Posted Wednesday, April 2, 2014 8:45 AM | Contributed by Jeff
Investors have been keenly waiting for financial evidence that the $1 billion investment is paying off. Disney’s parks business has lately been a good one — operating profit climbed 17 percent last year, to $2.33 billion — but the company’s spending on the project has dented margins at its flagship property here. Underscoring its importance to the company, analysts have peppered Disney executives with questions about the system in recent conference calls.
Read more from The New York Times.
Short term focus of Wall Street is always amazing. "You spent money yesterday, show us the financial results today." Seems to me that much of the benefit of the project is long term. And for most analysts, that is something beyond next quarter.
I suppose, but is 2 billion dollars a common figure for something like this? If it was my money I'd be nervous and would be knocking on someone's door every day about it.
Where's the return? The system pros and cons have been discussed here already, but does it translate into profit? I don't think Disney customers were that unhappy to begin with, and the benefit to this that I see comes in the form of happier guests. The ads tout the MagicBands as something designed exclusively to make your stay easier and worry free. Maybe so, but will it cause such an uptick in business (and repeat business, really) so that 2 billion dollars is justified?
Just down the road are awesome new attractions and a great looking hotel that I'd guess cost far less money. It seems just that alone would be a bigger draw leading to happy visitors as well as investors. I'm not forgetting Disney's investment in MK, but that cost big bucks too. I have a hard time visualizing a family choosing Disney simply because of the MagicBand. I call it a nice little extra.
I still think it's one of those things that's hard to quantify now, but when we see the Disney of 10 or 15 years from now, it will make perfect sense as to why they needed to make this move.
Maybe they can explain to the investors that by then the pride tag would be 4 billion, so make hay while the sun shines... or something.
I'm not knocking it, my comments about our experience with the system (in its trial, even) have for the most part been positive. And if everyone involved is happy to wait for long term return, then fine. I'd just hate to be the one fielding those phone calls.
I mean it more along the lines of Disney will slowly be transforming the way you visit and/or tweaking the business model and experience. Implementing this system is necessary as it will be the platform that the future of how Disney does things is built on.
Right now it seems weird because it's a step to the left. It didn't really move things forward, but what it did was set them on a different path. Now they can make incremental changes to how the parks operate going forward that weren't possible with what they had in place before.
(and yes, I still think there's a future point at Disney when you reserve most - if not all - of your visit in advance)
Its often very difficult to make long term decisions in the public arena (not just with public companies) because of the focus on short term results. A lot of bad decisions are made because of that.
Disney is at a huge advantage to make long term moves based on its past track record of success. They will likely be able to fend off analysts' and large shareholders' questions about this investment. Many other companies would be crucified for this type of investment (on similar scales) or likely wouldn't have made it at all.
Agreed on the quarterly expectation, and how ridiculous it is. I've seen it in every public company I've worked for, and it gets in the way. Only Amazon seems exempt.
I'm admittedly too close to the action at Disney, because the technology community is surprisingly well connected, and I've heard many, many stories about the overall NextGen project. If they've spent a billion, I'm not surprised and it does sound like the most inefficient IT project in history. I've worked on many projects that missed target dates, and went over budget by millions, but I've never seen anything like this.
I really don't think they're trying to force everyone to plan everything. That's not a vacation, it's a class or meeting schedule. Kids in particular aren't that rigid. I think they are trying to better distribute people and keep more of them out of a queue more of the time, and they're likely succeeding at that. I just don't know that I would have chosen RFID on a bracelet. Try bending your arm the right way at a hotel door with those, or over the POS readers. It's so awkward. The employee to FP+ kiosk ratio is easily 1 to 1 right now too, and you can watch them fiddle around with it to try and find something for you that makes more sense. (Anecdote, a few weeks ago they managed to get my wife, kid and in-law on to Soarin' earlier, but in a 15-minute overlap of reservation windows, instead of all together. That's stupid.) The kiosks don't register your touch most of the time (you have to aim lower than your target). The iOS app hangs constantly while the UI thread locks up waiting for some action.
I'm sure they'll get it right eventually. The vision is solid, I just can't believe they spent as much as they did and still have had such a suboptimal roll out. Actually, I can believe it, because they seemed to just throw bodies and consultants at it to get it done, and more bodies never means faster or better.
