When Success Isn't Enough: What's Holding Back the Disney Parks

Disney's U.S. theme parks are discovering the flip side of being part of a massive media conglomerate.

Typically, being one division of a big company delivers a lot of benefits for theme parks. They have easier access to the characters and franchises from their owner's movies and TV series. They can promote themselves on their company's TV shows and cable channels, too. And big companies have access to a lot more money to pay for big new attractions, hotels, and other expansions than independent parks can raise.

But as the rest of the company gives to the parks, the rest of the company can take away, too. That's what appears to be happening at Disney now.

Let's be clear. Disney's U.S. theme parks — at the Walt Disney World and Disneyland resorts — are doing very well. Attendance and revenue are up, according to the company's latest financial reports, driven in part by the new Star Wars-themed events at Disneyland and Disney's Hollywood Studios. Disney's movie studio is doing great, too, thanks to the latest episode of Star Wars and a string of other hits in the past year.

So what's the problem? The parks outside the United States in which Disney owns a stake aren't doing nearly as well. Attendance at Disneyland Paris is down, and Hong Kong Disneyland posted an annual loss. (Disney does not own the Tokyo Disney Resort, which is owned and operated by the Oriental Land Co., under license from Disney.) And building Shanghai Disneyland continues to drain money from Scrooge McDuck's vault.

(By the way, here's an interesting little note buried in that story about Hong Kong Disneyland — it appears that park will be getting the Hyperspace Mountain overlay of Space Mountain that debuted at Disneyland last fall, too. Maybe that will help attendance, like it did in California?)

But Disney's bigger problem is ESPN. The company's former cash cow has been losing subscribers as more and more television viewers "cut the cord" and give up their cable subscriptions in favor of streaming services. ESPN has a streaming deal with Sling TV, but I tried that service last year and it was terrible — delivering little more than buffering warnings during popular events. (I cancelled.) Analysts are concerned that Disney doesn't have a plan to replace the revenue it used to earn from ESPN during the peak of its popularity, despite all the money that Star Wars is earning at the box office, and Disneyland and Walt Disney World are taking in from their operations.

That's why the company's stock has been down over the past few months, and now cast members in the park are buzzing over leaks that Disney will be cutting hours and slowing hiring in the U.S. parks to save money to help plug the gap between earnings and expectations created by the underperforming foreign parks and ESPN.

Basic economics would suggest that when a company is doing well — bringing in more customers, who are spending more money — the company would be more profitable and able to afford to increase its spending, wages and investment... and not have to cut back. But with companies as large as Disney, nothing about their operations or finances is that simple anymore.

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