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- [00:06]
Ryan Knudsen
A few years ago, Disney hit a pivotal moment. For the first time, the company made more money from its theme parks and cruises than from movies and tv.
- [00:17]
Ben Fritz
Parks have become the most important part of Disney's business. They account for the majority of the company's profits. Now.
- [00:25]
Ryan Knudsen
That's our colleague Ben Fritz, who's been covering the company for years.
- [00:28]
Ben Fritz
For a long time that wasn't true. Like most media companies, Disney made the majority of its profits from television. You know, those cable networks like ESPN and the Disney Channel were hugely profitable. But of course, we've all cut the cord now, right? So there's a lot less money coming in from television. And Disney's really leaned into its parks as a result.
- [00:52]
Ryan Knudsen
Disney is leaning hard into parks. In fact, right now it's investing $60 billion into its parks division, nearly double what it's spent in the prior decade.
- [01:04]
Ben Fritz
They're expanding all the parks. They're nearly doubling the size of the cruise ship line. They're building a new park, and they're really relying on that investment to drive the company's growth.
- [01:16]
Ryan Knudsen
And the people within Disney in charge of spending all this money and delivering.
- [01:20]
Ben Fritz
Disney's dreams, they are a mysterious group called the Imagineers.
- [01:27]
Ryan Knudsen
Imagine, a portmanteau of imagination. And engineers are the creative brains that build the happiest places on earth.
- [01:35]
Ben Fritz
I say that both the opportunity and the pressure couldn't be higher on Imagineering right now. They spend more money than anybody else in the entertainment industry. You know, their projects often cost billions of dollars and take years to complete. And hopefully, you know, what they build will be the next space mountain that people love and that lasts decades and decades.
- [02:03]
Ryan Knudsen
Welcome to the Journal, our show about money, business and power. I'm Ryan knudsen. It's Wednesday, January 28th. Coming up on the show, how Disney is using its imagination to spend $60 billion.
- [02:31]
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- [03:30]
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- [04:06]
Ryan Knudsen
Do you remember the first time that you went to Disneyland?
- [04:09]
Ben Fritz
I do. I remember one thing. My father took me when I was 4 or 5. We went to Disney World. The main thing I remember is that we walked by Captain Hook and the actor playing Captain Hook was standing totally still. So still that I thought he was a statue. And then as I was looking at him, Captain Hook jumped out at me and he scared the crap out of me. And then he hugged me. And we have a nice photo and everything, but yeah, that is my first memory of a Disney theme park.
- [04:40]
Ryan Knudsen
Disney's theme park started out as just an idea inside the mind of the company's tireless founder, Walt Disney in the 1950s. Walt Disney's Disneyland Here's Walt Disney in a 1954 interview, talking about his dreams for a park that would bring Disney's magic to life.
- [04:57]
Walt Disney (archival audio)
We hope that it will be unlike anything else on this earth. A fair amusement park, an exhibition. A city from the Arabian Nights, metropolis from the future, in fact, a place of hopes and dreams, facts and fancy, all in one.
- [05:14]
Ryan Knudsen
To make his dream a reality, Walt Disney needed a group of people with a very special set of skills. The that didn't really exist back then.
- [05:22]
Ben Fritz
So the Imagineers. They weren't called that originally. They were the group of people who Walt Disney brought together in the 1950s to fulfill his crazy vision for a theme park, which became Disneyland. Nothing like it had ever been built before. Exactly. So he had to figure out, okay, what kind of people do I need?
- [05:42]
Walt Disney (archival audio)
Engineers, architects, artists and designers all work together using the tools of imagination to create the Disney Themed experience.
- [05:52]
Ben Fritz
He drew a lot of them from his movie studio. There were, you know, people who were designing sets and costumes and so on. And then he had to recruit a lot of engineers, People who knew how to do the physical work, who actually.
- [06:05]
Ryan Knudsen
Knew how to build stuff. Right.
- [06:06]
Ben Fritz
Cause they had to build things. Exactly.
- [06:08]
Ryan Knudsen
And weird things. Not like buildings that are up to normal code.
- [06:11]
Ben Fritz
Yes, absolutely right. Not erect a building. Like, they had to start building mountains with roller coasters, and they built a river eventually with a boat that went through it. They did all sorts of crazy stuff.
