Monday, October 13, 2008

The Sponsor Subterfuge


In 1979, Walt Disney Productions reported income of $114 million on revenue of $797 million. Although the company made less than that in the fiscal year, it was also spending about $1 billion to build EPCOT Center, the grand effort to rescue Walt Disney's last dream.

At Walt Disney World, its operations, including hotels, recreation, admissions, merchandise and food were bringing in about $370 milion a year, with attendance of about 14 million people. There was only one theme park, The Magic Kingdom, and operating expenses were high. Costs for EPCOT Center, which were originally estimated to be several hundred million dollars, were ballooning.

It made sense, then, that EPCOT Center would take a very successful page out of Walt Disney's creation of Disneyland. Remember, back in 1953-55, Disneyland cost more to build than Disney's company had. So, it sold sponsorships. In return for exposure in what was promising to be one of the biggest tourist attractions ever, companies would cover many of the costs for their ride, show or attraction. In addition, they could have some sway over the content of the attraction. It was a brilliant concept, one that was borne out of desperation but grew into something of a cottage industry. Today, Disney is hardly alone in having a "Corporate Alliances" department, one that primarily ensures that companies like Coca-Cola and Siemens are happy with what they're getting for their money -- and if they're not, to find someone who will be.

If it was an exciting, new and lucrative business a half-century ago, today it's much more difficult. Marketing has become ubiquitous (come on, there are even marketing messages on bananas, for crying out loud!), and it's increasingly difficult to persuade a large corporation to pony up tens, if not hundreds, of millions of dollars to fund a theme-park attraction.

The benefits are obvious. Consumers get to interact with your brand, they see you as a leader, they trust your name, they associate you with something they enjoy.

But 50, 20, even 15 years ago, it wasn't commonplace for consumers to willingly wear t-shirts with your brand name, to spend hours at your online site, to target your message so directly to exactly the consumer you want. You can spend $30 million on a Super Bowl ad that reaches a certain demographic, directing them to your website (where you completely control your message), which prompts them to spend five days playing a "viral" online game that ceaselessly conveys your specific marketing objective.

Or, you can pour $100 million over 10 years into a theme-park ride that reaches a certain percentage of 12 million annual guests, half of whom probably aren't "geo-targeted" to your specifications (that is, they don't live in the country or region in which you do most of your business), and are a mix of demographic targets -- men, women, children, senior citizens, Americans, Brazilians, solvent, insolvent, educated, uneducated, professional, blue collar ... well, it's hard to tell. Plus, the overriding message they're receiving is, increasingly, about Disney, not about you. No longer does Disney want to give over a 20-minute experience to the virtues of Exxon, MetLife or AT&T -- it continues to infuse its own messaging into the experience. "Buy more Disney. Buy more Disney now."

Well, then, it's easy to see why it's not easy to get a sponsor.

And here's the question: Does it matter?

Twenty-six years after EPCOT Center opened its gates, worrying a financially wobbly company and partly leading to the end of many careers, Disney has annual income of $3.3 billion. The Parks & Resorts division generated revenue of $6.4 billion, and had income of slightly less than one billion dollars -- $946 million. That's a far cry from the weak, desperate company that opened EPCOT Center.

In 1982, when EPCOT Center opened, there was no way Disney could afford to shoulder the costs on its own. It absolutely needed the involvement of major corporations, and the beauty is that the park's original design quite literally depended on that involvement. Those companies, once the pinnacle of American industry (AT&T, GM, Exxon, GE, United Technologies, Nestle), are in most cases shells of their former selves. They have grown, or shrunk, changed, merged and morphed so many times that in many cases it's not even easy to really know what they do anymore. Kind of like Disney itself.

But the concept was clear: Those major American corporations would have the opportunity to show the world the virtues of American ingenuity and innovation, and would shine a light down a path toward a better tomorrow.

Obviously, EPCOT Center has changed.

It's not clear, really, exactly what Epcot means to be, but one thing is clear:

The place is falling apart.

OK, maybe that's a tiny exaggeration, but have you noticed the weather-beaten wooden slats that form a rarely (ever?) used stage at the south end of the Fountain of Nations? Or the almost-creaking Audio-Animatronic figures in the Universe of Energy? Of course, you've seen the (literal) shell of a building that used to be the Wonders of Life, and hopefully you've very recently read about the 20-year-old film in the run-down theater at the end of Maelstrom in the Norway pavilion?

The commonly used excuse that Disney lobs out is that these attractions (save Fountain of Nations, which perhaps could use one) now lack sponsors. And lacking sponsors, it is difficult or impossible to maintain the attractions and improve them.

I don't buy it, not for a second.

