Disney Parks' New Theme: Uncertainty : Growth Plans Meet Protests, Recession, Declining Tourism


While the audience inside Washington's Uptown Theater was voicing its resounding approval of Walt Disney Co.'s new animated feature, "The Lion King," company Chairman Michael Eisner was getting a very different reception outside: 100 sign-toting demonstrators were chanting "Disney go home!"

The purpose of the recent protest was to urge Eisner to shelve plans for the controversial Disney's America theme park near their homes in suburban Virginia.

The homeowners are being joined by an unlikely coalition of civil rights groups, farmers and historians such as C. Vann Woodward, who denounces the way "Disney and its Hollywood investors" want to commercialize ground that has "soaked up more of the blood, sweat and tears of American history than any other place in the country."

The troubles in Virginia point up the mess that is being made of what Eisner proclaimed would be "The Disney Decade" of new and expanded theme parks.

Tinkerbell's wand continues to work magic on the company's animated movies and its forays into enterprises as diverse as the Broadway production of "Beauty and the Beast" and the Mighty Ducks hockey team. But the theme parks--although they are still growing--are hardly the happiest places on Earth.


* In Southern California, the company disclosed last month that it will wait until at least next year to decide whether to build a $3-billion resort next to Disneyland in Anaheim. That project is already two years behind its original schedule, and Disney says it remains too financially risky to build.

* In France, the troubled Euro Disney project has fallen $1 billion in the red since its opening in April, 1992, and the losses there are continuing to pile up. Disney, whose half-share in the project cost it $514 million last year alone, is hoping to reduce its exposure by arranging for a Saudi prince to help bankroll the park.

* In Florida, construction has yet to begin on a fourth theme park. The park was reportedly going to be a newfangled zoo, but it ran into opposition from environmentalists concerned about an existing turtle habitat. A group of them picketed a Disney annual meeting dressed in turtle costumes. Disney responded by creating a "wilderness preserve" on its vast Florida holdings.

And while Disney shifts gears between expansion projects, attendance at Disneyland in Anaheim and Walt Disney World in Florida has been sagging.

The two parks have responded by encouraging older workers to retire and by investing in lavish new rides and attractions. For the first time, however, they face strong competition from the Universal Studios and Six Flags theme parks, and also from new family-friendly gambling resorts in Las Vegas.

The one continuing bright spot is something in which the company has no significant ownership interest: Tokyo Disneyland. That is owned by a Japanese company that pays licensing and other fees to Disney but keeps the bulk of the profits for itself.

Disney officials say they expect attendance at the company's parks to rise as the U.S. and European economies improve. They also say the stops and starts of the new theme park developments are normal for projects of so large a scope.

"You have to be very patient in this industry and be a long-term player," Disney theme park division President Judson C. Green said. He noted that from conception to opening day, Euro Disney took about a decade to create.

The theme park troubles are disappointing, but they are substantially less important to Disney's bottom line than they were a decade ago. When Eisner took over in 1984, the parks accounted for more than three-quarters of Disney's operating profit. Last year, the division contributed less than half, or only 13% if Euro Disney losses are included.

Said Eisner: "Theme parks are still very important to us." Industry observers agree, but they note that the parks are stable, mature businesses with less opportunity to grow than other endeavors.

"It will become a smaller part of the mix," predicted Jessica Reif, who tracks entertainment companies for the New York brokerage Oppenheimer & Co.

There was nothing small about Disney's vision for its theme parks in the 1980s, when there seemed to be a never-ending parade of free-spending baby boomers and their eager-to-be-entertained offspring streaming through the gates.

Such demand allowed Disneyland prices--now $31 for an adult pass--to rise 14 times during the past decade. Eisner proclaimed "The Disney Decade" and vowed to build four new theme parks by the year 2000--two in Europe, one in Florida and one in California.

Then the world changed. First came the Persian Gulf War in 1991, bringing international tourism to a standstill. It was followed by recession and disasters in California and Florida. Tourists shied away from Southern California after the Los Angeles riots and earthquake. Florida became better known for Hurricane Andrew and as a place where tourists are slain than as a holiday haven.

As demand fell, Disney took the rare step of laying off about 300 park workers. Equally unprecedented have been discounts, which appear not to have led to substantial rises in attendance.

Through it all, Disney has continued to invest in new attractions at its parks. This summer, for instance, a new "Twilight Zone Tower of Terror"--featuring a drop down an elevator shaft--made its debut in Florida. Disneyland has a new parade this summer, and a big new ride is planned for next spring.

Other entertainment giants, meanwhile, have been angling to catch part of the Disney franchise.

MCA's Universal Studios division is planning a huge resort in Florida and has already seen big gains from its "Back to the Future" rides on both coasts. Time Warner's Six Flags parks, which include Magic Mountain in Valencia, have spent lavishly on new roller coasters.

Las Vegas has seen the opening of the first theme park on the Strip at Kirk Kerkorian's MGM Grand Hotel, and other new resorts have also spent generously on entertainment for children.

Against this backdrop, only one of the four parks laid out as part of Eisner's Disney decade was built: Euro Disneyland.

Plans for a second park in France are on hold while investors, bankers and Disney try to stave off further damage at Euro Disney. There is no word yet on the new Florida park.

Just as it appeared Disney might be abandoning all its plans, it turned its attention to yet another project: the history theme park that would be built 35 miles west of downtown Washington in Virginia.

Here, Disney had a project it actually wanted to build. And it was easy to see one reason: At $650 million, Disney's America is a bargain compared to the cost of building California and European resorts.

First, though, Disney must conquer protesters such as Virginian Sylvia Gilman. She grouses that "the red carpet gets rolled out everywhere" when Eisner comes to town, and "I wish somebody would listen to me when I say we don't want this park."

Then there are the historians, and even some in Congress, who say they are worried about the park's proximity to Civil War battlefields. The site is five miles from the Manassas National Battlefield Park.

"We don't want them to put a theme park there and destroy real history," said Richard Moe, president of the National Trust for Historic Preservation.

Many of the critics, Eisner says, are exclusionists bent on stopping all development in Prince William County, Va. "They have a right to their opinion. I just think they are overly sensitive," he said, adding that the opposition took him by surprise.

"Had we known there was going to be a public relations issue here, we would have prepared more," Eisner said.

Given the trouble encountered in Virginia, the experience raises questions as to whether Disney--or any major theme park company--will be able to build a large-scale resort in the future without significant opposition.

But industry experts say to give it time; they believe the Disney touch is still intact.

"I believe they will hold their appeal for a couple of decades if the Disney organization is as innovative as they have been," said George Wade, a veteran amusement executive.

Lagging Theme Parks

Though the Walt Disney Co.'s theme parks are still growing, the division has accounted for less and less of Disney's total operating income and revenue during the past 10 years primarily because of the stellar performance of Disney's film and video business.

1984 1993 REVENUE Theme parks 75% 40% Filmed entertainment 16.8 43 Consumer products 7.5 16.6 OPERATING INCOME Theme parks 76.7% 43.3% Filmed entertainment * 36.1 Consumer products 22.3 20.6

* Less than 1%

Note: Totals may not add up to 100% because of rounding.

Source: Company reports

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