- [06:22]
Walt Disney (archival audio)
In this land, Hopes and dreams are all that matter. We hope that through our television shows, that you will join us and take part in the building of Disneyland and that you will find here a place of knowledge and happiness.
- [06:35]
Ryan Knudsen
The first park, Disneyland, opened in southern California in 1955.
- [06:40]
Walt Disney (archival audio)
And the rest, as they say, is history.
- [06:49]
Ryan Knudsen
For decades, imagineers have built some of Disney's most iconic attractions. Huge, ambitious, expensive projects that drew in massive crowds.
- [06:59]
Ben Fritz
The Haunted Mansion, Pirates of the Caribbean, Space Mountain, It's a Small World. That geodesic dome in the center of Epcot Center. I mean, those were all created from scratch by imagineers. And they've become, you know, iconic parts of world culture.
- [07:16]
Ryan Knudsen
And all of those things were, like, original ideas back then. They weren't making rides and stuff like that based on movies.
- [07:22]
Ben Fritz
They were making some, but not a lot. It was just one part of the theme park. In other parts, there was Adventureland, which was all about traveling to the wild west. And there wasn't very much based on the Disney movies, for example. And Tomorrowland was all about a science fiction future. And again, there was nothing from the movie. So there was always a big presence for original creations in the theme parks. That's been an important part of imagineering's history.
- [07:54]
Ryan Knudsen
In the 1990s, Imagineers also added a new venture to their portfolio, Disney Cruises. But over time, things between the imagineers and the rest of Disney started to get a little tense, especially as costs grew.
- [08:11]
Ben Fritz
The imagineers, I think it would be fair to say, had a very healthy ego. They thought they were special, and, you know, they were special. They did this amazing work that nobody else could do. And the stuff they created was vital to everything Disney is and how people perceive the company. But on the flip side, you know, a lot of people at Disney felt like they didn't play well with others. Basically, they considered the executives at Disney to be people they had to convince to give them money to do the work that they wanted to do.
- [08:38]
Ryan Knudsen
Hmm. I can sort of Imagine, it's like the creatives versus the spreadsheet types.
- [08:43]
Ben Fritz
Yeah, totally. And the creatives had this confidence that if they were just left alone to do their best work, then everybody benefited.
- [08:52]
Ryan Knudsen
And so the Imagineers started finding ways to maneuver around the spreadsheet types.
- [08:57]
Ben Fritz
I heard about this term called progressive seduction, where they basically knew if they went in and they said, this is our grand idea. It's going to take this many years and this many billions of dollars that the executives who were overseeing the budgets were going to freak out A.
- [09:12]
Ryan Knudsen
They're not going to spend that much money and have it take 10 years. Like, get out of here.
- [09:15]
Ben Fritz
Right. Why do we need to do that? Couldn't we do the version that's 50% as good and that would be fine? So they would come in with a 50% as good version, and everybody would be on board, would be great. They'd start working on it, and then they'd be like, oh, wouldn't it, you know, it would be so cool. What if we just added this one feature to it? It would only take a few more months and a few more million dollars, and everybody, you know, they're already into it, and they'd be like, sure, that seems so cool. And then once we're doing that, they'd be like, and if we're going to do that, we really should add on this other thing. And then there's one more thing. And look, it's only another, you know, $20 million or whatever. And they would keep doing that until eventually they got most or all of what they wanted.
- [09:51]
Ryan Knudsen
In 2017, Disney unveiled an attraction based on the world of Avatar, the movie by director James Cameron about the blue aliens. It was supposed to cost $850 million, but ended up costing $1.2 billion, according to people familiar with the matter. Another issue, the Imagineers have been known to miss deadlines. Such was the case with the 2019 Star wars attraction called Galaxy's Edge. The idea was for riders to choose between five different adventures in the iconic Millennium Falcon, meaning they'd be incentivized to come back and ride it again and again.
- [10:27]
Ben Fritz
But as Galaxy's Edge was being built and the budget was rising and there was pressure to get it done, then they actually cut that way back, and now there's currently only one mission on the Millennium Falcon, they ended up scrapping the other four.
- [10:40]
Ryan Knudsen
What is this story about the Millennium Falcon Reflect about these issues with the Imagineers versus the executives and their expectations.
- [10:47]
Ben Fritz
I mean, there's constant tension between the Imagineers and the executives over what can we build and how much is it going to cost? And so sometimes the imagineers kind of win and the project gets postponed or the budget goes up. Sometimes the executives win, like in this case, and they say, sorry, I know you have ideas for five missions, but you're only gonna get to do one.