In 1955, 1971 and 1982, sponsors were critical to getting theme parks built. Disney couldn't afford it.

But today, we're talking about the same company that spent $19 billion to buy Capital Cities/ABC Inc. -- and that was 13 years ago.

We're talking about the same company that spent tens of millions of its money (in conjunction with Walden Media) and then lost it on Prince Caspian.

We're talking about the same company that is probably still trying to realize a return on its $3 billion investment in Fox Family (now ABC Family).

We're talking about the same company that is pouring $1 billion into the failed Disney's California Adventure, hoping it will make a silk purse out of a sow's ear.

You're telling me that a company that realized profit of nearly $1 billion in its theme parks division alone can't afford to make an investment of $400 million or so into the only Epcot in the world?

Of course, Disney can say that Epcot doesn't really need help -- plenty of people visit it just like it is.

But consider this: For the full year in fiscal 1982, Walt Disney Productions reported that attendance at Walt Disney World was 12,560,000 people. One year later, attendance soared to 22,712,000. (Back then, Disney used to report Florida and California attendance figures. What a lovely concept!) That means EPCOT Center brought in 10,152,000 visitors in its first year.

Last year, Epcot's attendance was estimated at 10.9 million. That's an increase of 7% over its attendance 25 years earlier.

On one hand, the argument can easily be made that if attendance has essentially held steady all these years, people must be satisfied.

On the other -- there's no real reason to go to Epcot. The technology isn't particularly exciting, the rides aren't particularly interesting, there's no comprehensible "theme," and other than drinking your way around the world, well, what else is there, really?

Here's what I'd argue: EPCOT needs a massive infusion of innovation, creativity, futurism, global awareness and compelling content. And Disney will have to fund it.

But, Disney says, we can't do anything without sponsors.

Wrong. Twenty-five years ago, that was true.

But a lot has changed in a quarter of a century, and it's time for Disney to suck it up and start taking responsibility for this extraordinary, neglected theme park.

Sponsors or not.

15 comments:

Future Guy said...

It's interesting how Disney insists that EPCOT needs corporate sponsors, then spends who-knows-how-many millions of its own money to overhaul the Seas pavilion (which remains sponsor-less, by the way). And it doesn't operate seasonally, either.

On the other hand, Disney has been hurt by the recent case of economic diarrhea that hit the world economy. JimHillMedia.com is reporting that they've actually postponed improvements to Fantasyland in the Magic Kingdom. That's huge, as I imagine that Fantasyland is at the absolute top of the pecking order as far as those things go.

Still, the Seas rehab shows that, given a "normal" economy, Disney can spend the money for improvements when they want to. But, since all megacorporations these days are run by a bunch of wingtipped executives sitting around a conference table making bad decisions, will they ever want to?

Anonymous said...

Disney is not being hurt by the economy.

Disney's INCOME is being hurt by the economy -- meaning that it is worried it will make less money than before.

It wasn't the shareholders or guests who decided to overbuild hotel rooms and the most expensive infrastructure imaginable (roadways and parking lots instead of monorails, shops and restaurants instead of attractions). The cutbacks Jim Hill has chronicled unfortunately showcase Disney's dread that it might see a decline in revenue and therefore a decline in income. But even in a worst-case scenario, it's unlikely that Disney would face a loss in its parks division. It's just that the executives can't stand the idea of not getting their fat salaries and big bonuses, so they'll cut back on the guest experience and cast member hours to make up for it.

Future Guy said...

I'm sure that the fear of shrunken executive bonuses might be partially to blame for the postponement of the Fantasyland improvements, but the freeze in the credit markets and all the stock market unpleasantness is certainly a factor.

I'm no economic expert, but I'm pretty positive that Disney (nor Honda, Coca-Cola, or any other blue-chip company) doesn't have fifty zillion dollars in a big vault somewhere. Their money is invested into all kinds of other assets, and the drastic shrinkage in value that such assets have seen over the last month or so makes it fiscally dicey to drop tens of millions on large-scare renovations. It's not just Disney, lots of large companies are re-thinking large projects right now; either suspending them or cutting them completely.

Of course, EPCOT has been getting the short end of the stick for a long time. The "sponsorship" thing is just an excuse, as Epcot82 pointed out.

Brian Place said...

Interesting article -it seems we were just starting this discussion a few days ago... :)

Disney himself was a master of making corporate behemoths "palatable" to the masses. He loved doing it, and EPCOT was always meant to be a showplace of new ideas *for the corporations of the world*. I'm really not sure how you can take the sponsorship theme out of EPCOT.