That much money could have built another entire theme park, which would be a great people-pleasing move because of how busy the parks are now. What does Magic Bands do to help with the crowd problem? They could have limited Fastpasses to three per day without spending 2 Billion Dollars. I just don't see any benefit from this technology at all aside from being able to pay for something without having the terrible inconvenience of reaching into your pocket and pulling out your wallet. I guess having your server know where your table is somehow more magical. I just don't get what they are trying to accomplish aside from knowing more about their guests, and I don't see how that translates into better service or happier customers.
Build more rides and attractions to accommodate the growing overall attendance, please.
Kids in particular aren't that rigid.
I disagree, but that's another conversation.
And also, 'loose' itinerary rules - but again, separate conversation.
I think they are trying to better distribute people and keep more of them out of a queue more of the time, and they're likely succeeding at that.
Possibly. The point is that there's a long term goal here that changes the way the park handles guests that simply wasn't possible without implementing this now.
Disney isn't dumb. As far as companies go - especially in our little niche of interest - they're about as far from dumb as theme park companies get. They didn't drop this much money just to dick with things.
I'm sure they'll get it right eventually. The vision is solid, I just can't believe they spent as much as they did and still have had such a suboptimal roll out.
I still think the ultimate goals are much longer term. The suboptimal rollout is merely a blip in the timeline from debut to goal. There's a plan here - this is the groundwork to build on for a long time to come.
That much money could have built another entire theme park, which would be a great people-pleasing move because of how busy the parks are now.
Yes, but there are other ways to please customers besides building new parks. It seems to me one of the objectives Disney has with Magic Bands is keeping guests on property and making it easier for them to spend money. One way to accomplish those goals is making it easy and convenient for the guests to do so.
What does Magic Bands do to help with the crowd problem?
The data Disney collects allows the company to better allocate resources.
They could have limited Fastpasses to three per day without spending 2 Billion Dollars.
True. And if managing Fastpasses was the end goal, that would be great. It seems to me Disney has its corporate eye on much bigger prizes than managing Fastpasses.
I just don't see any benefit from this technology at all aside from being able to pay for something without having the terrible inconvenience of reaching into your pocket and pulling out your wallet.
It's been proven that people spend more money when they use credit cards then when they use cash. Magic Bands add another layer. The less you can make people think about how much money they're spending, the more money they're likely to spend.
...I just don't get what they are trying to accomplish aside from knowing more about their guests, and I don't see how that translates into better service or happier customers.
The more a company knows about its guests results in the company being better able to match its resources to its guests expectations. If you know that x number of guests will be converging on Haunted Mansion at 3 pm, while y number of guests will be shopping on Main Street at 4pm, then you can have your cast members already there, ready to assist your guests.
And that last point seems kind of transparent to me. So, let's say eventually Disney uses this resource to become masters of crowd control and guest/employee ratio. Everyone moves through the park without the hassle of lengthy waits or crowds while they ride, eat, and shop. Fine. But isn't that what people come to expect? Will it translate into higher return? I suppose yes- if I walk into a gift shop, find that impulse item then turn to see a long line at the one and only register they have open I might set that item back and walk out. If I can purchase quickly I'm likely to leave with that item in my hand, and I might look back at my Disney vacation with a kind of subliminal happiness which will prompt me to re-book in the future and tell all my friends. But it's kind of like my mother always said. "Nobody notices that you dust the top of your refrigerator. Until you don't."
With the inside information that Jeff has shared with us, it seems lucky for everyone involved that Disney has their eye on the prize and is willing to spend like they do to win it. And what a shame if they've had a cluster trying to get there. You'd think Disney would have The World at their disposal (no pun intended) and the biggest heads in the industry would be the line up. And I dont know, maybe they are in place. But as many have previously noted, in any other situation, at our own companies where we work, heads would have rolled and the project would've been yanked long ago.
Another upside for Disney, once this system is successful, is the fact that they're global. The most attended parks in the world are owned by Disney, and are not all here in the U.S. If Orlando is being used as proving ground, I'd expect the next step will be easy, seamless implementation of the system at other parks and resorts. Not only will guest experience improve, but it potentially will allow the company to collect worldwide data from a single desk somewhere. And that last point won't mean much to customers, but will do a lot to inform and satisfy these eager investors.
To quote my mother again, "If they should live so long".
There aren't really bigger things at play Gonch beyond what has been talked about here. You'll just have to take that for what it's worth. Never underestimate the data involved either. The data that comes out of this will do more to affect the experience in the long term than anything else.
