Like clockwork, Disney quietly made its annual ticket price increase overnight for Walt Disney World and Disneyland following another year of growing attendance in the parks. Also like clockwork, the fan community responded, with some fans defending the increases in light of the value offered and the parks’ popularity, but the majority deriding Disney’s greed and arrogance in light of the massive construction projects currently impacting the guest experience at many of its parks.
I don’t think anybody is a fan of paying more money for things, but this post attempts to set aside that natural inclination against price increases to evaluate the arguments for and against increasing Walt Disney World and Disneyland ticket prices. In so doing, we offer alternatives to address problems with the current pricing structure.
The crux of the two polarized sides of the debate consist of core arguments that “Disney is a business with a sole objective of maximizing shareholder wealth” and “Walt Disney created the parks as a place all families could go to spend time together, not with the goal of making money.” Both of these statements are at odds with one another, and both are ostensibly true at least to a degree. The difficulty thus becomes in reconciling these arguments and finding some sort of nuanced middle ground.
Let’s start with the position that Disney is a business operating to earn a profit. True enough. There’s really no debating this, but it also certainly doesn’t justify any decision The Walt Disney Company makes from the perspective of pricing. Where this argument falls flat is when it’s extended to assert that the sole responsibility of a company is to maximize shareholder wealth, a claim that I’ve frequently seen made by those defending the price increases in the past. That was more or less the standard of law espoused by the case of Dodge v. Ford. In 1919. The “business judgment rule” has since been ameliorated by a line of subsequent decisions (even in 1919, that was a reductionist view of the law, but I digress…), almost all of which give a corporation’s officers and directors considerable discretion in determining how to manage a company and its corporate funds. This has even included upholding decisions made by officers to donate such funds to charity.
It’s this same business judgment rule that allows other publicly-traded companies to pay higher wages than their competitors, offer superior benefits to employees, cut customer prices in the face of rising costs, and even raise the wages of executives to levels millions of dollars higher than their competitors (e.g., Disney’s Bob Iger). There are a variety of reasons for companies to make decisions that ostensibly seem at odds with the objective of maximizing shareholder wealth, which is why the business judgment rule protects most decisions companies make. These reasons can range from strategical (paying an employee higher wages than competitors can reduce turnover, increase employee satisfaction, etc.) to attempting to increase business goodwill to undercutting competition, and beyond.
In other words, anyone who thinks The Walt Disney Company must raise ticket prices if attendance is up is flat out wrong.
At the other end of the spectrum, there are those who argue Walt Disney built Disneyland (and intended to build Walt Disney World) as a sort of egalitarian place where all families could spend time together. We can quibble over some of the details, but there are Walt Disney quotes out there establishing this, so this argument can’t be completely rebuffed. Rather, in this situation, I think it’s important to think of Walt Disney, the actual human being. Time has painted a very rosy picture of Walt Disney that doesn’t exactly mesh with reality.
Walt Disney is the polar opposite of a lot of corporate leaders these days, and I think many of us want to view him with a certain reverence that glosses over the fact that he was leading a business and often doing very savvy things in marketing and operating that business. Thanks to a lot of his decades-old quotes and clips of his television appearances, coupled with the spectacular, family-friendly products he was able to create, Walt Disney has been elevated to a pedestal of infallibility and beneficence.
I am a huge fan of Walt Disney and greatly admire what he accomplished and inspired others to accomplish. I also believe that he was a master marketer and promoter. I believe that Walt Disney went into Disneyland wanting to create a place where families could spend time together. I believe that profit wasn’t the only motivation. I also believe that profit was one motivation, and regardless of Disneyland being a labor of love for Walt, it would have never been built if he didn’t think it would be profitable. Always the master marketer with an unimpeachable reputation, of course Walt Disney was going to pitch his park as being built out of passion while differentiating it from his competitors.
We don’t take any contemporary CEO’s talking points about their product at face value, yet we give complete deference to Walt quotes about his products. I think part of this is because Walt Disney actually was genuine, and at least part of his pitch was how he actually felt about Disneyland and what he wanted it to be.
However, the simple fact is that even in Walt Disney’s era when Disneyland cost much less to visit, it was never a place all families could visit. Even then, some people could not afford to go. That’s the inherent nature of any product. No matter what park tickets cost, so long as they had some cost, there would always be someone who wouldn’t be able to afford going. That, plus the cost of travel would be an insurmountable barrier for a large portion of the population.