Disney does a reasonable job of running some things unsponsored, but even many attractions at the three other parks in WDW are sponsored. I think Disney really shines when they team up with a great big company with tons of resources (i.e. GE in Horizons) - they articulate the corporate message in a way that is much more compelling than if Disney tried to go it alone on the attraction. The sponsor gives them direction & resources they would not otherwise have. Both Disney and the sponsor can benefit greatly from a properly arranged partnership.

I would hate to see EPCOT go with fewer and fewer sponsors. Sponsors "buy-in" to EPCOT--basically saying "we approve of this park and its message and want people to come visit." It gives them partial ownership of the park--and it means it's in their best interest to make sure their message is getting across. Sponsors even keep Disney in line - if Disney doesn't keep up maintenance or runs a shoddy show, the sponsors can *contractually* complain about it.

Though I hate the phrase (because it's usually wrong,) in this case I think it's true: "it's not just about the money." It's about building partnerships & creating a much richer & more faceted experience that wouldn't be possible if Disney were to simply do everything themselves.

Brian Place said...

"Here's what I'd argue: EPCOT needs a massive infusion of innovation, creativity, futurism, global awareness and compelling content. And Disney will have to fund it."

I think there would be a lot more leverage in building a "task force" within EPCOT who can actively promote external sponsorship. My guess is that there are not really dedicated resources within EPCOT management actively searching for new sponsorship of attractions--I am totally guessing here but I am assuming the status quo is "wait for a company to approach us for a sponsorship." Probably they were a little panicky when AT&Ts contract ended with SSE and put together a big push to land Siemens, but has there been a lot of real progress since then?

Disney execs, if you're out there, I would love to travel the world finding new sponsors for EPCOT. :)

Zach said...

Understandable given your focus, but in the real world all four parks are competing for the same resources, and all four need work. MK has attractions in desperate need: CBJ, Space Mountain, etc, not to mention the state of Fantasyland. DHS continues to be a mess that not only needs updates, but is lacking content. DAK is beautiful but is also lacking in content. Yes, Epcot needs some loving, but it is getting some. Soarin, The Seas, Mexico, Canada, SSE, and now the upcoming bullet train in Japan, whenever it arrives. Not to mention the massive investment in Mission:Space. It has had two countries get new attractions, three pavilions get completely rehabbed and updated, and one major new E-ticket. Not all of these things have been successful, but you can't say the powers that be have been ignoring Epcot.

Future Guy said...

Japan's getting the bullet train? When was that announced?

Epcot82 said...

I can say it, Zach, and I will. They look at Epcot as another "Disney Parks" resource -- take a concept and put it there even if it doesn't make sense. Look at Kim Possible. Donald Duck in Mexico. ("Hey, we need to move more Donald plush, so let's give him a ride. But where? Oh, put him back with those Mexican singing birds and shove it into Epcot. We'll say it's an upgrade.")

Maybe not "ignored," but abused and mishandled.

The "massive investment" in Mission: Space has, on all of my visits in the past three years, resulted in 5-minute waits and empty seats. At least everyone COULD go on Horizons. Last time I was at Epcot, there were more people waiting outside the attraction for riders to finish than were in the queue area.

But as long as the P&R division makes its numbers, Disney doesn't seem to care much about actual creative content. They want to please the analysts.

Gives new meaning to "Not just Wall Street, but Main Street"!

Anonymous said...

TAKE DOWN THE WAND PICTUREEEE!!!!!!!


*dies*

=p

Dan said...

I just returned from a day at Epcot, the Studios, and the Magic Kingdom. Since my first visit in 1984, I've always considered Epcot my favorite park. No more. Disney needs to inject some serious money into the park to upgrade stale attractions and add new ones. It's a shell of its former self, and keeps getting worse.

Anonymous said...

I long for the days when just about every attraction had a corporate sponsor - it not only helped Disney fund the attractions, but it made Disney accountable to someone else for the upkeep of the attraction.

I was fortunate to be work in a unique position at Innoventions when it opened. While I was a Disney employee, my position reported directly to the exhibit sponsor, and I was amazed to see Disney's treatment of the sponsors. Disney adopted a "You need us more than we need you" attitude that spread beyond Innoventions walls and crept into other pavillions with sponsors. I know that this treatment did not set well with many of the sponsors and they simply pulled out rather than be bullied by the Mouse.

When/if that attitude changes, and Disney starts giving companies real value for their sponsorship dollars, then hopefully sponsors will be flocking back to the American parks like they do in Tokyo.

Hlinskona said...

:sigh:

Yes, the film at Norway is over 20 years old now.

But if they ever do a new one, I hope that statement of the spirit of Norway is in the people remains.

It's a spiritual thing for those of us who walk the Asatru way.

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