attendance back up. And with no huge cuts of personnel or other features. That's where long term success will come from.

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