Disney World Taking Up to $300 Million Loss on Star Wars Galactic Starcruiser
Star Wars: Galactic Starcruiser will permanently close in Fall 2023, and with that, they will write off up to $300 million. This covers a new interview with Josh D’Amaro about the tax implications, plus more commentary about the decision, the timing of the closure, and more.
In case you missed it, the final voyage for Star Wars: Galactic Starcruiser will take place September 28-30, 2023. This makes it one of the first cuts to be made and revealed before Disney’s new fiscal year starts on October 1, 2023. (Usually, these cost-cuts are announced a few weeks before the new fiscal year starts, but with the nature of Starcruiser, more advance notice was necessary.)
Walt Disney World has also eliminated discounts for the final few months of Star Wars: Galactic Starcruiser, removing the 30% off deals that were available for APs and Disney Visa Cardholders. This makes sense, as the final voyage sold out over the weekend, and it undoubtedly isn’t the only date that will book up as fans scramble to experience Starcruiser for the first time or say their fond farewells to the starship Halcyon.
The latest update comes from the 2023 JPMorgan Global Technology, Media & Communications Conference. During this event, Disney Parks Chairman Josh D’Amaro was interviewed by JPMorgan analyst Phil Cusick. During that wide-ranging session, D’Amaro said a lot, most of which was not noteworthy. He spoke again about expansion plans and about “aggressive” investments in the international parks, among other things.
One of his more interesting comments was a claim that the standoff with Governor DeSantis has not impacted Disney’s business results. This isn’t really a surprise to us. We’ve said repeatedly that average Americans are not heavily invested in culture wars; that’s more the domain of the chronically connected.
With that said, it’s also fair to point out that Walt Disney World has seen booming business due to pent-up demand, which has helped mask the negative consequences from all decisions they’ve made in the last few years. (We’ve also repeatedly pointed out that guest satisfaction took a big hit starting in Fall 2021.) But I digress.
Cusick also asked D’Amaro about Star Wars: Galactic Starcruiser, and how investors should think about the impact of that decision.
D’Amaro started his response by lavishing praise upon Starcruiser, calling it “stunning” and saying how Cast Members did an “exceptional job” in bringing it to life. He added that “Imagineers did an incredible job pulling it together and guests give it very high ratings.”
Despite that, D’Amaro conceded that Star Wars: Galactic Starcruiser “did not perform exactly how we wanted it to perform, so we decided that we’re going to sunset this in September.” D’Amaro added that it was “a never-before-seen type of experience, and I think it’s raised the bar from a creativity perspective on where we can go next.”
D’Amaro then turned to the financial impact of the Starcruiser’s closure and said, “I don’t think we’ve talked about this before, but in both Q3 and Q4 as we accelerate depreciation on that Starcruiser, we should expect about $100-150 million acceleration in depreciation.”
Cusick clarified that D’Amaro meant depreciation of $100 to $150 million in each of the quarters, rather than total. D’Amaro indicated that was “correct.” This signals that Walt Disney World expects to take a loss of between $200 million and $300 million on Star Wars: Galactic Starcruiser between now and the end of this fiscal year.
Turning to commentary, I’ll admit that I find the Starcruiser saga endlessly fascinating. Perhaps you disagree, viewing its closure as an inevitability that is altogether unsurprising. Honestly, same…but that is precisely why I find this so interesting!
From literally the day that this concept was announced, the Star Wars “hotel” was met a ton of fan skepticism. It’s not an exaggeration to say that each new detail released pre-opening reduced interest rather than expanded the interested audience. Everyone knew it was going to be astronomically expensive from the outset, but the clearer it became that this wasn’t a hotel, the more it lost fans of both Walt Disney World and Star Wars.
Documentaries will someday be made and books will be written about “what went wrong” with Star Wars: Galactic Starcruiser. At least from a business perspective, the short answer is everything.
You might see this as vindication or an obvious outcome and not be as interested in the saga, but that’s precisely the point and why this subject is so fascinating. If you look back through our old posts about Starcruiser, they almost read as prescient now. This is not to pat ourselves on the back–we were far from the only ones sharing such sentiment. Many, many commentators saw this coming a parsec away.
This is something we touched upon over the weekend in Cleaning Up Chapek’s Costly Catastrophes, but how did so many people on the outside see this coming, but not the company itself? There is no DTB market research division (yet!) and the long-term viability of this Starcruiser is something we’ve questioned since before it even opened.