- [11:11]
Ryan Knudsen
Imagineers have also felt increasingly constrained by Disney's push to harvest more from existing IP based on movies and TV shows instead of dreaming up their own ideas.
- [11:22]
Ben Fritz
So all the biggest stuff that the imagineers have done in the past 20 years have been based on the movies. There's Cars Land, there's the Frozen Ride, there's a Ratatouille Ride. And on the one hand, it's been very successful. On the other hand, a lot of imagineers have been very frustrated that they're basically not allowed to be as creative as they used to be.
- [11:41]
Ryan Knudsen
During the 2000s rank and file, imagineers often clashed with the head of their division, a man named Bob Chapek.
- [11:49]
Ben Fritz
Chapek was very frustrated that they were constantly over budget and constantly behind schedule. And he felt that they needed to be whipped into shape a bit. And in the late 2010s, when Chapek was running parks, Imagineering was being very closely scrutinized. Chapek was installing people who were going over all the budgets and constantly questioning the imagineers about what something was really going to cost, how long it was really going to take. He basically felt that the imagineers had to earn back their credibility. So it was a time of really diminished ambition for imagineering.
- [12:24]
Ryan Knudsen
Things hit an all time low in 2020, when the pandemic meant that imagineers couldn't work in person and the theme parks were closed. Most imagineers were furloughed and eventually more than 400 were laid off. Around this time, the company also unveiled a plan to relocate the imagineering team from California to Florida in a bid to save money on taxes. That plan was eventually scrapped.
- [12:47]
Ben Fritz
Though it was a dark time, the morale in Imagineering was the lowest it's been in a very long time. And they weren't doing as many cool projects. So I think they really felt like, as one person said to me, it just wasn't fun anymore. And it's hard. If you're an imagineer, the least you should be able to say is that your job is fun, right?
- [13:09]
Ryan Knudsen
But just a few years later, the imagineers got a lifeline when a former CEO returned at the helm. That's next. In 2022, Disney got a new CEO who was actually an old returning CEO, Bob Iger. And when Iger took over, he saw a company facing numerous challenges. TV revenue was rapidly declining and the streaming service Disney wasn't making up the difference.
- [13:51]
Ben Fritz
When Bob Iger comes back, he can see that the television business is declining rapidly and streaming is not close to making up for everything they've lost in the profits from tv. So he needs a new area where the company can really grow in the long term. And parks makes a lot of sense.
- [14:08]
Ryan Knudsen
While the movie and streaming businesses were in decline, parks were taking off.
- [14:13]
Ben Fritz
Since the pandemic restrictions have eased, people are rushing back to the parks. They're full every day. There's way more demand to get into the parks than there is capacity.
- [14:22]
Ryan Knudsen
At first. Disney responded to all this demand by jacking up ticket prices. It was a way to capitalize on the in person hype and it helped regulate crowd sizes at the parks. But it also meant that Disney had to show that those more expensive tickets were worth the price.
- [14:38]
Ben Fritz
Disney is not going to cut prices and that's not a good long term growth strategy either. What they want to do is make the experience better. So people feel like, okay, I spent a lot of money, but I got my money's worth.
- [14:49]
Ryan Knudsen
I spent a lot of money, but I maybe felt like not that I had the place to myself, but the lines weren't too long. I wasn't, you know, waiting for everything and just shoulder to shoulder, right?
- [14:58]
Ben Fritz
And I went on all these spectacular rides and a lot of them are new. I've never seen them before and they're better than anything else I've ever seen.
- [15:05]
Ryan Knudsen
Disney has said its theme parks are within financial reach for middle class families and that it offers a range of price offerings for different products as well as year round promotions. To keep it that way. With a renewed focus on parks, Iger wanted Imagineers to feel more empowered.
- [15:24]
Ben Fritz
He felt like they were a creative company and that the balance had gotten out of whack and there was too much focus on the numbers and not enough focus on creative excellence. And that was true across the company and it was true in imagineering.
- [15:37]
Ryan Knudsen
So in 2023, he gave the Imagineers $60 billion to work with over a 10 year period. The money is meant to boost Disney's theme park and cruise offerings. To oversee all this work, Iger also rehired a beloved Imagineering boss, a man named Bruce Vaughn.
