Disneynomics: Governor Newsom vs. California’s Theme Park and Economy

 by Ray Keating

Disneynomics Column

DisneyBizJournal.com

October 21, 2020

 

California matters. Whether people from other states like it or not, 12 percent of the U.S. population resides in the Golden State, and 15 percent of U.S. GDP comes from California. 

Therefore, when Californian politicians impose misguided and costly policies – such as higher taxes and increased regulations – on entrepreneurs, businesses and investors, it, of course, matters most to Californians, but it’s not like the rest of us can just shrug our shoulders and not care.

 

This economic reality is part of the backdrop to the latest head-scratching decision by California Governor Gavin Newsom and his Health and Human Services Secretary Mark Ghaly. At a news conference on Tuesday, October 21, the Newsom administration finally got around to providing guidelines for reopening theme parks in the state. But the guidelines were split between smaller and larger theme parks, and the news for the big boys, like Disneyland, was anything but good. That, in turn, is bad news for workers and small businesses as well.

 

As the Orange County Register reported:

 

Smaller theme parks can reopen at 25% capacity or 500 in-county visitors, whichever is fewer, with admission by reservation only in the “moderate” tier. Larger theme parks can reopen at 25% capacity with reservations in the “minimal” tier.

 

The new guidelines mean Disneyland, Universal Studios Hollywood and other large theme parks won’t be able to reopen for months until their respective counties reach the least-restrictive “minimal” risk level…

 

At best, that means major California theme parks won’t reopen until November or December. At worst, reopening dates could be pushed to next year, which makes setting a reopening date for Disneyland, Universal and other California theme parks difficult if not impossible. Without a firm reopening date, the parks can’t set staffing, training, ride testing and visitor reservation plans.

 

The Orange County Health Care Agency Director Clayton Chau was quoted saying that it would be difficult for Orange County to reach the “minimal” tier until there was a vaccine, and he was looking for something like that coming next summer. That would put the reopening of Disneyland into the summer as well.

 

In a statement, Disneyland President Ken Potrock said:

 

We have proven that we can responsibly reopen, with science-based health and safety protocols strictly enforced at our theme park properties around the world.

 

Nevertheless, the State of California continues to ignore this fact, instead of mandating arbitrary guidelines that it knows are unworkable and that hold us to a standard vastly different from other reopened businesses and state-operated facilities.

 

Together with our labor unions, we want to get people back to work, but these State guidelines will keep us shuttered for the foreseeable future, forcing thousands more people out of work, leading to the inevitable closure of small family-owned businesses, and irreparably devastating the Anaheim/Southern California community.

 

For good measure, Erin Guerrero, executive director of the California Attractions and Parks Association, said:

 

Theme parks have opened and operated safely around the world for months. Data and science prove that theme parks can operate responsibly anywhere – there’s no rational reason to believe they can’t do so in California. No one cares more about park employees and guest safety than the parks themselves.

 

Let me be unequivocal - the guidance issued by the Newsom Administration will keep theme parks shuttered for the foreseeable future… 

 

This plan prolongs unemployment for tens of thousands of people, hastens bankruptcy for families and small business owners adjacent to parks, and contributes to insolvency for local governments whose budgets rely on parks as an anchor economic driver.

 

So, bewildering policymaking that undermines the California economy continues. 

 

Some might ask: Why? At its core, it goes to a philosophical bias that places ultimate trust in government – i.e., in politicians and their appointees – to make broad decisions for society, while holding a deep distrust of private-sector entrepreneurs and businesses. But here we have another glaring example courtesy of Governor Newsom that politicians lack the knowledge and proper incentives to make intelligent decisions about most matters in life and the economy. 

 

It’s true – politicians tend to be clueless. And Disneyland, other theme park operators, workers, small businesses that serve the parks and their workers, and the California economy suffer accordingly.

 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

 

Also, get the paperback or Kindle edition of Ray Keating’s new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York.

 

Disneynomics: Pandemic Accelerating New Thinking at Disney

by Ray Keating

Disneynomics Column

DisneyBizJournal.com

September 9, 2020

Christine McCarthy, The Walt Disney Company’s chief financial officer and senior vice president, was interviewed today for the Citi 2020 Global Technology Conference. McCarthy largely hammered home points about how the pandemic has driven an assortment of changes in the way Disney is thinking about a variety of its businesses.

