The Power of Policy

The power of policy. In this episode, we discuss Chapek's latest debacle, the impact of rising oil prices, Tokyo Disease new pass policy, the cancellation of IAAPA Expo Asia, and the latest from Disease CFO

Philip: From our studios in Tampa, FL and Los Angeles, CA, this is Green Tagged Team Park in 30. I'm Philip and I'm joined by my illustrious co-host, Scott Swenson of Scott Swenson Creative Development.

Scott: Hello everybody, welcome back for another week of information and discussion, and perhaps even Scott and Philip arguing. I don't know, it may happen, it could happen, stranger things have happened.

Philip: It's definitely my favorite part when that happens, we just argue for fun. Speaking about arguing for fun.

Scott: That was the most awkward transition you have ever made, because I know where you're going.

Philip: It is not the most awkward transition. 

Scott: OK, that's true. It's in the top five though.

Philip: Yeah, so our first set of stories here, which will take the majority of the show, all had to do with the impacts of different policies on the attractions industry and how different people are choosing to make policies. Of course, the first one, which is probably the top headline of news from past week, is the whole Bob Chapek, and we Don't Say Gay Bill debacle. The most recent article on this we're going to link to from the Verge, which I feel like does a great job summarizing the whole escapade.

"Facing a tidal wave of backlash following Disney’s failure to speak out against Florida’s “Don’t Say Gay” bill, Disney CEO Bob Chapek formally apologized to employees today for the company’s failure to support its queer community." In an internal memo he addressed the widespread criticism previous actions in that, and he said:

QUOTE - https://www.theverge.com/2022/3/11/22973199/disney-bob-chapek-apology-dont-say-gay-bill-florida

“Thank you to all who have reached out to me sharing your pain, frustration and sadness over the company’s response to the Florida ‘Don’t Say Gay’ bill,” Chapek wrote. “Speaking to you, reading your messages, and meeting with you have helped me better understand how painful our silence was. It is clear that this is not just an issue about a bill in Florida, but instead yet another challenge to basic human rights. You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry.”

Philip: The article that we'll link to explains kind of the background of it a little bit more, and I think the big takeaway is that for now at least, they are stopping funding for political candidates in the area, which I think amounts to $300,000 that they were giving to the people that supported the bill. So, anyway, Scott!

Scott: Well, being in Florida, I will tell you... So, as a member of the LGBTQ plus community this hits me very close to home, but I also want to keep it in perspective. Basically, yes, this is the wrong thing to do. This bill is horrendous and inappropriate. However, does it impact me directly in my life? Probably a tiny, tiny bit. Where it does impact people in Florida are, I have friends who have kids, who are same-sex parents who have kids. They're going to be taught in their schools that there's not a word for what their parents are--their same-sex parents. That is going to be ignored, that part of their culture is going to be erased.

Where my heart also breaks is, I know 10-, 11-, 12-, 13-year-olds who have come out as they either identify as gay or genderfluid, and in a trustworthy setting of a school, or what is supposed to be a trustworthy setting of a school, they're going to lose the ability to have words to define themselves. It is going to make it, more and more difficult for these kids to understand the feelings that they're having. 

I don't care what you call me, if you want to call me gay, call me gay, that's fine if you want to call me, Scott, that's probably better, I actually prefer that. Call me what you will, but don't take away the words that help define who people are to children. I had a friend of mine who is cisgender, male lead household, the mom in the household was trying to explain to their kids about some friends of theirs who are same-sex parents, and she said it was so nice to use the word gay because that way I didn't have to explain what they did, because that's language a young child can't understand. 

If you take away the words that they can, then it's just going to make it far more difficult for people in the future to either identify who they are, or to be compassionate about who their friends are, or their family members. So, is it going to impact old gays like myself? No, it probably isn't. Is it going to impact the next generation? Absolutely, and that's shameful. 

I applaud Chapek for coming out and saying, "you know what, we were too silent." Mainly because, again, being in Florida the Disney organization in Florida has a very strong LGBTQ plus workforce that is part of Disney, and they are parents, and they are parents of young children, and that's who this bill is going to affect.

So, I hope that more and more people understand that this is not about trying to get rid of Pride, this is trying to get rid of Pride for young people. The word Gay is not a bad word, and there are far, far worse words in our language.

Philip: Yeah, there are worse words.