(As we’ve said for years, fans overestimate the degree to which Walt Disney World leverages data and analytics. On top of that, much of their market research exists to confirm decisions they’ve already made. Starcruiser will be used as Exhibit A in support of that going forward.)
The saga of Star Wars: Galactic Starcruiser is like a slow-motion trainwreck. Worse, actually. The more apt analogy would be the starting out on an unfinished railroad, everyone knowing that the track is incomplete, and the train chugging along anyway until going over a cliff. The risks here were knowable and known from day one, and not having a backup plan is just…incredible.
This actually reminds me a lot of Lightyear. Once the hype of the initial announcement wore off, each new detail raised more questions than it answered. That movie made the ‘bold’ decision to use a different performer and animation style, while abandoning the rest of the characters, adding a narrative conceit that made no sense and wasn’t explained by marketing, etc. It was a story that literally no one asked for, and the whole thing had big “bootleg Buzz” vibes. It was like they didn’t understand what made the original Toy Story franchise a success.
In both cases, there was an excessive amount of hubris on display by Disney. I guess that’s what happens when your phoned-in live action remakes generate billions at the box office despite being awful, and when seemingly every theme park decision–including price increases–only drives demand higher.
Over the last couple of years, I’ve heard some wild numbers thrown around about the “true cost” of Star Wars: Galactic Starcruiser. I always assumed there was hyperbole at play, as some of those numbers would have meant that the breakeven point on the 100-room experience would be decades into the future.
Well, $300 million is one such number. That amounts to at least $3 million per room in profit. Do you know how many thousands of voyages would’ve been necessary for Star Wars: Galactic Starcruiser to not lose money?
Keep in mind that this is profit, not revenue–so you cannot simply point to the high voyage rates for Star Wars: Galactic Starcruiser. As we’ve shared repeatedly, the operating expenses for Starcruiser were also astronomical due to its equity entertainment and cast-to-guest ratio. Staffing alone was a huge cost, but that’s not it. Starcruiser had far more ‘moving parts’ than a standard hotel, so maintenance and upkeep also would’ve been significant costs.
It’s also probable that $300 million does not represent the entire cost of Star Wars: Galactic Starcruiser. I want to preface the following by saying that I’m about the furthest thing possible from an accountant, so my knowledge of depreciation and amortization rules is remedial–to put it very charitably. (In other words, what follows could be mildly inaccurate or worse–I welcome actual CPAs to correct any or all of it.)
For one thing, this is not the first year that Star Wars: Galactic Starcruiser has been operational. Presumably, Walt Disney World would’ve depreciated a portion of the asset in the last fiscal year, since the ‘resort’ opened in March 2022. My assumption is that they would’ve depreciated Starcruiser consistent with other fixed assets on a straight line basis across a decade or 20 year useful life. That means ~$15 to $30 million has already been depreciated.
With Star Wars: Galactic Starcruiser, there are a couple different types of assets. One is the physical infrastructure–basically the building–that will be abandoned. In addition to that, there’s the tangible technology that was produced via Imagineering R&D. Things like that fancy new lightsaber, the Yoda effect (trying not to spoil it), and other showpieces.
To the extent possible, I would hazard a guess that the second bucket of costs will be rolled into the first for the sake of accelerating deprecation. For example, everything affixed to the atrium of the Halcyon that won’t be repurposed elsewhere is going to be depreciated this fiscal year.
I’ve heard anecdotes about some of these assets being particularly problematic, going way over budget, and Imagineering wanting nothing to do with them in the future as a result. If there’s no intention to reuse certain set pieces and props, it’s probably pretty easy to bundle that into the building and depreciate it all at once.
But what about the lightsaber and other more ‘portable’ effects that could find a home in Star Wars: Galaxy’s Edge or a future dinner show? It may not be possible or make sense to accelerate depreciation on all of that this fiscal year if there’s an intention to repurpose it.
Regardless of the exact numbers, it stands to reason that the actual price tag for Star Wars: Galactic Starcruiser was well above $300 million–probably in the neighborhood of $400 to $500 million. Not all of that is strictly “wasted” money, as the underlying technology, props, and pieces will find homes elsewhere in Star Wars: Galaxy’s Edge or beyond. (There’s an old adage that no good idea dies in Imagineering–and it’s true!)