- [15:54]
Ben Fritz
Bruce Vaughn is a veteran imagineer who joined in the 1990s and eventually rose to be the co president. He was pushed out in 2016, when Bob Chapek was making his changes, you.
- [16:06]
Ryan Knudsen
Sat down with an interview with him. What is he like?
- [16:09]
Ben Fritz
He is, like, a really fun person, as you might imagine. He has this crazy office full of. With all these toys and models from the theme parks over the years. He has a little scale model on his table of Shanghai Disneyland, which he helped to build. He has, you know, everybody who works in the parks wears a name tag with their first name. And he has, like, dozens of name tags on his walls that he's had over the years. And he really speaks with, like, a lot of genuine excitement about the work that the Imagineers do. You know, you can tell that this is something that's. That's personally thrilling for him.
- [16:46]
Ryan Knudsen
So how do the Imagineers react to this news once Bruce Vaughn is back and they're getting a giant check?
- [16:52]
Ben Fritz
They're thrilled. I mean, I would say that the morale at Imagineering has swung back up in a big way. People are very excited about the opportunities that are in front of them and the fact that they have the full backing of the company and they have a leader who they trust.
- [17:09]
Ryan Knudsen
So one of the big moves that Disney announced recently is that they're building a whole new Disneyland in Abu Dhabi. But what else are they working on?
- [17:16]
Ben Fritz
Yeah, they're doing so much, Ryan, I don't think we have time for me to list it all. They're nearly doubling the size of the cruise ship fleet from 7 to 13. And the imagineers also do all the design work on the ships. They're doing expansion work at every one of the companies. Six global resorts. So Shanghai, Disneyland, Tokyo Disneyland, Hong Kong Disneyland, Disney World Disneyland, and Paris Disneyland are all getting new lands, new rides, et cetera. There are new Marvel rides in Anaheim. There's a new Lion King Land in Paris. There's an Encanto ride in Orlando.
- [17:53]
Ryan Knudsen
Wow. So that sounds like a ton.
- [17:55]
Ben Fritz
That is a ton. That is absolutely more than Imagineering has ever been doing at the same time in its history.
- [18:04]
Ryan Knudsen
Disney describes this new era as turbocharging the parks business. For Vaughn, the returning Imagineering boss, the situation comes with high stakes.
- [18:14]
Ben Fritz
Bruce Vaughn told me, you know, on the one hand, he wants to do creatively excellent work, but he doesn't want to go back to the way it was 15 years ago, when everything was over budget and behind schedule. So he's trying to balance doing great work, keeping the Imagineers happy and having things come in at the price and on the schedule that they're supposed to. Bruce told me this is the most ambitious time in the history of Walt Disney Imagineering, and the pressure couldn't be higher for him to get it right. And if he fails, then it's going to do major damage to the entire Walt Disney Company.
- [18:48]
Ryan Knudsen
A Disney spokeswoman said 93% of Imagineering's work in the past four years has come in under budget. Disney's big push into parks is all happening at a moment when its rivals are also making big investments, hoping to take some of the company's customers.
- [19:03]
Ben Fritz
Universal, which is their biggest competitor, has by this point been investing a lot in their own theme parks. And in Orlando, Universal actually has three different parks now, and the newest one, which just opened last year, called Epic Universe, is, if you ask most theme park fanatics, probably the best park in Orlando right now. It's one of the best ones in the United States. So Disney can't just rest on its laurels and assume that if families want to go to a great theme park, they're going to go to a Disney one anymore. They could easily go to Universal.
- [19:35]
Ryan Knudsen
For the Imagineers, morale is improving and they've got more money to work with than ever. But as they might say in a Disney movie, be careful when you wish upon a $60 billion star.
- [19:48]
Ben Fritz
Managing a creative group that spends huge amounts of money is incredibly difficult, and we can just see that in history. The Imagineers have such a hard time doing excellent work and being on schedule and being on budget, and if any one of those things goes wrong, it's a problem. People in Imagineering described it to me as like a three legged stool where they want to be creatively excellent, they want to stay on schedule and they want to be on budget. And if any one of those legs falters, then you know, the stool falls over and now they have a huge opportunity in front of them. But they need to keep that stool balanced and it's really, really tough.
- [20:39]
Ryan Knudsen
That's all for today. Wednesday, January 28 the Journal is a co production of Spotify and the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts route every weekday afternoon. Thanks for listening. See you tomorrow.