Scott: So, I think that this bill has been uniquely positioned to get it passed so that no one feels excluded. They're not excluded, they're erased, and that's what infuriates me about this. But I will say that I am thrilled that Bob Chapek has come out and recognized that Disney was horrendously silent, and I am very proud to see that the funding has been pulled from the people who support this. But I think what this all comes down to is, in this world we've gone through such a time here where we've been divided that it means we have to somehow make a stand or we have to make our position clear. We can't just say no, because by doing nothing you are helping the opposition. I think that is a really important point that everybody should take from this particular story.

Philip: I am infuriated by Chapek, but I'm trying to figure out how much of that is just like the position he came into and how much of it is like what the other shareholders and other people. I feel like a lot of it is he's probably a straw man for a lot of stuff happening, and I think that's kind of his job, But it is infuriating. This whole thing is infuriating to me on levels.

I'm trying to empathize where I do kind of understand, and to your point, Scott, you just said, it's kind of an impossible situation now that people find themselves into, and that's what makes it such a shame. Their original statement, it's not like they said nothing to be clear, they did put out a memo originally, so the order of events is: the bill got brought up, it was of large concern before the bill went to a vote, the employees of Disney did ask Disney to do something, Disney gave a response--which was that they didn't want to do anything--and I think that was the problem.

I don't even think there's much flaws with the response they gave. In the original response, he said:

QUOTE - https://www.theverge.com/2022/3/11/22973199/disney-bob-chapek-apology-dont-say-gay-bill-florida

“corporate statements do very little to change outcomes or minds,” adding that “the best way for our company to bring about lasting change is through the inspiring content we produce, the welcoming culture we create, and the diverse community organizations we support.”

Philip: And that actually, 10-15 years ago, that would have been a fine answer, as in kind of being like, "politics is politics, but our company is our company, and they are separate and we make it good at our company. This is our job in the world, telling stories that involves these characters." Except where we are now is very different as a culture, and that's not just going to fly anymore, clearly from this, where you're not going to be able to just kind of dip out of the conflict and by not taking a stand.

The other criticism that Disney got for it is, a lot of people said basically, that is not true because a lot of their animations are kind of "whitewashed" of just getting rid of queer characters and writing them out of the scripts. So, it made it even worse because then you got a lot of the animators that were like, "you know what? Here's all the characters we wanted to include in these Pixar films, but that management took out, because they didn't want queer people in," and that is really, really, just worse. 

Scott: That's a whole separate issue. You cannot compound those two together, that's unfair.

Philip: It is a whole separate issue, except that he literally said, “the best way for our company to bring about lasting change is through the inspiring content" So, he literally drew them himself and then they're like, "actually, you know, this content is not that." So, what I'm saying, my overall point is, there was really not a good way for him to navigate through this. It was an impossible situation from the get-go, because no matter what you did, somebody is going to be angry with you. That's the problem with, as attractions, us trying to navigate these public spheres.

I think a lot of it has to go back to what we talked about several times previously, which is there's low trust in so many organizations now, and some of the highest trust that exists is with companies. Which is an advantage for us, because it means that our customers trust us. It’s also an advantage because we can be experts, the aquarium, the zoo, and the theme park can be experts in animals, in storytelling, and in the fantasies that we create. But now the downside of that is these types of situations. Since we are high trusted brands and we're expected to be experts in this when things come up in this political sphere, we're expected to comment on it, clearly. I think that's kind of where the Disney model, they were thinking that they could stay out of it, and clearly, they can't.

Scott: Well, to me the challenge is they said they were staying out of it and yet now we're finding out that they were supporting political figures who supported this bill. So, they weren't in essence staying out of it.

Philip: But also, everybody does, I mean, I feel like that's standard practice. I think a lot of most public companies do donate to political entities on both sides, and I'm sure that pretty standard.

Scott: They're hedging their bets.

Philip: Everyone hedges their bets.

Scott: I guess my point is, and you've heard me use this analogy before, training animals and training humans is exactly the same thing, you use positive reinforcement. When they do something good you tell them you did good. You may have screwed up before, but you did good here. That's my whole point with Chapek, you know he could have continued to just let this pass and let it go, because the bill went through.

Philip: He did do the right thing. To demonstrate how wrong his initial stance was, he did do the right thing by literally just saying they didn't support it, which is initially what he said would not matter. You know, initially, he's like words don't matter, “corporate statements do very little to change outcomes or minds,” and yet, when he apologized everybody was happy and what it did was change.

