Why Disney's $60bn In Experiences Is A Great Long Term Move
The largest portion of long term value capture of intellectual property could be in experiences. It is also an area where Disney faces the least competition.
Troy Benton, September 21, 2023
First, the investment is consistent with Disney's goal of being the world's leading entertainment company. Theme parks and cruise lines are two of the most popular forms of entertainment, and Disney is a leader in both industries. By investing in these businesses, Disney is positioning itself to continue to grow and attract new customers.
Second, the investment is capitalising on the trend of rising consumer spending on experiences. Consumers are increasingly willing to spend money on experiences that create lasting memories, such as vacations and trips to theme parks. Disney is well-positioned to benefit from this trend, as it offers a wide range of high-quality experiences for all ages.
Third, the investment is capitalising on the trend of globalisation. The theme park and cruise line industries are global businesses, and Disney is a global leader in both. By investing in these businesses, Disney is expanding its reach into new markets and attracting new customers from around the world.
In addition to the above factors, the investment is also a good strategy because it:
The Long Tail/Lifetime Value Of Intellectual property: Disney has a vast library of intellectual property, including characters, stories, and brands from its movies, TV shows, and other entertainment products. This intellectual property can be monetised through theme parks and cruise lines in a variety of ways, such as through new rides, attractions, merchandise, and entertainment offerings.
Look At All Of Disney’s Businesses And Experiences Stands Out As Unit With Least Competition: The theme park and cruise line industries are relatively less competitive than other industries, such as streaming and TV and movie creation. This gives Disney a lot of flexibility in terms of pricing and product development. This heavy investment also widens the gap between Disney and any potential next option and disincentivizes anyone entering it in the future.
Value Capture Across Whole Spend On Experience: Think from a consumers wallet perspective. The moment they start thinking about going to a Disney experience presents maybe 10s of revenue opportunities. The hotel stay is obvious but car ride and/or parking at airport could eclipse what a family spends on Disney+ per year. Disney's theme parks and cruise lines business has a number of ancillary markets, such as hotels, retail stores, and restaurants. These ancillary markets can generate significant revenue for the company. The better way to look at it, is that the potential of all spend before, during and after that experience is served by the Disney ecosystem.
Overall, I think Disney's $60 billion investment in theme parks and cruise lines is a really smart strategy in terms of capturing the largest portion in the lifetime value of intellectual property.