The boo birds weren't many, but they were clearly audible in voicing their disdain when Walt Disney (DIS 0.81%) CEO Bob Chapek was introduced to the stage during the D23 Expo this past weekend. It's sloppy etiquette, but the act of disrespect isn't exactly a surprise. The D23 Expo is an event for diehard Disney fans, and a lot of them aren't pleased with the money-making decisions that Chapek has made in his two and a half years at the helm.
The rub is that it's not up to the superfans to decide if Chapek goes or stays. The fans may know the words to every song in Encanto -- not just "We Don't Talk About Bruno" -- and can recite the entire Haunted Mansion attraction preshow narration, but it's Disney's board of directors that felt comfortable enough in Chapek to extend him as CEO through 2025.
Image source: Disney.
There's always my way
The Chapek bashing really heats up in online groups of Disneyland or Disney World annual passholders. Many of them aren't happy with how things have changed on this side of the pandemic. The number of annual passes available are limited and more expensive than they were before, but that's not the only thing that's different at the world's busiest theme parks. Visitors now need to make park reservations. There are time constraints on hopping into a different park on the same day. Access to expedited queues now comes at a premium.
Disney's reasoning for the changes isn't wrong. It's supply and demand. There isn't enough capacity at Disney's six domestic theme parks to satisfy the number of people interested in visiting, so people have to pay up for access.
For an annual passholder who pays between $1 and $5 a day for year-round access, paying $15 to $20 for a day of Genie+ access to Lightning Lanes for faster-moving queues isn't a compelling value proposition. However, a day guest paying at least $104 for a one-day ticket is less likely to flinch at the Genie+ premium, especially since the less frequent visitor is going to want to maximize the number of rides and attractions completed in a single trip.
NYSE: DIS
Key Data Points
Reality stings, and making annual passes less attractive -- in terms of pricing, perks, availability, and access -- isn't a defect. It's a feature. Revenue per capita is up 10% over the past year, but more importantly it's up a whopping 40% from where it was three years ago in pre-pandemic times.
There's no going back to 2019 unless it has to and it will be up to turnstile clickers to decide if the theme park operator has to go back in time. The current path won't be sustainable if the economy heads into a global recession or if "revenge travel" was a flash in the pan.
But if things change, Chapek will be ready. Annual pass sales for new buyers can resume. Promotional discounts can get deeper. Disney can't let itself get caught on the wrong end of the supply and demand equation, since no one will pay for Genie+ at an empty park. Chapek's math makes sense now, but it might not always be that way.
The real chills come later
Beyond the dissed passholders, employees aren't exactly happy with the CEO either. Chapek commands an unimpressive 58% approval rating on anonymous employee ratings site Glassdoor. Shareholders seem to have mixed feelings. The stock is down neaerly 15% since Chapek was tapped as Bob Iger's successor 31 months ago, but 94% of the votes cast at this year's shareholder meeting wanted him to stay in the boardroom.
Chapek has had his share of successes, though they aren't unqualified. Disney+ is an undeniable smash, but it's expected to keep losing money until 2024. Feeding Disney+ could also be getting in the way of dominating at the box office the way Disney did before the COVID-19 crisis.
For now, heavy is the mouse-eared crown on Chapek. Those who want him out may not realize that it's the unpopular decisions that he has made that are keeping him in place...for now. It's not easy being the top dog among entertainment stocks in a world of foolish mortals.