Scott: But it didn't change politics. He was right in fact that it didn't change politics. I want there to be hearts and flowers every time a company does something that I agree with. But the reality is you know his first statement was accurate, his second statement is accurate. It's just you have to make sure that its interpretation is there and that you are recognizing who your audience is. My guess is that because Disney has so many LGBTIQ plus team members, cast members, my guess is that they went, "Whoa, wait a minute. We're supporting you as a company and you can't stand up for us," when in essence, he was trying just to not stand up for anything.

Philip: Yes, correct, and I think that is in essence the biggest takeaway for all of our listeners and for us as we're going back to our teams, thinking about that our team members now expect this. They expect us to, if they're supporting us and working for us, then us the same for them in a public setting, putting our money where our mouth is, I guess, as a company as a leader.

Scott: The importance of a clear corporate culture.

Philip: OK, our next story on policies, I didn't really want to make it segue out of that one.

Scott: Yeah, so let me start something new here, because this is very different.

Philip: Yeah, let's start something new. It's sort of different. the United States has banned imports of Russian oil, liquefied natural gas, and coal. We're not experts in this, again as we said last time, we're not going to dig into the invasion, we're not going to dig into any of these things, we're really just going to focus on how it impacts the attractions. The quick takeaways I think that this impacts attractions, it's going to take about 6 to 8 months for the global market to kind of recover from the shortage, and that's, of course, going to cause plane tickets and gas at the pump to rise. So, basically, travel expenses will rise for the end purchaser coming to attractions, and also transportation costs and the kind of ancillary costs of manufacturing for theme parks will also rise.

The other thing here, there's been a lot being thrown around about how we really don't import that much, which we don't, It's like 3% or something. But oil is a global price, so any shortage of supply will echo through all the price for oil that everybody is buying, since it's based on our global index, it's not based on the country index. So anyway, just to like kind of point that out, that we've already seen it now, costs are going to increase. 

I'm sure we've already seen the memes of how people driving to Disneyland, it's like add an extra $50 to your Park Hopper because of the price and gas it'll cost to drive you there. So that that's going to have a trickle-down for the next 6 to 8 months on our guests and how far they're going to travel or not. We talked about this before already, but just to kind of underline, to come back to that, there has been developments, it is going to get worse than it was when we talked about it last week.

Scott: So, I finally was able to afford my tickets to Galactic Starcruiser and now I can't afford the gas to get there, is pretty much it. The idea here is, you know, gas has gone up and down and it goes back to, what we've been saying since the very beginning of this podcast; be prepared for the unexpected. It's inevitable but unexpected, and I think that's something that we have to continue to keep our minds on no matter what it is, whether it's gas prices, whether it's social distancing, whether it's I don't know content trending. We just have to recognize that the world changes a lot more quickly now than it used to, and I think the pandemic had something to do with it, I think our recent political situations had something to do with it, I think this new conflict or war that is taking place in Ukraine has something to do with it, but they're all happening much faster than they used to. So, lead multiple paths have multiple plans, because otherwise you're going to get left behind.

Philip: Oh, that's a great transition. Speaking of having multiple plans and contingency plans the Tokyo Disney Resort is up to some shenanigans. The Tokyo Disney Resort is, to give some history, a little bit of history, they had discontinued their annual passes and they have still not really re continued them, they've just issued now a limited number of multi day visit passports for Summer. These are really only for local residents. 

QUOTE https://www.disneybymark.com/2022/03/tokyo-disney-resort-to-issue-limited-number-of-multi-day-visit-passports-for-summer-2022/

"The Tokyo Disney Resort will sell Multi-Day Visit Passports on March 9th, which allow Guests to visit a park of their choice two times per month, valid from May through July (6 visits in total)."

Philip: So, it's kind of like a weird, not really annual pass, but just for residents to kind of appease them, etc. But the big thing I think was maybe skimmed over in the release of this, which is why I thought this was a good transition from Scott's points about contingency plans, is that they have a new policy that basically, there are no refunds for days, unused or for closures. So, if the park closes for COVID, or invasion, or any sort of reason the park might close, you don't get a refund for the tickets, which is kind of the opposite of the previous policy, with the annual passes where there were refunds issued. This is, of course, not operated by Disney, just to remind everyone out there. It may be called Tokyo Disney Resort, but it is operated by Oriental Trading, and the land is owned by a different company, so it sounds like their contingency plan, Scott, is to just say, "you know what? If you have unused tickets and we close for something unusual, like say, a pandemic, then you just don't get your money back, sorry." 

