Furor from devoted Disney fans has spilled to Wall Street, but will a boost to earnings keep Bob Chapek as CEO?
Furor From Annual Passholders
Since Bob Chapek took over the reigns from former Disney CEO, Bob Iger, it’s been a rocky road. Navigating out of the ever-changing COVID-19 restrictions meant that Disneyland resorts in California and Walt Disney Resort in Orlando faced different policies, procedures, and reactions from the public.
However, in addition to reduced maximum capacity (as low as 25% for the Magic Kingdom theme park in Orlando), the parks laid off some 28,000 cast members, reduced benefits, and added criteria that exceeded the requirements by the cities and states in which they operate. Here are some of the key reductions of service that were implemented during COVID:
- Park hopping (this may still be possible but requires a reservation at the first park and is subject to availability after 2 PM, is not guaranteed and is usually limited to one daily)
- Fast Pass (ability to schedule a no-wait ride)
- Included Photo Pass (digital copies taken by professional photographers in the parks)
- Ability to become an Annual Passholder generally
Following a return to nearly pre-COVID conditions, reservations have stayed and then came the delayed introduction of “Genie+.” This daily $15/person add-on that restored some Fast Pass ride access, Photo Pass, but added “Lightning Lane”, a Fast Pass alternative for the Disney parks most popular rides for an additional per ride variable charge typically about $9-15/each.
Prices have gone up, annual passes still have not returned outside of the “Pixie Pass” a local-only weekday Pass with heavy limitations.
According to feedback online, “the magic is gone.” Supply chain issues have affected the usual sterling quality of Disney products, and passholders have expressed outrage at the endless cash grabs for what was (and remains) an already very expensive experience for families.
Wall Street and Main Street Take Notice
Prior to becoming CEO of the Walt Disney Company, Chapek was chairman of Parks and Resorts. Some have stated that changes like Genie+ were in the works prior to Chapek taking over as CEO, but that would indicate that he was at the helm (and he was) during their development.
Wall Street had deteriorated the stock price of DIS from an all-time high of just over $203/share to $133.60/share prior to last week’s earnings call.
Rumblings from faithful Disney fans are nothing to ignore, but any change will always be met with disdain from their biggest fans.
However, some mainstream swell began to gather in the last few weeks. A Change.org petition to “Fire Bob Chapek” has garnered more than 103,000 signatures. The New York Post covered a movement to remove him from the board of directors on February 9th. Abigail Disney, daughter of Roy E. Disney, debuted her film at Sundance last month calling for a boycott of Disney parks to help cast members secure better working conditions. Former Chairman and CEO, Iger, declined calls to return to the helm and avoided questions about working conditions in the film but applauded Dolly Parton for adding books, tuition, and fees to the benefits for Dollywood employees.
Positive Earnings Growth May Keep Chapek Installed
Unfortunately for loyal Disney fans, the revenue moves and reduced benefits is helping earnings. Visitors to parks around the world including the six-park complex at Walt Disney World found that one-third to one-half of guests are paying for Genie+ despite higher ticket prices. However, a small number of visitors are Annual Passholders so the numbers may be misleading.
In the previous quarters, Parks, Experiences, and Products performance sagged but has now come back stronger than ever. Investments in home entertainment and streaming services still operated at a loss, and Chapek indicated during the earnings call that Disney+ prices would be climbing.
Investors don’t care about happy customers so long as the registers continue to ring. One would say the two go hand-in-glove, but to this point, that doesn’t appear to be the case. Despite a vocal and public push for Chapek to be replaced including Disney shareholders and Disney regulars, based on the last quarter his replacement seems unlikely. To the detriment of Disney visitors, Chapek will likely be emboldened by surviving any attempted ousting and buoyed by the financial performance of the company.
What do you think? Will Chapek remain in charge of Disney? If so, will he further degrade the product or will customers, in fact, vote with their wallets in support for his policy changes?