Like other enterprises of all types and sizes, McCarthy made clear that the pandemic is pushing Disney to reassess how it operates, its cost structure, how many (not all) people can work differently, and its physical plant. She came back again and again to words like “nimble,” “flexible,” and “acceleration.” For Disney, the acceleration largely has to do with direct-to-consumer services, namely, streaming services Disney+, Hulu, ESPN+, and its international STAR efforts.

McCarthy, as CEO Bob Chapek has done, also reiterated that they “know” that original content is crucial for gaining and retaining streaming subscribers. She acknowledged the company still being “hamstrung” due to COVID-19 in terms of producing more new content – for streaming, for ABC, for the theater, and so on. McCarthy did note that things were back up and running for the next Avatar movie, for Marvel’s Shang-Chi and the Legend of the Ten Rings, and for some 20 series being produced in “bubbles.” 

Also mentioned was that Disney looks forward to getting things rolling once more on Marvel series WandaVision, Loki, and The Falcon and the Winter Soldier. Those three shows are very important for Disney+.

As for the Mulan $29.99 video-on-demand premiere on Disney+, McCarthy justified the extra expense for families, and would only say that Disney was “pleased” with the four-day weekend. Details will have to wait for the next Disney shareholder meeting.

As for looking a bit further down the road, the issue of the rights to the NFL came up. McCarthy made very clear that the NFL “is an extremely important partner” for Disney, but also that the company would be “disciplined” in accessing opportunities. As I’ve argued before, Disney would seem to be an ideal partner for the NFL and its NFL Ticket, given ESPN+ as well as ABC and the ESPN linear channel. Think about how many additional subscribers Disney would gain for its combo package of Disney+, Hulu and ESPN+ if the NFL Ticket were added. Watch out Netflix.

By the way, in terms of taking advantage of any opportunities that present themselves, McCarthy noted that Disney has over $20 billion in cash on its balance sheet. That’s a nice pile of cash with which one can be nimble and flexible, and can hit the accelerator in terms of opportunities and necessary changes in a new environment. 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

Also, get the paperback or Kindle edition of Ray Keating’s new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York.

Disneynomics: Universal Orlando Ticket Offer – Come for a Day, Stay Through Christmas Eve

by Ray Keating

Disneynomics Column

DisneyBizJournal.com

August 20, 2020

How do you get people to come to your theme parks during a pandemic? 

That’s obviously a difficult question that companies like Disney and Comcast (owner of the Universal parks) wrestle with on a daily basis.

Before the pandemic, theme park pricing actually was focused on “date-based tickets.” We economists call this peak-load pricing or congestion pricing. That is, adjust pricing according to dates and times of the day in order to control crowds, enhance the guest experience, and maximize profits. This pricing model is used by hotels, movie theaters, utility companies, toll roads, and so on. It’s straightforward economics in that consumers react to price changes, so businesses can better manage resources by adjusting prices to reallocate consumption from periods of high demand to times of low demand.

In fact, even in the current period of COVID-19 and a brutal economy, date-based pricing made an appearance in the news in recent days with Universal Orlando announcing that it was following Disney’s lead in implementing this model. Disney went in on date-based pricing starting in 2018. Universal now will vary ticket prices based on when people visit their parks.

Fair enough. Makes sense. 

But far more interesting was a pricing option Universal Orlando served up to Florida residents earlier this month. Actually, I’m not sure if you can really call this a pricing option; it’s more like a giveaway.

What’s the deal? Florida residents can purchase a 2-Park, 1-Day Park-to-Park Ticket, and come back every day through December 24 with no blockout dates. That’s right, for $164, a Universal guest gets to visit both parks – Universal Studios Florida and Universal’s Islands of Adventure – each and every day, if they choose to do so, through Christmas Eve. That one-time, $164 payment covers it all. And you can toss in Volcano Bay for another $29. Florida residents have this option through September 30. If you love Universal, this is an awesome deal. Heck, if you just like Universal, it’s a great deal.

The question in coming days and weeks is: Will this incredible offer for Florida residents by Universal affect Disney’s pricing decisions? Well, don’t be surprised if Disney follows suit in some way. But in the end that will depend, of course, on multiple factors, especially the direction of the pandemic, the economy, and therefore, park attendance. 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

Also, get the paperback or Kindle edition of Ray Keating’s new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York.