While the delay isn't good news for Disney, the company doesn't have a habit of rolling out half-baked products. If It's going to spend a billion plus on a project, it's going to do it right.
Walt Disney World‘s billion-dollar plan to outfit theme-park visitors with wireless rubber bracelets and get them planning more of their trips in advance has fallen behind schedule.
At a minimum, it will likely be several more months before all of the giant resort’s customers can use “MyMagic+,” which includes a new reservation system allowing visitors to book ride times weeks before their vacations and microchip-embedded “MagicBands” that act as all-in-one park tickets, room keys and credit cards.
Senior Walt Disney Co. executives once said they hoped to have MyMagic+ “largely” introduced by the end of the company’s 2013 fiscal year, which concluded in September. But the project remains in testing and mostly limited to guests staying in Disney-owned hotels.
Disney would not provide any updated timetable last week. In a written statement, the chairman of the company’s global theme-park division said he was pleased with the progress.
“From the outset, our MyMagic+ development has been focused on enhancing the experience our guests have with us. Our roll-out schedule is designed to be flexible so that we can make adjustments based on our testing and guest feedback,” Walt Disney Parks and Resorts Chairman Tom Staggs said in the statement. “We’re happy with the progress we are making, and MyMagic+ is now available to all our Walt Disney World hotel guests.”
Staggs added that Disney has been making “modifications” based on the feedback it is receiving from guests during testing. “Once we’re satisfied with those adjustments, we will continue to broaden the availability to our other theme-park guests.”
MyMagic+ is critical for Disney, which has spent more on the project than it did in building the hugely successful Cars Land attraction at Disneyland in Anaheim, Calif. Executives have said they think the project will ultimately get travelers to make more trips to Disney World and spend more time and money at the resort when they visit.
Some analysts had expected the project to begin contributing to profit growth for Disney in 2014, but that now appears unlikely to happen until at least 2015.
Although Disney didn’t announce MyMagic+ until January, the project has been in development for more than five years. Disney has been incurring significant costs tied to the project for at least two years, according to regulatory filings.
One month after announcing MyMagic+, Walt Disney Co. Chairman and Chief Executive Officer Bob Iger said it would be rolled out “over the next several months.” Chief Financial Officer Jay Rasulo expanded on Iger’s comments in May, telling analysts at a New York conference that “by the end of this fiscal year, you’re going to feel like it is rolled out,” though he said Disney would continue to add elements over time.
But they began to push that target back over the summer. Iger told analysts in August the project was designed for “a probable full rollout in the early part of fiscal 2014.” And they have since stopped offering any specific time frames.
During Disney’s year-end-earnings call earlier this month, Rasulo said MyMagic+ was “still very much in the early days of rollout.”
Disney would not discuss the delay in any detail. But in discussions with analysts, executives have characterized the project as exceedingly complex and repeatedly said they intended to make sure all kinks were ironed out before beginning a wide launch.
“We are walking before we run, so that when you come down and use the service, you are going to feel really good about how it works and not experience glitches, which is our business and not the guest’s business,” Rasulo said in September.
In addition to taking longer than expected, some analysts suspect the price tag for MyMagic+ has climbed. Doug Mitchelson, a media-industry equities analyst with Deutsche Bank, said he initially projected spending on the project at about $800 million, but “clearly they would have to be north of $1 billion at this point in time.”
Still, Mitchelson said he remains optimistic that MyMagic+ ultimately will drive the double-digit returns that Disney management has predicted. And he said Disney is wise to wait until management is “absolutely sure” the systems will work as promised.
“This is obviously one of those projects that you can’t afford to get wrong, not even once. Disney’s brand is so crucial — they really have one good shot at introducing this to the marketplace,” Mitchelson said.
“This is a project of relatively historic undertaking,” he added. “It’s never been done.”
MyMagic+ is the capstone of about $6 billion in capital spending that Disney has plowed into its domestic parks-and-resorts business during the past half-decade or so, a construction spree that included two new cruise ships; a rebuilt Disney California Adventure theme park; a Hawaiian hotel; and the New Fantasyland expansion and Art of Animation hotel at Disney World.
Disney once said those projects would cumulatively contribute to profit growth during its 2014 fiscal year. But during its year-end-earnings call, the company changed that forecast, saying the “growth initiatives” would generate about $300 million in expenses during the current year and “more or less the same amount” in revenue.
Asked what had changed, Rasulo cited MyMagic+ costs, noting that the information-technology infrastructure Disney World has installed as part of the project depreciates more quickly than conventional attractions.
Rasulo has also said that some of some of Disney’s other big investments — primarily the California Adventure makeover, which culminated in the 2012 opening of Cars Land — turned profitable faster than the company originally expected.
Although some of Disney’s most devoted fans have been discussing and speculating about MyMagic+ for years in online forums, the company has managed to keep expectations muted among its mainstream customers, said Kevin Yee, an author who has written about Disney theme parks. That helps ease pressure to get the project done quickly.
Among those who have followed the project closely, Yee described the collective feeling as one of “trepidation.” Some fans have been especially vocal about fears that MyMagic+ will sap the spontaneity from their visits by forcing more planning — fears that Yee said won’t truly be addressed until the project is totally launched and being used by all guests.
“There are so many variables that the actual implementation could be really positive or it could be really negative,” he said.
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Photo Credit: A family uses the MyMagic+ band in this promotional image from Disney. Disney Theme Parks