As a slight aside, fully accelerating the depreciation also reinforces the notion that Walt Disney World does not have any current plans to repurpose the building itself. Although accelerating the asset’s depreciation doesn’t necessarily preclude that in the longer run, it also doesn’t comport with conventional accounting practices to do so now with a plan in mind for its future.
It’s unlikely that Disney will throw good money after bad with further investments in the Halcyon building, meaning that it probably will not be repurposed any time soon. As we’ve said before, the most likely scenario is pulling a page from the Pop Century Legendary Years playbook–letting it sit there for a decade and possibly revisiting it down the road. Even that seems improbable given its unique style. It was custom-built for this and only this.
The timing is also really fascinating here. Walt Disney World had dipped its toes into the water of discounting Star Wars: Galactic Starcruiser. Walt Disney World had offered 50% off discounts for Cast Members, as well as 30% off discounts for Annual Passholders and Disney Visa Cardholders. There was also a special offer for $700 off Deluxe Resort stays booked as part of a Star Wars: Galactic Starcruiser vacation package.
These discounts were available for almost all voyages between now and mid-September 2023. Even after releasing those deals, Star Wars: Galactic Starcruiser had not been filling up all voyages–and had cut some as a result. Despite this, no discounts had been released to the general public (yet).
Less than one month ago at Star Wars Celebration, Imagineers Scott Trowbridge and Ann Morrow teased updates coming to Starcruiser. They spoke of bringing new stories to life, evolving the experience, and more. Some of this sounded like fluff or perhaps wishful thinking on their part, but those were definitely not the words and tone of people who thought Starcruiser’s future was in jeopardy.
Even during the most recent earnings call a couple weeks ago, CEO Bob Iger and CFO Christine McCarthy did not indicate or imply that Walt Disney World would see accelerated amortization this fiscal year. While such a disclosure would not have been required, it would’ve been the “perfect” thing to tease–at least, from an investor perspective–as an offset to the slower forward bookings McCarthy mentioned.
From the outside looking in (and with incomplete info), this suggests to me that the decision to close Star Wars: Galactic Starcruiser was an abrupt one. My guess would be that the team in Burbank looked at Starcruiser’s performance even after offering discounts, and concluded that it was beyond the point of no return. That it would’ve operated at a loss with general public discounts, and there was no easy pivot that would’ve made it economically viable. Better to cut losses than throw more money into a doomed concept.
In all likelihood, the decision was made quickly and decisively by Burbank, without much warning to Walt Disney World. Some of this is supported by details that have trickled out in the days since the news broke. It’s also generally supported by the circumstances and what Walt Disney World tried to steady the ship–and what they didn’t.
If the goal were to maximize revenue and profits on Star Wars: Galactic Starcruiser in the near-term, it seems likely that the announcement would’ve been made more methodically, with a greater amount of lead-time. For one thing, they had only opened voyages through the end of this calendar year. They could’ve kept those on the books and announced that Starcruiser was closing at the end of the calendar year.
That alone would’ve prevented Walt Disney World from having to offer 50% off discounts for displaced guests who booked between October and December, and had to be rebooked. For another thing, it would’ve created a sense of urgency for everyone else. With an end date established, Star Wars: Galactic Starcruiser will most likely sell out its remaining voyages between now and September. The same would’ve probably been true if that end date were December 31, 2023. Heck, a farewell season with a telegraphed end date would’ve probably made Starcruiser viable through mid-2024. And that’s without discounts.
It would thus seem like Disney just wanted to wash their hands of Star Wars: Galactic Starcruiser, take the write-offs this fiscal year, and move on. For whatever reason, those were more advantageous than letting it have a proper “farewell” season and trying to capture as much revenue that way. (Stated differently, taking a $300 million loss was deemed better than continuing to operate Starcruiser into the next fiscal year.)
At least, that’s my gut reaction based on the totality of the news and rumors about Star Wars: Galactic Starcruiser. I’m anxiously awaiting future developments in this saga–and will share them here so long as there’s reader interest. I’m truly curious about how things went off the rails so quickly and irreparably.
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Thoughts on Walt Disney World permanently closing Star Wars: Galactic Starcruiser and taking a $300 million write off? What would you have preferred the company invest $300 to $500 million (assuming additional R&D costs not in the depreciation) on at Walt Disney World? (Just think, we could’ve had a new envelope-pushing Journey into Imagination at EPCOT or Cars Land at DHS!) Think the company will convert it to a regular resort, reopen it as something else, or abandon the building forever? Expect some of the tech to move over to Star Wars: Galaxy’s Edge? Do you agree or disagree with our assessments? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!
