Disney’s Promising Pivot to “Lifetime” Fans.

During Disney’s first earnings call under new CEO Josh D’Amaro earlier this month, a phrase came up that’s been stuck in my head ever since. In fact, there were some subtle stylistic differences in the report as well as the Q&A that were overshadowed by the substantive news, but feel like they’re worth revisiting.

Before we get going, check out Disney Park Attendance & Hotel Occupancy Down, But Higher Guest Spending Drives Revenue Record if you want a recap of the earnings call. That covers everything from Walt Disney World lapping the previously-discussed headwinds from the international visitation and Epic Universe induced slowdowns to the supposed non-impact of the Iran War and rising gas prices to declining attendance and occupancy numbers, and more.

With that out of the way, let’s turn to the stylistic changes under D’Amaro. The first change comes in the earnings report, which you can read for yourself here. It opens with some numbers, followed by a 7-page letter to shareholders largely devoid of numbers, followed by the segment by segment results starting on page 10.

This was a deliberate adjustment to the earnings materials made to focus on Disney as a whole rather than its individual segments. You might even say it was done to highlight the Oneness of Disney. As explained at the start of the call, this was done to illustrate to investors how the company’s various business lines operate together, and provide all the information relevant to the financial markets in one place.

As could be expected, the letter contained a lot of fluff. This includes the company’s three pillars under D’Amaro, which can basically be distilled down to creating popular IP, reaching more consumers, and better using technology. I’ll spare you from further elaboration on those, because they’re exactly what you’d expect.

One detail that did catch my attention about the letter to shareholders is that the words “fan” or “guest” are used 17 times, whereas “investor” or “analyst” or “Wall Street” or “shareholder” are used a total of 11 times. Remember, the audience of the letter is the latter.

There’s a lot in the financials that’s obviously aimed at investors as opposed to fans, but the audience for the letter is fans. The overlap can best be summed up by one line, describing investments in the theme parks to “deepen fan affinity and drive attractive economic returns.” This is something we’ll circle back to in a bit.

The other key change came with the Q&A, which shifted away from live questions from analysts to pre-submitted ones. The downside of this is a lack of extemporaneous, off-the-cuff answers like we’d grown accustomed to during the Iger era, which sometimes gave us an unvarnished look into the thinking of the executive team.

Iger was an incredibly adept improvisor, but that wasn’t true of everyone participating in the calls over the years, such as the dearly-departed Bob Chapek or Christine McCarthy, who produced memorable gems like the infamous ‘good for guest waistlines’ and ‘unfavorable attendance mix’ soundbites. We also strongly suspect that Iger’s announcement of the Avatar “experience” at Disneyland a few years back was not scripted.

D’Amaro is a similarly skilled communicator, so I don’t necessarily read anything into the format change being driven by gaffe-mitigation, but perhaps it is. More likely, it’s about being more polished. Because for all of his oratory skills, sometimes Iger did filibuster or pivot to scripted talking points when the actual answer to a question might’ve been “I don’t know off the top of my head.”

In giving more rehearsed responses, one thing Josh D’Amaro said has stuck with me. It wasn’t a big moment during the call, and it’s flown under the radar, but I found it to be promising and meaningful. Here’s his answer:

Lifetime value is something that we’re focused on across the whole enterprise. And you start with our fan base. Disney has the world’s most passionate and loyal fans. It’s something, if you go to our theme parks, you see it all the time. They’re a high-touch, high LTV [lifetime value] business.

Our biggest fans, they come off and they tend to be repeat visitors. Now a large number of our park visitors, they’re also Disney+ subscribers, but there are millions of Disney+ subscribers who aren’t regular park visitors. And so this is where we’re focused.

Our parks, they’re essentially the physical center piece of the company. Similarly, we’re building Disney+ to serve as the immersive interactive digital center piece of the company. And in the long term, what you’ll see is those pieces of the company become increasingly connected.

When we do this well, which we will, the lifetime value equation, it starts to change fundamentally. A fan who watches a Disney film, for example, or visits a park or plays a game and buys our merchandise, it’s not just a subscriber, they’re in a relationship with the company, one that spans years and can generate value across every part of our business. And that’s the model that we’re building toward right now.

This might sound like corporate buzzword soup. And sure, there is undeniably that element to it. With everything said on these calls, you have to cut through the fat to get to the meat. In this case, there’s also both good and bad.