In other words, I think there’s more than meets the eye with this whole debate, in academic terms, and neither “side” is entirely right. There’s far more nuance to the issue of Disney and pricing than is evident from these two positions, and the underlying issues giving rise to the controversy, are worth discussing.
Disney seems uniquely situated when it raises its ticket prices in the amount of attention garnered not just from fans, but also from the media and society as a whole. I think there’s a reason for this, and it’s not just that price increases by Disney are a harbinger of things to come elsewhere in the market. Disney theme parks occupy an interesting place in our society as privately-owned and operated locations that have become so engrained in our culture that visiting them is almost an indelible part of the American experience. Many adults visit each year not because they are enamored with Disney–for some, quite the contrary is true–but because they view a visit to the Disney theme parks as a rite of passage for their kids.
You may think, ‘so what?’ as the fact that Disneyland and Walt Disney World have been woven into our cultural fabric doesn’t change the fact that they are a business. Unlike the National Parks, which are more appropriately viewed as our birthright as Americans, Disney theme parks are not managed by the government, and we don’t have any “public right” to them. I am not arguing that we as a people do just because they are culturally significant–I think that would set a dangerous precedent.
However, Disney has marketed its theme parks very aggressively as a place where families make memories, and that “rite of passage” status so many people recognize Walt Disney World and Disneyland as having is a direct result of Disney’s excellent marketing efforts. Arguably, Disney has positioned itself as accountable to the public through these marketing efforts, and the status it has attained for itself as a rite of passage through said marketing (in a way, Disney has somewhat of a monopoly on “rite of passage” theme parks that allows it to dictate pricing). This is something of which its leaders should be aware and respectful. This is not just because those leaders have become enriched by the marketing efforts that established Disney’s position as a “rite of passage” location, but because the founder of the company (whose efforts have also enriched his successors) explicitly said he wanted it that way and more or less behaved consistently with his statements.
Still, Disney is a business, and expecting its leaders to develop a sudden sense of altruism is…well, let’s just say not pragmatic. This current leadership, on the rare occasions when it has announced or addressed price increases, has commonly touted the exceptional guest experience and improvements thereto. Had such a statement been made this year, they would probably give Seven Dwarfs Mine Train and the upcoming Disneyland 60th Anniversary as examples. Nevermind all of those closed attractions in Disney’s Hollywood Studios, the stagnation of Epcot, the sea of construction walls in Animal Kingdom, and the current closed status of numerous headliners throughout Disneyland Resort.
I think we all know this statement is merely marketing-speak and no one on either side of the argument really gives it much credence. However, it does speak to the notion that price increases would be justified by an improved slate of attractions or a better guest experience. Many would still have issues with people being priced out of visiting Disney theme parks, but overall, the increases would be more palatable because at least then added cost would be commensurate with added value.
An increased attraction roster is frequently cited as a way to address the crowds that the parks draw. Despite the rising prices, theme park attendance is also on the rise, and without increasing supply, raising prices is one way to reduce demand until arriving at an equilibrium price. If Disney truly is a quasi-monopolistic supplier as I’ve posited, what this equilibrium price would be is anyone’s guess. Instead of finding out, many Disney fans have argued that Disney should add new, high-capacity attractions to relieve the crowding problems.
Theoretically, this would work. If park capacity increased from (hypothetically) 75,000 guests in a park at any given time to 100,000 guests, that is an alternative way to address demand. Setting aside the argument that it’s easier and more efficient to simply raise prices (a really cold and calculated way to view theme parks no matter who you are), I’m not entirely convinced this would work.
If anything, I think the recent large additions at the Magic Kingdom (New Fantasyland) and Disney California Adventure (Cars Land) have created new demand close to or in excess of the capacity they added. If you’re Disney, this is a good problem to have, but it doesn’t solve the crowds problem. There are definitely ways to increase capacity without creating new demand, but I think most would require adding high capacity attractions that aren’t going to be highly publicized or buzzworthy. This would upset fans in a different way, and I can’t really see Disney opting for this route. Alternatively, the parks could add so many really, really awesome things simultaneously that would collectively create so much new capacity that new demand couldn’t possibly be as great. Had Disney added 1-2 high capacity attractions consistently each year over the last decade, this would be the end result today, and we probably wouldn’t even be having this conversation. Don’t hold your breath on that one happening right now, all at once.
