Disney (DIS) - Get Walt Disney Company Report wined and dined Wall Street's media analysts earlier this week, offering those that cover its stock a sneak peak at its newest theme park addition, Pandora: The World of Avatar.
For the analysts who traveled to Orlando, Fla., for the gathering, it was a chance to see Disney's latest attraction, a project that cost an estimated $500 million and took more than four years to build, before it opens to the public on Saturday. For Disney executives, it was a chance to move the conversation away from ESPN.
And for good reason. Disney shares, and CEO Bob Iger's patience, have been tested in recent months amid declining subscribers and advertising sales at the company's largest business unit, historically the source of more than 50% of profit. Disney shares have underperformed the broad market in 2017, gaining 3.4% though Friday morning compared with 7.8% for the S&P 500 index as ESPN reported subscriber declines in successive quarters.
Among analysts invited to the Pandora preview, there appeared to be lots of oohs-and-aahs. Indeed, Disney has proven for generations that it can build theme parks that thrill and captivate, annually drawing some 11 million visitors just to its massive Disney World complex in Orlando. An impressed Marci Ryvicker of Well Fargo lauded Disney for the new attraction's "incredibly advanced technology and the intricate story-telling experience," while Bernstein's Todd Juenger confessed that it "will undoubtedly generate excitement among Disney enthusiasts because it is new and cool."
But will Pandora, the product of a 2011 deal with Avatar director James Cameron and 21st Century Fox's (FOXA) - Get Fox Corporation Class A Report Hollywood movie studio, add much to Disney's bottom line?
Pandora will augment Disney World's Animal Kingdom park. In recent years, Disney theme park devotees have often complained that Animal Kingdom didn't have enough exhibits to be considered an all-day outing. It's important to realize that Disney World is 600 acres and contains five themed areas. Few families cover the whole place in a single trip, or maybe even a lifetime.
The question for Disney number crunchers is whether Pandora will increase the total number of visitors or the average amount of money any guest will spend during a visit. Juenger has doubts that Pandora alone is going to move the needle on new visitors even as its delights and dazzles attendees.
"Kids won't know or care about the origins of Pandora, the Na'vi people, or the [Mo'ara] Valley, or unobtainium," he said in an investor note. "Maybe some of their parents will, but we would be surprised if there is much strong attachment. Instead, it's just a very cool, but totally new and unfamiliar, story."
Ryvicker agreed, adding that the benefit of Pandora most likely will come from visitors to Animal Kingdom hanging out for longer stretches rather than retiring to their hotel pool or cocktail bar.
"Animal Kingdom (actually all of Disney World) has been at peak attendance," she wrote. "So while we should see an increase in capacity, we think most of the potential upside will come from higher per-capita guest spend and ticket prices and fewer promos."
Disney executives, for their part, were pitching analysts with the view that Pandora can have the same impact on Disney World that Cars Land had on its California Adventures park in Anaheim when it opened in June 2012. Cars Land is credited with boosting attendance at the Adventures park by 23% during its first year and hiking ticket prices by 9%, Ryvicker said.
That's a reasonable pitch, but it remains to be seen whether it will play out. One thing that's certain is that Disney's theme parks have emerged as a steady growth business. Operating income at Disney Parks & Resorts jumped 4% in the March quarter to $750 million on a 4% attendance growth at Disney World and Disneyland in Anaheim as well as the June opening of its $5.5 billion Shanghai Disney Resort.
But is it enough to get investors to stop talking about ESPN?