Scott: Yep, and the thing is, I'd fault them for it except for the fact they're telling us upfront. 

Philip: I feel like most guests don't know. We just know because we read the fine print. 

Scott: But again, I'm not praising them for this choice, I don't think it's a good guest-centered choice.

Philip: No, I think it'll backfire.

Scott: But at the same time, they're not changing policy midstream.

Philip: Correct, that's a good point, yeah.

Scott: So, if you don't like strawberry Kool-Aid, don't buy strawberry Kool-Aid, I think is the answer there. But it also means that you need to kind of read that fighting print as well. I am, like I said, I am not saying this is the right choice, I'm not saying this is a wise choice, and I would even go so far as to say, and again I don't know what the laws are in Tokyo, but I would even go so far as to say if a company is unable to provide the service that you have purchased that there could be some legal ramifications against it. So, I don't know. I don't know whether it's going to backfire or not. 

I know that like, for example in Florida, because I do know that Disney Resort quite well, prior to COVID I think Disney closed maybe three times in the 20 years that I had lived here, and that was for hurricanes. So that's sort of like saying, they've made it very clear that they're not going to refund for alien attacks. "We haven't had any, but we're not going to refund for it!" The world keeps changing, I think this is a way for them to actually say, "Yeah, here's where we need to stand now based on what we've learned from what can happen with COVID, and perhaps invasions or whatever."  I agree with you in the fact that I don't think it's a smart move from a guest standpoint. However, they're being straightforward about it, they've made a decision and communicated, or should I say, [whisper] communicated that upfront. So again, can't slap him too much, but I don't think it's a good choice.

Philip: Yeah, overall though, it does continue the trend that we have been seeing that Disney has been pretty transparent. Well, transparent on the shareholder meetings about pushing it through, of course, which is trying to get away from the local, trying to get a higher spend per guest, and also reducing capacity. This limited pass does both of those things, it allows them to better control capacity, it also allows them to get more guests in that are maybe not local, so they'll have a higher spend, and of course, overall, it's a higher spend because if you don't want to be locked into this six-visit thing, then you just have to buy individual tickets, even if you're a local. So, it does achieve all those goals.

Scott: My guess is that they have looked at how many times a "former season pass holder" actually visited the park, or visited the resort, and have decided, "well, six is about... two times a month is about average, so that's what we'll do." It gives everybody a little bit more control without giving carte blanche to everybody who buys a season pass, and keeps "season passes" affordable for guests. So, they get some savings off of the single ticket, but it's not overwhelming the system by allowing them to come every single day.

Philip: Yes, especially for summer, you know busy time as we're coming into it. Well meanwhile, also in Asia we have some news from IAAPA. The IAAPA Expo Asia 2022 has been canceled due to COVID-19 related uncertainties in the Hong Kong region. The press release says: 

QUOTE - https://blooloop.com/theme-park/news/iaapa-cancels-asia-expo-2022/#:~:text=IAAPA%2C%20the%20global%20association%20for,the%20pandemic%20in%20the%20region.

"Unfortunately, the ongoing impact of COVID-19 in Hong Kong, and continued travel and business restrictions have reduced the feasibility of hosting a successful Expo in Asia in June. After careful consideration, and with significant input from members, exhibitors, the IAAPA Board of Directors and our team, we have decided it is best to cancel this year’s IAAPA Expo Asia.”"

Philip: Actually, that's basically it. There's no other reason, you get no other data, that one sentence is it. I will say the reason that this is important, from a larger standpoint, and I will share some Gantom information, I'm trying to say it in a way that's not violating the agreements, but basically... 

Scott: So you won't get sued? Is that what you're saying?

Philip: Well yeah, you know. Why this is a larger issue is that a lot of component pieces, and a lot of base manufacturing still, even from the US, comes from China, in the theme park and supplier area. Gantom is a manufacturer, we do get some components that come from there, and our factory is located in Shanghai. They're still on leftovers from the 0 COVID Policy, which means that they will lock down entire buildings if a case is suspected, or et cetera, et cetera. For us, recently, there was even a lockdown that affected our factory where it wasn't having do with any of our team having COVID, or anyone but just kind of the neighboring building having something that was suspected in contact tracing, so they had to lock down the entire thing. It just is to underline that there are still going to be the echoes of unexpected shutdowns, like this cancellation and et cetera, just because of the policies that are in Asia that are so different from the US.

