Disney’s Fight With DeSantis Masks A Bigger Problem: His Business Is In Trouble

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CNN
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Disney’s battle with Republican Florida Governor and future presidential hopeful Ron DeSantis plays out like a reality TV show. And while Disney’s tactical moves — most recently, the abandonment of a billion-dollar office project near Orlando — have grabbed headlines, it partly obscures a less cinematic reality: Disney’s business is in difficulty.

The company’s latest salvo in the back and forth with DeSantis came Thursday, when it unplugged its Lake Nona office complex. The project would have transferred some 2,000 well-paying jobs from California to Florida. Now the mass relocation is complete, and Disney said it would even help the roughly 200 employees who had already moved back to California if they wanted to.

There are several ways to read this news. For Team Disney, the move is just the latest in which the company relentlessly takes on a relatively inexperienced politician who has fought with the wrong conglomerate. If you’re on the DeSantis team, the Lake Nona closure reflects the desperation of a company whose stock is plummeting and whose core businesses are facing serious headwinds.

There is some truth on both sides.

A spokesperson for DeSantis said Thursday that it was “not surprising” that Disney was canceling the project “given the company’s financial difficulties, falling market capitalization and falling oil price. ‘stock”.

He’s not wrong. But Disney’s financial troubles are much more related to its cash-hungry streaming business and the rapidly declining profits of traditional cable TV.

Its streaming business (Disney+, Hulu and ESPN+) remains unprofitable, and operating revenue from its cable and broadcast networks fell 35% due to lower ad revenue in the first quarter of this year.

Disney’s traditional backstop, the reliably profitable parks division, is always a bright spot from a financial standpoint. But fans are deeply unhappy with the recent price and logistics changes, saying they feel and nickel. Disney recently slashed park prices in response to customer outrage, but that hasn’t really helped its earnings slump.

“You need a doctorate to plan a vacation to Disney World – they’ve made it so complicated,” said Pete Werner, who runs travel agency Dreams Unlimited Travel as well as WDWInfo.com, one of oldest disney fan sites. “Parks and resorts have always been good for them,” he said. “That can change, and it will change if they don’t change the direction of the parks soon.”

Investors seem to share these concerns. Disney stock is down more than 5% this year, while the S&P 500 is up about 9%. Rivals such as Comcast (up 16%) and CNN parent company Warner Bros. Discovery (up 28%) soared.

News of Lake Nona’s cancellation came the same day Disney announced it would be closing its Star Wars hotel, known as Galactic Starcruiser, which is barely a year old. Fans immediately balked at the price of the resort, where guests paid around $4,800 to $6,000 per cabin for an immersive two-night experience. That price proved a tough sell, Werner said, and Disney began offering discounts in January.

With the parks in particular, he said, Disney is “almost surgical” with cuts.

Given how important the parks are to Disney’s bottom line, there was no question of letting one of its expensive resorts languish.

Disney CEO Bob Iger, back for his second stint at the helm, has his work cut out for him. He may be winning the PR battle right now with DeSantis. But the real work – solving Disney’s existential threats – will take more than a team of lawyers and well-paid communications professionals to solve.

– CNN’s Natasha Chen and Chris Isidore contributed reporting.

Correction: An earlier version of this article incorrectly stated how much the S&P 500 index gained this year.