Excellent article. I too have been following this topic with interest and most of what I’ve read doesn’t mention things like the “cast-to-guest ratio” and instead insist on comparing Galactic Starcruiser to actual hotels.
I’m sure you’ve seen by now that the bookings sold out by 4:30 yesterday. I wanted to add my experience, which is similar to the comment from Maggie. I started calling a minute before business hours opened at 7:00 and got “call cannot be completed” messages from different voices and in different languages until 7:50, when I was told the wait time was 7 minutes, and sure enough 7 minutes later I got the screener who made sure I had the 20% deposit ready (much quicker screening process than last year) before putting me on the main queue, which told me the wait time was more than 2 hours. Sure enough after four hours on hold I was able to book my reservation. By that point, slightly after 12:00 noon, all but the Standard Cabins were already booked. I’m guessing the backlog of calls continued like that until 4:30 when the last slot was booked.
To me this sudden demand resembles when it first opened. The trouble was there wasn’t a big enough audience to sustain this demand year round. After attending last year, I was planning on going every two to three years, but the number of people doing that wasn’t enough to sustain it year-round. Similar to a Broadway show needing to have an almost full house every night in order to recoup their investments (as only 20% of them do), Galactic Starcruiser needed to fill every voyage in order to even cover the expenses, and the number of people who will attend or even attend regularly just wasn’t large enough.
But I for one am glad they took the risk. At 10 times larger than any immersive theater production I’ve seen, it was a huge leap in entertainment concepts. When you’re that far ahead of the curve, there’s not a lot of data available you can use to determine how big the audience will be for something that’s never been done before, other than trying it out.
I’m hoping that Disney or somebody, maybe Universal, figures out a way to do this profitably and affordably. Perhaps Harry Potter Hogwarts type adventure? There were certainly enough students to accommodate a large paying group and the faculty was somewhat limited.
It has been a crazy morning since the bookings re-opened. True to form, the line was so overburdened that most people calling in just received a busy signal. I managed to get lucky as I decided to call into the main reservations line and they were able to transfer me into an actual queue, but even so the voyages have been selling out fast enough that I literally lost my preferred dates AFTER the rep confirmed them and started the booking process. I still have a spot and I’m thankful to get it, and I imagine you are correct that many voyages will sell out – certainly all of August and September. I’m not so sure about June, though…it’s so close, I don’t think many people are scrambling to book it.
Thanks for sharing your experience! I had pieced some of this together via social media, but this provides more detail and context than what I’d heard.
My guess is that June sells out, too. Just a hunch, but I suspect that many fans are going to get shut out of August and September, be surprised by that, and then change their plans to fit in a farewell trip. For lack of better options, a June visit will be their default. (I also think the prospect of lower summer crowds and the VIPassholder Days will help sweeten the appeal of the earlier dates.)
Glad to hear you made it in!
Wow, you were right immediately! It’s been booking up so fast today that they actually shut down the queue and are telling people to call back tomorrow. It’s kind of heartening to see there is such a dedicated following…but also really depressing because of the inherent nature of it.
I guess at this point they could use it as housing for cast members or could they? How many beds in a room? 1 cafeteria
My husband continues to insist this would’ve done better in DL rather than WDW. Finding space for the hotel aside, I go back and forth on whether that’s true. I think it’s closer for more people with that sort of money to throw around. While we could’ve afforded Galactic Starcruiser, paying for airfare for our family of four for just the couple of days for the Starcruiser “voyage” seemed wasteful and then we’d be left tacking on another hotel and more Disney days at the end. And I mean, we’re the sort of people who have Star Wars Legos and artwork prominently displayed in our house so I’d think we’re the target audience? Honestly can’t wait for the tell-all book about this whole mess.
“Better” is a relative term, so I’ll agree with your husband: it would’ve failed slower in California.
But it still would’ve failed. This crashed and burned in, basically, a year. Whatever changes could’ve been made might’ve moved the needle a little, but not enough to make this viable in the long-term.
This is the reason they cancelled the Lake Nona project but Dems want to blame DeSantis. Disney got too greedy and lost their ass! Now Disney employees are loosing their much needed jobs which adds to our local economy. Yet Disney executives will get their big salaries and bonus while cast members suffer.