As someone who believes ticket prices are too high and that the spirit of what the founder of the company intended should be honored as best as possible in light of a changing world, I don’t think the conversation ends here with Disney having its hands tied and being “forced” to increase prices since attendance is on the rise. Disney still has a few options of which it could avail itself.
The first would be to not raise prices and simply sell out of tickets on more popular days. So many other entertainment options do this, and although it would require re-educating the public so that vacationers didn’t arrive in Orlando or Anaheim only to be heartbroken that they couldn’t enter the parks, it could definitely work. Tokyo Disneyland already employs this strategy, and those parks sell out of tickets numerous days per year. That’s proof-enough that this strategy is possible, but it’s not my preferred way of dealing with demand.
I’m sure a lot of you are not going to like this proposal because of the way it would impact you personally–and it would impact me, too–but I think imposing restrictions on Annual Passes is the best way to address crowds in the immediate future. I’m not suggesting pricing all but the rich out of Annual Passes, but restricting the number of times an Annual Pass can be used each year, adding parking fees, and getting more aggressive with blockout dates would be among the things I’d like to see considered for Annual Passes.
This is my proposal rather than the simpler plan of selling out tickets because I would then use all the increased revenue and decreased demand to offset a decrease in the price of single day tickets. I’d like to see a 1-day ticket in the $75 range, as I feel this is an amount that is realistic for many families (even if it requires a lot of saving), in line with the value of the entertainment offered, and in keeping with the spirit of what Walt Disney expressed as his vision for Disneyland.
Obviously, value is in the eye of the beholder, and some people are going to think $75 is still ludicrously expensive while others will think it is an incredible bargain. That’s my personal “gut” number, based on what I think is a good value, plus the other variables identified. Annual Passholders definitely wouldn’t like this, but anyone who legitimately believes that Walt argument they’ve been advocating should. I think this would have the unintended consequence of also causing many Annual Passholders to appreciate their visits to the parks much more, rather than treating them as a place to hang out. (I’m not casting any stones here–I’m guilty of this, myself.)
I know it couldn’t get to $75 and still keep revenue for The Walt Disney Company where it is simply by Annual Passholder revenue increases, so this price shift would be accompanied by a revenue decrease in park ticket sales for Disney. Before you decry that “Disney is a business!” think of the goodwill Disney would receive. It would be all over the news, with the same kind of “are pigs flying?” reaction as was seen to the recent wage increases announced by Wal-Mart. (Wait…wage increases at Wal-Mart…isn’t it a business?!) The comments section of virtually every story anywhere posted about Disney would no longer revolve around how it’s ‘too expensive’ or ‘crassly commercial’. The ancillary benefits like this would be innumerable and immeasurable, and guest spending on high-margin items once people were in the parks would probably increase since people wouldn’t have to overextend themselves so much just to get into the parks.
At least, that’s what I theorize, and the best way I can balance all of the competing interests in a practical way to deal with this “issue.
I am well aware that all of this is entirely academic. Disney employs analysts and economists far more intelligent (and with better information) than me–I’m just some dude who rants on the internet. Disney is going to raise prices as it sees fit, only stopping if attendance decreases or there is such a negative backlash about pricing that the brand is being tarnished. I don’t think any of the words I’ve written here really have any chance of impacting change. I just find it to be an interesting topic, and rather than grousing about it on Twitter without a fully-formed argument, I thought I’d share some of my “deep thoughts” regarding pricing. Hopefully it’s an interesting conversation piece, and you’ll share some of your thoughts in the comments…
I suppose the silver lining in all of this, if there is such a thing, is that some Disney ticket sellers still have limited quantities of Walt Disney World tickets available at the “old” prices…so if you missed the boat and didn’t buy before the increase, check out our Tips for Saving Money on Walt Disney World Tickets for info on how to buy at the old prices (actually, at a discount on them) for the next few days.
Everyone has an opinion about Disney price increases, so what’s yours? Even in light of the increase, do you think Disney them parks are still a good value for the money? Have you been priced out of visiting? What’s your tipping point? Will you renew your Annual Pass? I’d love to hear some of your thoughts, but let’s keep try for critical thinking and reasoned analysis, rather than just ALL CAPS ranting. 😉