The bad is the subtext, which is that this was indirectly a question about Disney’s supposed super app (see our post about the Super App for Theme Parks, Cruises, Streaming, Movies & More). In case you haven’t or don’t want to read that post, I think a supposed super app is a colossally stupid idea.

It’s a ‘solution in search of a problem’ to appease Wall Street and make the case that Disney is a tech company. It isn’t, making a super app nothing but a money pit. I really hope the idea is abandoned before it gets to that. We’ve seen this movie before, and know how it ends.

The good of that quote is the focus on lifetime value of fans, which has the potential to be one of the most consequential reframings of Disney’s parks strategy in years. It represents a meaningful departure from the direction the company has been heading for most of the last decade.

For those unfamiliar with it, lifetime value (LTV) is a straightforward concept: how much revenue does a single customer generate over the entire course of their relationship with a company? A guest who visits once and pulls out all the stops, dropping $20,000 has a lower LTV than a guest who visits annually for 30 years, but spends “only” $3,000 per trip.

Conversely, that same annual guest is spending less on a per visit basis. For the last several years, Walt Disney World’s business model was that of a once-in-a-lifetime destination. Increasingly, the ideal audience was first-timers who would save up, go once, and spend lavishly.

Under this model, Walt Disney World felt it didn’t need to earn repeat business, because there was a steady stream of rite of passage travelers who had never been before. The prevailing view was that loyal but lower-spending fans were as much a liability as an asset. This was doubly true in a capacity-constrained or pent-up demand environment.

The company became ‘addicted’ to the one-and-done audience as the most important guest, because they have the highest marginal value. This model has worked well for a long time, so well that the company has sought to replicate it at the more locals-centric parks (which is all of the other ones) by turning them into multi-day destination resorts targeting tourists.

Return visitors, diehard fans, Florida and California locals, Annual Passholders, and Disney Vacation Club Members (except those interested in adding on!) were often treated as an afterthought, or worse yet, “unfavorable” attendees. We felt begrudgingly tolerated and having our loyalty taken for granted, as opposed to appreciated. And for good reason, because the company openly admitted as much during past earnings calls. This tonal-180 is a big part of why we view this as a potential pivot as opposed to fluff.

It wasn’t just that one comment on a single past earnings call. Chapek constantly invoked the mythical Marsh family from Colorado or Seattle or wherever when justifying decisions that might be unpopular with fans. He was almost singularly focused on a steady stream of big fish.

One (of many) reasons Chapek never endeared himself to fans was because he had a thinly-veiled hostility for us. I still remember the WSJ tech conference where the mask came off fully and finally; Chapek was gone less than one month later. That Q&A was a big reason why we wrote that Bob Chapek Did Not “Get” Disney.

Iger was never openly hostile towards fans in that same way, but he still used similar-but-softer language and made clear which demographics were desired. There’s a reason the company has chased these one-and-done first-timers, and it can be summarized by Rizzo the Rat (as Mickey Mouse): “Rat, schmat! Besides, they’re tourists. What do they know?”

It’s a fun gag, but it also underscores the distinction between infrequent visitors and fans. The former are free-spending, less discerning, and don’t know what they’re missing. The latter don’t pay as much per visit but do spend more over time, but are also more demanding and have knowledge of the past. None of this is meant to be a value judgment, by the way; one reason I love visiting with first-timers is because they’re a good ‘reality check’ and reminder of how much magic there is in the parks.

Regardless, you can draw a straight line from the company’s philosophy to some of the most controversial decisions of the last decade, from the removal of perks and free value-adds to the proliferation of pricey add-ons. First-timers wouldn’t know what they were missing with the cutbacks, and would willingly shell out for the upcharges thanks to the FOMO or FUD factor. All of this made them an ideal guest, on top of their higher per visit spending.

The underlying logic to this was that Disney didn’t need to earn loyalty because there’s an inexhaustible supply of first-timers. This mentality did a lot of damage coming out of COVID, and even before D’Amaro took the helm, the pendulum was already starting to swing back in the other direction. Our hope is that this “lifetime value” framing suggests he’s trying to reorient the parks around the actual value of long-term fans.

The first-timer focus is myopic and short-sighted, and emblematic of Wall Street’s fixation on quarterly results. The “problem” is that there’s not an endless supply of first-timers willing to spend lavishly, at least not to the extent necessary to fill the parks. It’s not either free spending first-timers or loyal fans, but both that Disney needs to thrive.