The problem, RCMAC, in my opinion, is that having vast resources is exactly why the cost got out of control. Not having more constraints means you don't have to be creative. It's the Jack White thing, where if all you have is a crappy guitar missing a string, you have to be creative, and that may just get you to a better outcome. The issue with technology is that you can't simply throw more people at something to make it work. You aren't building a structure where a drywaller is pretty much interchangeable with the next guy. In this case you needed the expertise and domain knowledge about a great many back-end systems they had (hotel operations, Fastpass, retail POS, folio systems, admissions, ticketing... I can only imagine the scope), and you had to take the legacy of all that stuff and pile new tech on top of it. And by the way, all of those areas have their own kingdoms (pardon the pun) that probably had limited interaction or accountability with each other. That's a recipe for a mess. It's a problem not unique to Disney, but the enormous scope of it is definitely rare.
It would certainly be a Chinese puzzle to figure out, even where to start, with nearly every single aspect of the business and guest experience to be included. But I guess the old saw applies- quality, not quantity.
Thanks again for your insight, though. I think the whole thing is so interesting, and I'm merely looking at it from a consumer's standpoint.
in any other situation, at our own companies where we work, heads would have rolled and the project would've been yanked long ago.
Unless that project is healthcare.gov.
We just got back from there. Right now this system has its goods and bads, but overall i would have to say we left a little less satisfied than the old system because of the limits on the system and the problems with the readers. Fortunately, we have been there before so if we missed an attration because it had a long line and we could not get FP, it was ok. But for someone who wants to do all the major attraction on their first visit, and they are not attending multiple days at each park, they are going to have to wait in longer lines.
1. You can select your fast passes for the times you want and you can change the times of the passes, if available
2. Bands are less likely to be lost than the previous credit card type tickets
3. You can select fast passes for any attraction from your phone or central kiosk, without going to the attraction itself.
4. Less paper waste from printing fast pass tickets. However the paper tickets were recyclable. Will the bands be reused by guests?
1. Limit of 3 fast passes a day which in the past you did not have, if available. There should be a limit on the pre-selections, but you should be able to get at least one more when the three are used, if available.
2. All three passes must be at same park.
3. The app would not allow to cancel any remaining fastpasses after one was used.
4. The slow reading of the bands is causing line queues for fast passes to back up onto the already crowded midways.
5. Almost every ride is a fast pass ride now, even the high capacity ones. Which means rides that did not have long waits or where the line never stopped in the past (that you could enjoy while waiting for your fast pass ride) potentially have longer waits now because there are fast passes being used on them.
6. Tiered system being used in Epcot & Hollywood Studios is horrible. You can only get 1 fast pass each day for the top attractions. The others you have to choose from attractions that never really needed Fast Passes in the past, so in reality you are getting only 1 real fast pass/day in these parks.
7. This system definitely forces you to plan your day ahead of time more than enjoying it spontaneously. There is a stress factor when trying to decide what times you are going to be at three attractions.
Some of these negatives i guess they are going to address, but overall we had excellent experiences before at Disney and this one wasn't quite up to the same standard because of the new system.
I get Jeff's point about the piling on of tech. I used to work for Ticketmaster, and all their fancy online presence etc is piled on top of the system the company started with in 1976.
I think that, long term, they will have a positive impact on the bottom line. Disney seems to be working on making it very easy for people to stay on property and spend money easily.
My family was there last week as different participants in the new system. My daughter and I were non-resort guests. My wife and son were resort guests. They made reservations in advance while we made them each day when we got to the applicable park. Wife and son did better with FPs than daughter and I did (and I did better than daughter with them as she was with groups of 8the typically and I was with one other person). But we did better with FPs before the new system.
Wife says wristbands worked well other than one POS that wouldn't accept it. I thought entrance gates were mor efficient under the new system. Wife didn't have problems with fingerprint scanner as she normmally does (though maybe it just registered her as a 'can't read' and let her pass if it couldn't read).
System has to be providing a lot of data to the parks. Not sure how much is usable versus being buried in it at this point. Or how that will change going forward as they tweak the system.
There aren't really bigger things at play Gonch beyond what has been talked about here. You'll just have to take that for what it's worth.
They're already changing it and making it better (via your post update):
By my thinking, that's a bigger and better move. At the very least it's a step forward from the suboptimal rollout.
I know you know what you know, but there's no way the current implementation is all they plan on doing with this.
I just don't get what they are trying to accomplish aside from knowing more about their guests, and I don't see how that translates into better service or happier customers.
I can't take issue with this strongly enough. Today, in 2014, I would say that knowing more about your customers is the number one thing companies in the service industry absolutely positively must do to provide better service, make happier customers, and make more money. This is the number one thing by like...a country mile.
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