For this to have worked, it needed mass appeal and family friendliness. I recall a statement from this blog when the cruiser was slated to open that it was likely after the first year, Disney would lessen the immersion, more or less let any ol family onboard who was not fully vested in the experience, so the first year was when true fans should book. Well, Disney not going that route is the downfall. Sorry but I have two young kids, they aren’t going to care about story line. And what the heck am I gonna do with them while onboard? I can’t bring them, so I won’t go, I’m out of state, and I have no child care options. I also think the concept is cool but maybe I don’t want to dress up or I have little total buy in interest. I also have no idea what “Bright Suns” means no matter how basic someone says it is. All in all, why should I spend my disposable income on something like this? “Ahh then this wasn’t meant for you” someone might say, and that’s the issue.
“I recall a statement from this blog when the cruiser was slated to open that it was likely after the first year, Disney would lessen the immersion…”
Yeah, we wrote this repeatedly pre-opening. Our ‘thesis’ was essentially that Disney would need to reduce prices to broaden its appeal, but lower prices would also necessitate cost-cutting (e.g. fewer performers and other staff).
After experiencing it in person, I became more skeptical that this would be possible given how interwoven everything is. I’m still surprised they didn’t try anything to cut costs (aside from reducing voyages, which also cuts bookings), though.
Even if they lose $ 300 million but I don’t think will affect them much it’s just a little amount but yes their revenue is affected. However, they will gain the loss very quickly because it is not a short time project and hope that it will not permanently close viewers are addicted to it.
Reader interest, YES. I find this saga fascinating as well and honestly just cannot believe it was this big of a disaster start to finish. And it’s so riveting to me because of how heartbreaking it is for those who helped make it so incredible. They all deserved better and I am so sad for them.
I think there’s a bigger conversation to be had regarding how Star Wars is handled overall at the theme parks. I see this as a potential big turning point. The imagineers who oversee SWGE and SWGS have been doubling down on interactivity at the parks which has been a disaster in almost every way imaginable. They can’t even get guests to say Bright Suns, the most basic thing!
Really enjoy your analysis.
One thing I forgot to explain: Why is depreciation a good thing for a company to take when it’s a current year expense on the books?
Depreciation (of the tangible goods) affects a company’s balance sheet which shows the company’s equity or value. It also affects the income statement of a company which is where you can show how the revenue for a period (year) has been affected by its expenses. So, taking all of the expense of an asset shows up here, which then can affect your taxes and shows whether you have a profit/loss.
For a company that has lower revenue the positive side of increasing your expenses (showing higher depreciation increases the amount of expenses shown in the financials in the current year) is that you would have a much lower tax burden. And in some cases that reduction that results in losses, which the IRS will then let you carryover into future years. This is how companies can result in having no business tax to pay. And why that can last for years. Taking the loss can help sustain a business during times of a decline from a financial point of view.
I would expect that they are expecting to have a lower income in the future. But by taking the loss on the Starcruiser now it’ll help mitigate those further future declines.
Talking depreciation on assets. When you have a large capital expenditure project where you’re creating new buildings typically that project pulls together into a book of assets done for a subtype like location. So, you wait until you have all of your costs for that project done and then you put everything into a “book” for that location. This could and does include things like R&D on projects as well when they’re significant. However, that book has each individual asset typically tagged and tracked individually by item. Those items by classes can have different depreciation schedules. A company typically has an asset classification strategy and timelines that they have as rules for how they do depreciation. This way they are treating all of their assets in the same way and you don’t generally pick and choose to change it as you go forward, unless there are good reasons (a change of the status of an asset – example a flood and ruination of the asset). There are general standards for typically how long assets get depreciated without knowing their company policies. For example, many buildings are depreciated over the life of the building, typically 40 years (in some cases this is shortening to 25-30 years if you can prove that the totality of the building will no longer be usable after that timeframe). Physical objects are around 7 years, like desks and chairs. Electronic assets have a useful life of around 3-5 years. The idea with depreciation is that once it’s fully depreciated the asset is “retired”, which means that there is no useful life left in that asset. For any company to fully depreciate their assets they are saying that they are no longer useful at all and will not be used. Generally, most assets you want to improve to extend their life and usefulness any improvement projects are typically depreciated around 20 years for those types of things. So, this is all to say that if you’re talking repurposing of items from the Starcruiser you wouldn’t take all of the depreciation at once, you would transfer those assets to the next location/book which then you take the regular depreciation each year. Total value of asset divided by life of asset equals depreciation by month/year. When they are talking about taking all of the depreciation on the books, they are saying this building is NOT going to be reused for another purpose. We intend to have it sit there, unusable. If they were to actually repurpose it after fully depreciating it they would need to have another project to actually put the value back into the building and then back onto the books. By taking the upside of the depreciation in full this year that’s a huge pickup to their bottom line and will help with other business costs elsewhere, such as declining revenue from attendance. Taking a loss on it is the better business decision when looking at the long term break even point of this whole debacle especially in light of declining attendance. Now taking what they’ve learned here and applying to something else entirely new elsewhere is a different matter. Hopefully they will have learned their lessons and actually make the new thing actually profitable, stranger things have happened. I hope that helps a bit. ~Not a CPA but do work in Accounting and with assets.
