February 22, 2009

Disney Dollars

The severe economic slowdown obviously hurts a destination like Disneyland. But money troubles were a constant in Walt’s business experience. As most everyone knows, he borrowed against his own life insurance policies to build the Park, and he named money as the single biggest challenge he faced.

Still, he insisted that the cost of delivering a freshly-scrubbed, brightly-polished Disneyland every day was worth it.

Burbank’s sharp pencils have had sharper points for around a quarter of a century now. I think the philosophical shift started in about 1984, when Disneyland endured the painfully slow summer of the Los Angeles Olympic Games. I remember spending long days behind an ice cream or popcorn wagon waiting for guests. After that summer, the popcorn that had been .65 became $1.00. The container’s size was cut in half. And high-profit stuff like churros and glowing necklaces became the stock-in-trade of Outdoor Vending.

Larger changes were made. Tomorrowland stopped trying to represent tomorrow and became a retro-futurist merchandising mall that wouldn’t become outdated because it no longer tried to be ahead of its time. Maintenance was cut back with results that you can still see today. The company pressed ahead to establish multinational outlets for Disney magic, while leaving the secrets of that magic home alone. It didn’t work.

Disney’s strategic decisions couldn’t prevent a global economic meltdown, of course. Still, the prices of everything associated with Disney are greater exponentially than they used to be, and the company can’t seem to make money without turning to discounting. Only a “buy four nights, get three free” promo is bringing folks to Walt Disney World these days. The product isn’t worth it without the promotion.

Disney faces a most “chilling challenge: to find a way out” of degraded financial conditions that don’t favor discretionary consumer spending. According to Argus Research, “at the economically sensitive Parks division, management will need to cut costs without diminishing the visitor experience in order to avoid long-term damage to the brand.” Will consolidation of the functions associated with operating the “Disney Parks” solve the problem? Or will it hasten the evaporation of whatever unique magic remains in the Magic Kingdom?

Those of us who miss the old days often say that Walt didn’t go into Disneyland just with the idea of making money. Maybe part of why he didn’t was because he foresaw the times when Disneyland wouldn’t make any money. He nevertheless believed that the Park was worth doing, and worth doing well. Cutting back on the essentials and raising the prices is wishful thinking, as is supposing that you can run Disneyland like any other corporate enterprise. If you could, Walt wouldn’t have prevented his associates from bringing in a bunch of businessmen when the place was just getting off the ground. You can’t fool the public into believing that you’re delivering the same value. Instead, when guests have fewer dollars to spend, you’ve got to give them greater value for those dollars.

Through innovation and dedication, Walt did just that, building an almost unimaginable amount of long-term brand value. But even something that seems infinite can be squandered, as every human-caused extinction and even the country’s own global standing after its response to the September 11 attacks demonstrates. If Disney is smart, it will protect its own global image—the one represented by Disneyland—at all costs.

2 comments:

PTA Transit Authority said...

I appreciate the posts very much. Being old enough... I have witnessed a lot of Disneyland history and change.

Mike said...

Anne,

Great to see you've kept posting! Of course, as a kindred spirit, I LOVE your blog. Stop by and see me on the Jungle sometime! Believe it or not, I'm a Disney Cast Member again!!

Mike
Jungle is "101"