Disney’s Fight With DeSantis Masks a Bigger Problem: Its business is Struggling
Disney’s clash with Florida’s Republican governor and potential presidential candidate, Ron DeSantis, is captivating attention like a reality TV show.
While Disney’s strategic maneuvers, including the recent abandonment of a $1 billion office project near Orlando, have dominated headlines, they overshadow the company’s actual struggle in business.
In the ongoing back-and-forth with DeSantis, Disney delivered its latest blow by canceling the Lake Nona office complex.
This project aimed to relocate 2,000 high-paying jobs from California to Florida but is now off the table. Disney even offered assistance to the approximately 200 employees who had already made the move, allowing them to return to California if desired.
The news can be interpreted in different ways. Supporters of Disney see it as yet another instance where the company outshines an inexperienced politician who picked a fight with the wrong corporation.
On the other hand, from Team DeSantis’ perspective, the Lake Nona cancellation reveals the desperation of a company facing a declining stock price and significant challenges in its core businesses.
Both sides hold some truth.
A spokesperson for DeSantis pointed out that Disney’s cancellation of the project is not surprising, considering the company’s financial difficulties, decreasing market capitalization, and falling stock price.
The spokesperson’s observation holds merit, but Disney’s financial woes primarily stem from its money-draining streaming business and the dwindling profits of its traditional cable TV operations.
The streaming business, encompassing Disney+, Hulu, and ESPN+, remains unprofitable, and the cable and broadcast networks’ operating income plummeted by 35% in the first quarter due to lower ad revenue.
While the parks division continues to be a financial bright spot, Disney faces growing discontent from fans due to recent price hikes and logistical changes.
Customers feel they are being nickel-and-dimed, prompting Disney to reduce park prices in response to public outcry. However, this adjustment did not alleviate the company’s profit pressures.
Pete Werner, owner of the travel agency Dreams Unlimited Travel and a prominent Disney fan site operator, voiced concerns about the direction of the parks.
He emphasized that Disney’s parks and resorts have historically been successful but cautioned that they could face challenges if the company fails to change course soon.
Investors appear to share these concerns, as Disney’s stock has dropped over 5% this year, while competitors like Comcast and Warner Bros. Discovery have experienced significant increases.
Coinciding with the cancellation of the Lake Nona project, Disney also announced the closure of its Star Wars hotel, the Galactic Starcruiser, despite it being less than a year old. The high price point of $4,800 to $6,000 per cabin for a two-night immersive experience deterred potential guests, leading Disney to offer discounts starting in January.
Werner noted that Disney is making precise cost reductions, especially in the parks division. Considering the parks’ importance to Disney’s financial performance, the company couldn’t afford to sustain a resort operating at a loss.
Disney’s CEO, Bob Iger, who is back for his second stint at the helm, faces a challenging task ahead. While he may currently be winning the public relations battle against DeSantis, resolving Disney’s existential threats requires more than a team of high-paid lawyers and communication professionals.