I read it all and appreciate the expertise! Thank you~
That helps a lot–thanks! A few takeaways (if my understanding of all this is correct):
1) $300 million is essentially the minimum cost of Starcruiser, and that would assume that everything–assets and physical building–are being retired and fully depreciated. That’s probably NOT the case, though, since there’s a lot that can be repurposed for future (or current) Star Wars projects and other Imagineering initiatives.
2) Anything that will be reused will be transferred to a new location/book and be depreciated on a normal timeline (“extending” lightsaber being one of a few examples) and wouldn’t be part of that ~$300 million.
3) Highly unlikely there’s any current plan to reuse the building anytime soon. That is, unless they plan on putting more value into it, which seems highly unlikely given the hundreds of millions already lost.
To answer your questions Tom:
1) Yes $300M is the starting point since that’s what they’re saying they’re going to take in depreciation. I would expect it’s much higher in actuality for total cost. Also, I would expect total project to be higher since you do typically take some expense immediately for things that you can’t include into fixed assets such as general administration and overhead (people’s salaries on the project if they’re dedicated to the project come to mind).
2) Yes, you’ve got it exactly. So, if you see things popping up elsewhere being used, that value of those items wasn’t included in the disposal of these assets/taking of all that depreciation in this fiscal year.
3) Yes, I would not expect that they’re going to use that building for anything going forward, if they’re taking all of the depreciation. Not even for offices. They’ll let it sit there and grow weeds. Now if they are using it for anything at all within the next year that would mean that they didn’t dispose of all of the depreciation possible on the building. That’s going to be the interesting thing to see and then I would say your numbers around $500M would be closer to the truth. If they were to start doing work on it say in a couple of years to then use it again that would indicate to me that they’re reinvesting in the building but the likelihood of that is really low because that would be a huge expense and capitalization all over again, and is typically not done, because it wouldn’t be a new build and you wouldn’t get the longer timeframe for depreciation. The more likely scenario is that they’d tear it down and rebuild because then you’re starting with a 40 yr depreciation on that new capitalization of the new building.
Happy to help.
Some best-case scenario back of the envelope calculations here: With 100 rooms at $5,000 per trip, assume something like 150 trips a year. Suppose profit margins are 50% (almost certainly way too high). It would have taken minimum 8 years to break even on the 300 million number (and that’s ignoring the time value of money which would make the numbers even worse because those profits in the future are being compared to already incurred costs).
Hard to imagine how this was ever approved given the numbers. My best guess is they gave Imagineering a blank check and figured whatever it’s Star Wars it will work.
50% profit margin is way too high. It’s probably more like 10%. My guess is they never expected to make $ off GS but instead assumed people would add it on to other packages where Disney did make money. But the price was too high for people to do it AND a full park trip. Accounting saw an opportunity to write it off this fiscal year and offset hits elsewhere. The fact they didn’t make much of an effort to salvage it shows the CPAs are in charge!
I’m think a lot of guests would just prefer a Star Wars-themed hotel that isnt limited to the second sequel
The refrain in a popular movie was, “If you build it, they will come.” This is real life.
As Tom points out, now that some of the costs are known, difficult to image the Star Cruiser was ever going to become profitable. That no ‘Plan B’ existed to repurpose the space is sinful. This could certainly become a business school case study.