I kind of feel like in the US, the endemic word has been thrown around a lot, and we really are trying to move on as attractions. Of course, now we have this year's flavor, which is Russia invasion. But that aside, you know there's still these different policies in Asia that will definitely impact our production and our ability potentially to open stuff on time.

Scott: And it reinforces, wherever there's a possibility, have multiple supply chains. I realize that's difficult, because China has been, well, Asia in general, has been such a cornerstone for affordable components that are used, as Philip says, in almost everything and he knows this far better than I do. But if that doesn't show, as much as anything else, the importance of having multiple supply chains or developing multiple supply chains, I don't know what it is. I mean because you're right, if you've got zero tolerance for COVID and that is the policy of the nation, not much we can do, you know? So, plan those things, work those things into your plans, extend your timelines. That is the easiest thing to do, it is not the most popular, but it is by far the easiest. Wherever possible, have those multiple supply chains.

Philip: Yeah, have multiple supply chains and extend that, and also really extended it. I'm already seeing this as a manufacturer, I guess I'll kind of like gripe out of school for some of our clients. I don't want name names. It seems like there are some clients that are not understanding that this kind of stuff just happens. I think it's because, in the US, we're like, we've moved past it, but you know. 

Something like this as a manufacturer, we have no control over it. Our factory gets shut down for two weeks minimum, and that adds 2 weeks onto the orders we're doing, and we just literally can do nothing about that. We cannot fight the Chinese Government in this, right? So, there's no recourse. Of course, we are working to establish, as you said, I am working to make a backup supply chain to make contingency plans, but one does not simply pick up a new supply chain in Mexico overnight with specialty pieces. The manufacturing of theme parks and of the equipment that we use is so niche and specialized, and a lot of places don't care, honestly.

I know we think Disney is big and all these places are big, but the volume of even a roller coaster is not enough to really attract a lot of other people. It's so specialized, it's so small, that's the problem that we're having. So, just to underscore that.

Scott: Right, and I don't mean to insinuate that it's easy to just pick up the phone and all of a sudden have a completely new supplier, because I understand that completely. But don't think that this need for multiple supply chains is going to change in the future, and obviously Philip you are doing this, the more you can establish those, the more protection you have moving forward based on whatever can happen in the future.

Philip: Well, I don't really know how to segue into this one, but the next story... Like in future, I don't know? The future. So, the Disney CFO who, I just love her, she has some great little notes she gives when she's doing presentations. So, she gave a presentation recently and she did share some interesting numbers about the theme park, where they're going in, etc etc. I will share here from her presentation. 

QUOTE - https://blooloop.com/theme-park/news/disney-capacity-post-covid/

"Disney’s theme park margins for the last quarter were 32%, which McCarthy described as “pretty damn good”, especially considering that the cruise ships are operating at reduced levels. Again she noted that they would be considering what full capacity should be, perhaps not “full to the gills”."

Philip: 32% I don't think we've received a straight-up number recently, but 32% is higher than it was previously. So, it shows that they're succeeding in increasing the profit margin of their offerings, and also shows that, overall, they're again underlying their idea of reducing the capacity over all the parks so they're not as full, but all the while simultaneously increasing the profit margin of the people that are there. We heard that, of course, we could extrapolate that previously, but it is a different thing to ever actually say the words and give us the direct line.

I'm going to pair this with a related story which also kind of got buried this week, which is Disney Plus is of course a big piece of their puzzle now, and Disney Plus is announced that it's expanding its offerings with AD-supported subscriptions. So basically, they're going to offer subscriptions now for Disney plus that cost less but include ads. Their idea with this is to try and use that as a way to bring in more subscribers by making an option for a cheaper offering. So, they're trying to expand their offering.

So, kind of opposite angles, but we've talked about this before, where they're moving to Disney plus being the accessible thing for the brand and the parks being the more exclusive, higher profit margin thing.

Scott: Again, they are diversifying their approach, which I think is smart. Just like you want to diversify your supply chain, you can diversify your guest-facing offerings as well and find the right offering for the right demographic. I think that is a wise choice. I think that probably the most exciting thing is that we actually have a quote from someone who worked for Disney that includes the word damn. It kind of shows that Mickey is growing up I guess, I don't know.