The Walt Disney Company invests in brick-and-mortar before digital.

The old expression goes something like this: “You can tell a company’s strategy by where it puts its money.” I was recently reminded of this on a family vacation to Walt Disney World in Orlando, Florida.

I recall my keenness to take the Jungle River Cruise on my first trip to Disneyland many moons ago. Fast-forward to today: the first thing my grandson wanted to visit on his trip to a Disney theme park was the Star Wars exhibition. Most important, he wanted to take a ride on the Millennium Falcon. As we queued to board this iconic spacecraft, I pondered the vast amount of money that must have gone into making it a reality.

All good Disney exhibits feel just like you are in the movie itself. But being on a boat on a river in the jungle is one thing; putting visitors on some strange planet getting ready to board a futurist intergalactic space ship requires capital investment on an exponentially grander scale. The experience was out of this world in more ways than one, but the keen finance guy in me could not help but consider it in terms of dollars and cents.

My interest in the Star Wars exhibition as a financial decision rocketed when someone in our travel party opined that the theme park business could be a loss-making segment of the Walt Disney Company – perhaps break-even at best. Could this be true?

Certainly this latest addition to the Orlando location cost an eye-watering amount of money. Moreover, I recall that, just a few years ago, Disney opened its fourth theme park outside the United States in Shanghai (the others being in Paris, Tokyo and Hong Kong). Yet, according to the old financial mantra of telling what a company’s strategy is by where it puts its money, this would indicate that its business strategy was to grow a loss-making part of its enterprise. Why would anyone do that?

A 2018 article in the New York Times revealed that Disney is spending more on theme parks than it did on Pixar, Marvel, and Lucasfilm combined – about $24 billon over the next five years.

When you dig deeper into Disney’s decision, it’s clear that profit is not the only ship in the solar system. While its media networks are more profitable (an operating profit of $6.6 billion vs. $4.5 billion for parks in financial year 2018), outside forces mean the tables are likely to turn. Growth is seemingly the key criterion for investment, not current profit.

The parks’ operating profit represented a five-year growth of 100%, while media’s operating profit fell by 3% from the year before. Moreover, between 2017 and 2018, revenue in the parks business grew by 10%, while the media’s topline growth was just 5%. Analysts suggest that media’s flagging performance is a consequence of the traditional media sector facing pressure from streaming, and consumers cutting their premium cable TV subscriptions in favor of low-cost internet alternatives.

Disney has taken a leaf from those old gamblers Han Solo and Lando Calrissian, and is rolling the dice. It is making a big bet that a bricks-and-mortar live experience is going to outperform its traditional business in movie entertainment. With consumers demanding ever more innovative and immersive experiences, it could be a judicious wager.

Calrissian lost the Millennium Falcon to Solo in a game of cards. The iconic spacecraft – in its physical theme park manifestation – could be a bigger winner for Disney than its celluloid cousin.

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