Coming down from the highs of revenge travel coupled with the restored capacity, Disney has plenty of excess bandwidth. This is reflected in attendance levels, which are still significantly lower today than they were in 2019. The parks appear to be having no trouble courting the coveted first-timers, but they still need to work harder to undo the brand damage of the COVID/Chapek era and win back disillusioned or former fans.

We’ve already seen some of this in action, with aggressive ticket deals for California residents this winter and spring at Disneyland, VIPassholder Summer Days, DVC Welcome Home Days, along with other perks, freebies, and special offers aimed more at locals, fans, and repeat visitors. These are levers that Disney has already pulled, so the proof is in the pudding, to some extent. Most recently, there’s the $100 gift card for Magic Key renewals, which is an unprecedented offer and signals that maybe the tides are finally turning.

Given all of that, I hope this emphasis on “lifetime value” is an actual paradigm shift in how the company views its fans. A realization that pulling the aforementioned “levers” isn’t just about hitting quarterly targets by incentivizing certain audiences as needed, but that fans are the bread & butter of the business.

The optimistic read on D’Amaro’s “lifetime value” framing is that it’s exactly this–a genuine philosophical shift, backed by the CEO’s personal conviction and his two-plus decades of experience that fans are the lifeblood of the parks. He is a theme parks guy, and one that has spent a lot of time on the ground. He’s unlike Bob Iger, who was more of a Wall Street guy, and certainly Bob Chapek, who was an…I don’t even know…guy.

D’Amaro understands, at a granular level, what makes these places special and what the relationship between Disney and its most devoted fans actually looks like. If anyone at that company is positioned to make this pivot in an authentic and meaningful manner, it’s him.

As the company is investing at least $60 billion over the next decade in ways that’ll meaningfully increase capacity–at a time when attendance has been flat to down–it needs lifetime fans to help fuel growth and fill that available space! Taking this reasoning to its obvious and logical conclusion, this can mean only one thing: a reimagining of Journey into Imagination with Figment & Dreamfinder! (I’m kidding…but not really.)

The pessimistic read is that “lifetime value” is a phrase that sounds great in an earnings call context and means almost nothing until it’s operationalized in specific decisions. That it was nothing but corporate buzzword soup.

Bob Chapek talked about a membership program akin to Amazon Prime that could’ve been a loyalty program for lifelong fans. That went nowhere. Bob Iger waxed poetic about “the relentless pursuit of perfection” while cutting costs in ways that were most visible to repeat visitors. Executives are adept at saying the right things, but talk is cheap.

There’s also the broader context here. D’Amaro discussed lifetime value in response to a question about the so-called super app. He somehow managed to hit on a concept that we’d love to see and is long overdue while discussing one of the most half-baked, unserious and superficial ideas.

As we’ve seen time and time again with this type of thing, the super app will almost certainly come at the expense of something substantive. It will likely be an attempt at squeezing a bit more spending out of people, a take without a give, or a “brand withdrawal” as opposed to a deposit, to use the words of another CEO.

Ultimately, the “lifetime value” framing could be a really-for-real shift that shapes parks’ philosophy and investment priorities over the decade to come. Optimistically, it could be the type of thing that yields more seasonal overlays, loyalty programs, special events, ride refurbishments & reimaginings, and a greater emphasis on the little things. In which case, it would represent one of the most meaningful positive shifts in Disney’s parks strategy in a long time.

That’s a big “if.” It could also be something that simply sounded good to say, or the end game of the silly super app, which is actually the antithesis of a renewed emphasis on lifetime value. We’re still getting a read on D’Amaro as CEO, and it’s hard to tell where he really stands on some initiatives that we’d describe as follies (see also, short-form video and user-generated content, and Fortnite), what’s posturing and what’s sincere. D’Amaro earned this job by being the kind of leader who understands why lifetime value matters. Now let’s hope he meant it.

Planning a Walt Disney World trip? Learn about hotels on our Walt Disney World Hotels Reviews page. For where to eat, read our Walt Disney World Restaurant Reviews. To save money on tickets or determine which type to buy, read our Tips for Saving Money on Walt Disney World Tickets post. Our What to Pack for Disney Trips post takes a unique look at clever items to take. For comprehensive advice, the best place to start is our Walt Disney World Trip Planning Guide for everything you need to know!

Your Thoughts

Do you think Disney’s “lifetime value” shift under D’Amaro is sincere, or simply earnings call buzzword soup? What would the company have to actually do to convince you it’s a genuine pivot? Do you agree or disagree with our assessment? 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!