It's hard to imagine criticizing Disney (NYSE:DIS), its direction or its well known slogan "as the happiest place on Earth." However, upon further inspection it becomes tough to overlook the company's allowed and growing separation between its business model and the families that have come to prop the company to the glory and respect it enjoys today.
My sudden negativity towards this historical and glowing institution arises from a variety of developments along with my recent visit to the company's four Orlando theme parks.
Going to the four parks a month ago was meant to provide an escape from the large crowds that circle the attractions throughout much of the year. However, this year proved much to the contrary. If the Florida heat and hour long lines that took up practically every ride were not enough, the parks unforgiving nature towards its tourists only added to the misery. Half of the restaurants throughout each of the parks were closed and vending machines, prevalent in most other parks including nearby Universal Studios and Islands of Adventure, were nonexistent. Overall, leaving customers baking in the sun while succumbing to more lines just to get something to drink.
Then, there was the clientele that made up the parks. Although you still saw many parents with their children, the family aspect which use to define the Disney landscape was all but gone. Instead, replaced with the ire of a crowd that appeared exhausted and disgusted at having spent so much money in what appeared a losing battle to have fun.
Now Disney will continue to attract tourists and plenty of business. The company's name alone guarantees it such certainty. However, when also considering the parks have little in the way of big rides or attractions, the question must be asked: If you visited Disney and experienced the long lines and, at times, questionable service, would you return?
The theme parks aren't the only things that leave me questioning the company's direction. After producing numerous hit movies in the 1990's including Aladdin, Angels in the Outfield, The Santa Claus, The Lion King, Man of the House, Pocahontas, Toy Story, Jungle to Jungle, Air Bud and Flubber, the company has failed to produce much in the way of family classics this century. Even movies which have garnered recognition such as The Shaggy Dog and Herbie Fully Loaded are mere repeats of previously successful films and film ideas.
Sure there are still the occasional successes such as the National Treasure series and release of The Avengers this past summer. However, they arguably pale in comparison to the creativity and imagination that defined practically every movie released by the company throughout the prior decades.
Besides the lackluster ideas and innovation that once defined the company comes the institutions growing separation between family and its films. From Disney's release of Snow White and the Seven dwarfs in 1938, the company never produced a film with a rating higher than PG until the 2003 release of Pirates of the Caribbean: The Curse of the Black Pearl with a rating of PG-13. Since then, five other films have received a similar rating including three since the beginning of last year. Overall, leading onlookers with plenty of reason to believe the company cares less and less about families and the children they are supposed to entertain and more about what avenue brings in the most money.
Through it all, Disney may surprise. With Michael Eisner, the former and controversial CEO, long gone, the company may enjoy a new beginning. However, with such a slowdown in successful films and a company that now seems merely out to make as much money as possible, the controversial separation between the company and families will need to be clearly overshadowed to make this stock again appealing. Without such an assurance, the stock remains overpriced and its continued appreciation unsustainable.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.