Club Disney to Close Amid More Belt Tightening
Walt Disney Co. on Tuesday pulled the plug on its fledgling Club Disney entertainment centers, after concluding that they won’t generate the returns the company wants.
Disney, which will close the clubs Nov. 1, has been tightening its belt amid sagging earnings and a lethargic stock price.
A number of the Burbank-based entertainment giant’s operations have come under scrutiny by company officials evaluating whether they are worth the capital being invested.
Other operations include its Anaheim Angels baseball and Mighty Ducks hockey franchises. But recent efforts to sell the sports teams to a group of Orange County investors have stalled.
Disney opened the first Club Disney, a 24,000-square-foot center in Thousand Oaks, two years ago amid a blizzard of hype that included a visit from Chairman Michael Eisner.
The clubs, which charge $8 admission, resemble large play centers, with such features as an obstacle course, large slide, arcade games, food and, more recently, a vine so kids can swing like Tarzan.
The idea was to create neighborhood centers that resemble small theme parks. In addition to providing entertainment, the clubs could be used to promote the Disney brand, its films and merchandise.
But Disney opened just five clubs, and never took the concept much beyond the prototype stage. In addition to Thousand Oaks, the company opened one club in West Covina, two in Arizona and one in Colorado.
“Given the current investment perspective and the simplification going on at Disney, the regional theme park strategy didn’t fit,” said analyst Jeffrey Logsdon of Seidler Cos. in Los Angeles.
Disney isn’t the first company to have trouble trying to establish a chain of entertainment centers for children.
Discovery Zone, once backed by the Blockbuster video chain, never took off as envisioned. In April, Discovery Zone filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The filing was the second by the company in three years.
Overhead from real estate and employee costs can be high at such centers. Analysts also have questioned how much repeat business can be generated, given the large amounts of money parents spend on admission, food, video games, merchandise and other items during a typical visit.
Disney said it will transfer employees to other Disney operations, and will offer refunds to people who bought tickets and annual membership passes or booked events. Disney said it will donate leftover supplies and equipment to school districts.
Disney shares fell 69 cents to close at $24.94 on the NYSE.
