Digital Theme Park Platforms: The Most Important Media Businesses of the Future
Disney is the envy of every media company, regardless of whether it focuses on film, TV, gaming, music or publishing.
In plain terms, there has never been a more dominant entertainment company, globally or in the US. It has a brand that actually matters to consumers, owns franchises that consumers essentially treat like subscription content services, and operates the biggest star-making platforms in the world. And as strong as this platform was at the start of 2019, it exited the year even stronger. In a matter of weeks, Disney’s brand new direct-to-consumer platform acquired 30MM subscribers.
The deeper we get into the digital era, the more dominant Disney seems to become. After all, it was long expected that the Internet would disrupt dominant media companies and IP via rights infringement and the emergence of myriad user-generated “franchises”. However, one of the biggest storytelling “lessons” in the 20th and early 21th century was that audiences have an unending desire for “more” of the stories they already love. And the Internet has enabled this to an unprecedented degree. You can constantly track production (cast Instagrams, behind-the-scenes featurettes, and leaks on social media), engage in fan communities (message boards and YouTube theory/Easter egg videos), consume endless amounts of fan content (e.g. fanfic and watch-along podcasts), play this content back on demand (e.g. Netflix), and engage in never-ending and constantly updated online multiplayer games (e.g. Star Wars: Battlefront 2). This is a powerful, self-sustaining financial and cultural flywheel. And Disney has many of the franchises that best lend themselves to this model. Many of those they don’t own, such as Harry Potter, have their rights fragmented.
But what is the strongest, most profitable, most defensible part of Disney’s business in the digital era? Its capex-heavy, physical theme parks.
There is no simple way to quantify how important this business unit is to Disney. The financial role is obvious. Disney’s Parks & Attractions segment generates nearly 100% more revenue and 60% more profit than Disney’s studio division (which already generates nearly three times the revenue AND three times the gross margins as its primary competitors). By turning hit films into theme park attractions, not only does Disney generate more “upside” from a hit than its competitors do, Disney’s breakeven point for these films is also much lower. But the parks are much more than this direct financial benefit. There is nothing that can compare to the impact of a child being hugged by her heroes. The ability to enjoy your favorite IP as “you” is unique and lasts a lifetime. Consider, for example, how many families have Disneyland photos of their kids with Mickey or Woody on the fridge. Or how many of these kids have kept those photos decades later (and compared them to their eventual spouse’s version of that same photo).