Disney World is in trouble

Hey everyone,

For the last five years, Disney World gone high-ticket. Prices are way up, customers are way down.

The craziest part: it’s working. They’re making more money, their costs are down, their margins are better. 

But there are some truths that don’t live on a spreadsheet.

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The wrong metric wins every argument

Back in the 70s, Disney's parks were built on a radical idea: pay one price at the door, and money disappears for the rest of the day. 

The idea was erasing class. The Manhattan lawyer and the Connecticut plumber waited in the same line for Space Mountain. This was their vision for the Experimental Prototype Community of Tomorrow — EPCOT. (You can watch the whole movie here.)

But then COVID happened, and capacity limits meant the company was forced to experiment. They quickly realized fewer guests meant higher prices. 

They didn't look back. Fast Pass (free) became Genie+ ($$$). Parking fees appeared. Character interactions scaled back. Older rides got left to break down for weeks while budgets flowed toward flashy new ones that attract high-dollar spenders.

And it meant, of course, that their customers have to be richer. 

Not ultra-wealthy (they’re booking private VIP tours), but upper-middle-class families who might be stretching a little to make a Disney trip work. 

That’s where things get risky.

→ Related read: How incentive structures led Kodak's smart people to make a $20B mistake

Going luxury is a one-way door

Once you tell your middle-class customers they're not the priority, they believe you. And they don't forget.

J.C. Penney and Sears both tried to go upmarket. But when it didn’t work, their old customers were gone for good. 

Disney’s making that choice right now.

To me, the worst part is that they’re doing this to Disney’s most devoted tribe: Millennials. Their parents drove them across six states for spring break. But now that those millennials are the parents, Disney's pricing strategy is making them feel specifically, personally betrayed.

So there’s plenty of rage on social media, but it’s really more about the feeling than the prices. They thought they were part of something. 

And in business, anger lasts a lot longer than loyalty. 

Meanwhile, Universal opened their most ambitious park in decades, trying to vacuum up the people Disney’s pricing out. Eight straight weeks of attendance declines followed at Disney World. 

The pressure is building.

—

To be fair, I get where they’re coming from. 

Disney has billions in debt from buying Marvel, Star Wars, all that stuff, and the parks are the only asset generating enough cash to service it. So there’s a ton of quarterly pressure from investors saying “pull whatever ripcords you have!”

The short-term revenue is the bait in the trap. It solves today’s balance sheet problems, so it’s hard to argue a business case against it. 

But if today’s 10-year-olds don’t get Disney trips anymore, they’re not bringing their kids in 2045. 

Thing is: the decision-makers at Disney today will be long retired by then. So it’s not their problem. 

That's my take, anyway.

Thanks for reading! 

Michael