My own refrain on the matter is that Disney never truly delivered on the ‘totally immersive’ aspect that might of gotten my family on board. Sharing time in Galaxy’s Edge with non-Cruiser guests – including waiting on lines for food and/or not having private time at the Cantina or attractions – cheapened the value proposition from the immersive VIP experience that Disney was charging for to being just a cooly-themed hotel (without windows or a swimming pool) that included some unique interactive elements.
Actually, the total immersion is something they really do nail. The activities on the Starcruiser itself are constant, and you’re being engaged and involved in the story from the moment the experience begins which makes it very much unlike a themed hotel. It requires you to ‘suspend your disbelief,’ to quote my high school drama teacher who was probably quoting something else…but if you ‘buy in’ during the first day on board then by the time you get to Galaxy’s Edge it does kind of feel like landing on a frontier world. Yeah, there are tourists everywhere…but that now feels alien after being surrounded by aliens. You also get lightning lanes and an easier shot at the cantina/lightsaber bookings, and if you *do* choose to do those experiences the staff in the park go above and beyond to further your story with additional interactions unique to Halcyon guests. You don’t end up wanting to spend too much time on Batuu, though – the Starcruiser beckons you back to continue the plot.
Obviously, this wasn’t enough to save the Starcruiser, I just wanted to point out it really is an immersive experience more than it is merely a themed experience.
I, for one, would love more updates contextualized by you. I appreciate how you take big, complex ideas and distill them to their essence. This failure was, in many ways, unlike any other failure that Disney has endured. The company is 83 years old, it is on the Fortune 100, and it has over $10B cash on hand (which, granted, is down a lot from the, ahem, halcyon days of 2020), so a mistake like this seems like an uncharacteristically large misstep. I want to know more about how that mistake was made and how it was decided to stop the bleeding.
Sidebar: Have you read “Quit” by Annie Duke? I kept thinking about it as I read this and other items on the Galactic Starcruiser. I think you might find it interesting and apropos if you haven’t yet read it (though I’m sure “What to Expect When You are Expecting” and Dr. Spock may have taken over your leisure reading time).
Stockholm’s Syndrome….I just can’t describe it any other way for all of those that still believe Iger, D’amaro and the Disney Board are willing or capable of bringing back any of the magic the Disney brand was built on.
Our family discussed booking a voyage, but we are leery now that Disney has announced the Galactic Starcruiser is closing. We are believe that Disney will cut back on the experience as the final voyages play out to cut costs. After all, there will be no incentive for the guests to book future voyages.
Since Disney is planning to write off the building, that tells me that Disney is planning to walk away and that they have no future plans for the building. You can’t write off an asset, and then start using it again. This building would take a lot of work to repurpose for different guest experience. The building is small, it’s in a remote location, it has no windows, etc. If Disney were to continue to use the building, it would take staff and maintenance. It sounds like Disney has decided to cut its losses and just walk away.
Tom, this post explains a lot — per Jared’s comment I’d like to see you dig into some of the content that was pulled from Disney+ — including some of our family’s faves. I happened to have an interaction with a star of one of those shows over the weekend and he seemed extremely saddened (and surprised) by the move and its urgency — I actually found out about the removal after mentioning I liked his performance. My kids are asking me “why are they taking our shows away?” and I didn’t even consider depreciation…but can you even take a write-off for a show that’s already premiered? I’d previously assumed this move was only about not paying residuals, which seems like just a cheap and callous move against both the content creators and Disney+ subscribers.
I’m also still baffled (as I’ve noted in several recent comments) that Disney didn’t have a contingency plan for the Galactic Starcruiser — not that all new endeavors need contingency plans, but the sheer audacity of this concept surely meant it had to be sold to a lot of cynical faces in internal pitch meetings, and no executive in their right mind would have bet on it being a sure thing. The optimist in me still thinks there’s a chance they repurpose the best parts of the facility for Galaxy’s Edge daytrippers but I’m not sure how that would work from an accounting perspective…
So Tom, I guess my questions are:
1. Can you skirt depreciation rules by shutting something down (e.g., the Halcyon) and reopening it as something significantly (but not totally) different?
2. Can you think of any project in Disney’s history that HAD a contingency plan? The closest thing that comes to mind is Star Tours, which was considered somewhat “future-proofed” against new in-universe stories/characters by design (and has validated that forward thinking in retrospect). Seems like Universal’s investments in screen-based ride systems are partly based on their understanding that IP can be semi-easily swapped out for something new if stars/stories/themes become passe or problematic.