At the beginning of May, CEO Bob Chapek said that although Disney believes in the concepts Imagineers have developed, upcoming Walt Disney World and Disneyland projects would be reviewed with a “fine-tooth comb” to save money. We’re now starting to see the first wave of this “combing,” and cover the resulting closures, cutbacks, and cancellations in this post.
Chapek’s original “fine-toothed comb” statement came as a follow-up to a statement that the parks would spend $900 million less than originally forecast this year by delaying and cancelling construction. Disney’s profits were down 91% to $475 million, and the closure had already cost the Parks, Experiences and Products division $1 billion primarily in terms of lost revenue.
This was revealed during the second quarter earnings call, which encompassed only 16-18 days of Walt Disney World, Disneyland, and Disneyland Paris being closed. It also came at a time when Florida was viewed as a success story and circumstances in California were improving. In other words, it was possibly the peak of optimism about the mid-term future of the parks.
Even at that time, the Walt Disney Company was pretty blunt about the current circumstances and near-term future. The third quarter is likely to be significantly worse (that earnings call will occur on Tuesday, August 4, 2020 at 4:30 p.m. EDT) as both Walt Disney World and Disneyland were closed for the entirety of that period.
There will likely be improvement in the fourth quarter as compared to the third quarter results, but it’ll likely still be worse than the already very bad second quarter. As for when Disney will see a return to its first quarter results? That is likely–quite literally–several years away.
Earlier this week, Cowen analyst Doug Creutz downgraded his rating on Disney’s stock after cutting his financial estimates and price target due to what he now expects to be a “longer impact on parks and film” due to accelerated spread and the prolonged impact of the pandemic. Much of this is predicated upon Disney’s film slate, and the likelihood that theaters will be largely closed until mid-2021.
As for Walt Disney World and Disneyland, the financial analyst expects the “recovery trajectory to be pushed out at least one year.” He said he believes that the best case scenario is heavy capacity restrictions remaining in place until at least mid-2021, along with a meaningful probability that the parks could close again. Consequently, this analyst does not believe Disney’s park profitability will return to last year’s levels until fiscal year 2025.
We’ve been highly skeptical of reopening predictions made financial analysts in the past. These individuals typically have no expertise in theme park operations, but understand the financial contours of the Walt Disney Company and its many business units.
Moreover, this is an unprecedented time, and these predictions run the gamut and often contradict one another. Suffice to say, cherrypicking the views of a particular analyst can validate your own preconceived notions, economic outlook, and general worldview–no matter what they may be–if that’s what you’re seeking to do.
With that said, there is consensus that Disney’s parks have a long road ahead, and recovery will not occur this year or even next. Financial analysts can quibble over whether the full recovery occurs in 2023, 2025, or 2027–but the point remains that it’s not happening in the next two years. And without certainty as to when the recovery will occur, the Walt Disney Company is in a precarious position during the intervening years.
That means less spending. It’s an inevitability that project cancellations, cutbacks, and existing attraction closures will occur at Walt Disney World. The same is true for staffing and layoffs. It’s not really a question of if these things will occur, but when and to what extent the severity will be. (Which is why a quick bounce-back later this year would’ve been great for Walt Disney World.) We’re now seeing this play out, with the first attraction and entertainment closures, plus projects “postponed” and scaled back for Epcot…
As covered in our Mary Poppins Epcot Expansion Info post, Walt Disney World quietly removed some concept art and scenes from the Epcot Experience overview video when the park reopened after its four month closure. Most notably, this included the segments on Spaceship Earth and Cherry Tree Lane in the United Kingdom.
In turn, Disney released the following statement: “As with most businesses during this period, we are further evaluating long-term project plans. The decision was made to postpone development of the Mary Poppins-inspired attraction and Spaceship Earth at this time.”
While the Walt Disney World spokesperson uses the term “postpone” in the statement, we believe the Mary Poppins/Cherry Tree Lane project is cancelled or shelved indefinitely.
The statement also means that Spaceship Earth will not receive its previously-announced multi-year reimagining and will instead continue to operate in its current form. Spaceship Earth needs a refurbishment for reasons unrelated to its show scenes and content, so at some point in the next few years, it will likely need downtime. However, that probably will not include the “story light” projection mapping changes.
There was also speculation that the new Festival Center had been scaled back. This new pavilion, pictured above, was slated to be a three-level structure with some of the most remarkable architectural designs at any Disney park, featuring a plaza level, a middle expo level, and a park that sits in the sky on the top level. The upper garden will provide a stunning elevated view of the entire park and an ideal view of Epcot’s new nighttime spectacular.
Disney released another statement, indicating that the company will “take a different approach” with the new Festival Center. While no details were offered, our expectation is that a Festival Center will be built, but not an architecturally-ambitious three-level structure.
Special events are lucrative business for Epcot and the Innoventions buildings where the Festival Center was to be located have already been demolished, so something will be built in that general location. As something that will directly generate revenue, the idea of a festival center won’t be cut entirely–just its scope and scale.
When it comes to the entire Central Spine redesign, you can expect a dramatically reduced budget–so adjust your expectations accordingly. Think more ‘mulch & grass’ and less things like the various interactive spaces and play areas. So much room for activities!
Next up, Walt Disney World has sent a memo to Cast Members informing them of the permanent closures of Stitch’s Great Escape, Primeval Whirl, and Rivers of Light. The first two are no surprise–we reported on Stitch’s Great Escape being gutted months ago, and even before then, it hadn’t operated in over a year.
Primeval Whirl actually reopened for the busy holiday period late last year, but still had “seasonal status,” which is almost always the kiss of death for Walt Disney World attractions. At one point, both of these attractions had replacement plans that were close to being greenlit. That almost certainly is not the case now, although I’m not 100% sure on that.
Rivers of Light is a bit more surprising. Walt Disney World spent a lot of money developing (and fixing!) this nighttime spectacular for Animal Kingdom in its efforts to keep guests there the entire day. Of that initiative, only Pandora – World of Avatar remains.
For our part, we actually liked Rivers of Light and reviewed it fairly positively. It concerns me that this might be the last big budget non-IP addition at Walt Disney World. However, I can count on one hand how many times I sat and watched the show in its entirety and we hadn’t watched Rivers of Light: We Are One in over a year. So I guess we’re part of the problem. At least the show’s beautiful soundtrack, which will do regularly enjoy, will live on.
Ultimately, even the announcement that Rivers of Light has already performed its final show shouldn’t come as a surprise. More cuts, cancellations, and closures are an inevitability, and some of them likely actually will be surprising. We don’t want to sound all doom and gloomy, but that’s simply the unfortunate reality of the present circumstances. While many Walt Disney World fans have probably yet to process it given everything else that’s going on, the fallout here over the course of the next decade is likely to be on par with or worse than the EuroDisney boondoggle or post-9/11.
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Are you disappointed by any of the cutbacks, closures, or project cancellations that have been announced thus far? Anything else you expect to be shelved indefinitely? Think this will end up being worse than the EuroDisney or post-9/11 fallout? Do you agree or disagree with our commentary? 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!