Morning Brew Daily - Disney's $60B Park Investment & Amazon Bulks Up for the Holidays

Episode Date: September 20, 2023

Episode 151: Neal and Toby discuss why Disney is investing $60 billion over the next ten years into their theme parks. Plus, Amazon and other major retailers are bulking up on staff before the holidays. The guys also explain the latest trend of entrepreneurship through acquisition and how the Senate's new dress code reflects the biggest changes in office culture. And finally, the reason an artist had to repay a museum for his work. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, Disney is doubling down on its parks business with an incredible-sized investment. Then the Senate is entering its cozy era as a change in dress code shows even our elected officials can't resist the sirens call of business casual attire. It's Wednesday, September 20th. Let's ride.

Happy Fed Day to all who celebrate later this afternoon. The Federal Reserve will announce its decision on interest rates and it's expected to be as noncommittal as a football coach. a midgame interview on the sidelines. No one thinks the Fed will raise interest rates this time around, which would mark the second time in six meetings this year that the Fed hasn't raised rates, a slowdown from the rapid rate increases of the past few years. But what Jerome Powell says at the podium during his press conference will be important. Investors want to know whether any more rate increases are in store later this year as inflation comes down, but hasn't yet reached the target rate of 2%. Toby, give me one word that describes how you're

thinking about this meeting. know my word. It's stressed. As we know, I do not envy our boy Jerome's job. And I think he is 100% stressed that inflation is in control yet, especially after seeing that price jump in oil. So that's my one word, Neil. My word is flexibility. Journalists are going to try to needle Powell into predicting whether more rates are coming. But he's going to counter by saying he's open to all options and we'll just follow the economic data and respond accordingly. So he's one that leaves the options open. I would say, I would say leave options open, but that's multiple words.

Stress and flexible. He just like me. All right, Neil, before we jump into the news, we have a quick little word from our sponsors. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard, then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot.

Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. Neil, Disney has been on a Tower of Terror Ride this year. Its stock hit a decade load this month. It's still in a feud with Ron DeSantis. And most of the new Marvel movies kind of stink. That's my personal opinion on that last one there. So what's the answer to its turmoil?

Spend more money, baby. Disney said yesterday that it will invest $60 billion into its global parks and cruise lines over the next 10 years. That's over double its investments from the last decade. Disney hasn't said exactly what they'll do with that chunk of change yet, but we're likely to see more rides within the parks based on valuable IP like Avengers and the Guardians of the Galaxy. There's even rumors circulating that we could see a Wakanda section of the park brought to life. This is all part of Disney CEO Bob Iger's grand plan to lean on the, the parks business as well as its movie studios and streaming divisions over the next five years

to generate growth. But there's a lot riding on the parks biz in particular, since Disney Plus doesn't look like it's going to be profitable in the near future. And Cable is still definitely riding the struggle bus. Neil, I feel like this was Bob Iyer kind of drawing a line in the sand saying, yes, we've been beaten down a little bit, but we're still Disney. We still got our fastball. And we're going to make sure that when you eat that $24 turkey leg, it's going to be in the most magical place on earth. It definitely seems like they are leaning into the parks business. I don't know if it's, I guess it's a position of strength in the parks business because that is the area of the unit of their company that's growing. But I think it does reflect a lot of these

bigger existential issues that are facing the other parts of the company. Like you said, cable is, is down bad. ESPN is just not the cash cow that it was. A bunch of other streaming services are buying the rights to live sports. I want to. I want to. to talk about the box office because Disney's known as, you know, a box office behemoth. I remember the days five to ten years ago when you would go down the box office list and look at the top movies of the year. And, you know, eight out of ten would be Disney. And it had just a horrible summer. The new Indiana Jones was a complete flop. And then Disney plus has a ton of competition in the streaming space. And I don't think it's like made a name for

itself. Meanwhile, the parks business is the only area of this company that is growing right now. it brought in 80% of its profits and accounted for a third of its total revenue. So this is like, I don't know if this is from a position of strength. $60 billion is a ton of money. But I think they're just like, this is the only area of our business that's growing right now. We have to feed the beast. Yeah. If we look at what that beast is, its theme parks will generate an estimated $10 billion in profit this

year. That's up from just $2.2 billion a decade ago. So clearly they see that there's more growth on the horizon. roughly 121 million people visited Disney Park in 2022. It really did rebound quite nicely from the COVID shutdowns. There's also, it just costs so much more money to go to the parks. The average spending per guess at Disney parks has increased 42% since just 2019. Part of that has to do with just inflation in general, but it also is a conscious effort

by Disney to raise the prices. What did confuse me a little bit about this big announcement, though, is that remember the first thing that Bob, Iger did when he stepped back in as CEO was shut down the Galactic Star Cruiser Hotel, which was this really expensive, really over the top hotel experience that his predecessor poured a lot of money in. And he was like, it was just too. Maybe it sucked. Too expensive. It could have just not been good. But then he comes back a year later and goes, we're going to spend a ton of money on this park. So it was interesting to see kind of those two things

parallel. Maybe they think the Star Wars IP is a little tapped out at this point. People have fatigue. Meanwhile, there are all these other films that have not yet had in in real life presence like Coco, Zootopia, Encanto, Black Panther, like you mentioned. So maybe he thinks there's a little more fruit to be, I don't know where I'm going with this metaphor, low hanging fruit, I guess is that one. To be had with this other IP. I also want to talk about cruises because Disney is investing in three more ships. It has five currently. It's going to add three to its suite. So it has eight. There's going to be a new one based in Singapore that has 6,000 rooms. So this thing is going to be massive, 6,000 passengers. So this is a big part of its business.

It's building another port in the Bahamas. So it's really being constrained on land because it only is about 1,000 acres that it can possibly develop. But everyone thinks Disneyland is kind of tapped out. It's in a small area in Anaheim and they have a dispute with the city. Meanwhile, in Florida, We know that Disney is withholding $17 billion of investment while it works things out with DeSantis. So there's not a lot of expansion opportunities in terms of land. So I guess it's saying, look, the oceans are mostly unexplored. Why don't we take to there? All right, Neil, let's move on.

We've talked about how the Philippines loves getting in the Christmas spirit as soon as the Burr month starts. And it looks like Amazon is of the same mind because it's already prepping for the busy holiday shopping season. it plans on hiring 250,000 logistics workers in preparation for the influx of shopping during that crucial period to end of the year. Just to give you some perspective on that number, last year it said it would bring on 150,000 workers, and in 2019 they pledged to hire 200,000 seasonal employees. So it's clearly bullish on consumers continuing their strong spending into the end of the year. But that bullishness is a bit of an outlier. Overall holiday hiring for retailers is expected to be the lowest since 2008, according to the job-seeking firm Challenger

Gray and Christmas. And places like Macy's, the U.S. Postal Service, and Target are all either hiring the same amount or less workers than last year. So, Neil, where do you think Amazon's bullishness is coming from? I think just overall e-commerce spending, that is because even while overall retail spending is expected to fall for the first time at its, it's expected to grow at its slowest pace in five years this holiday season, e-commerce and online shopping is still expected to grow at double that rate. It's booming. And Amazon is capturing 38% of all online spending still. So it's just like in the best position. It did have this incredible growth trajectory during the pandemic. Then it had that little hangover. But it's emerged from that hangover really strong,

one that I hope to aspire to over the weekend. I also do think there's this interesting angle, the Shopify angle. So earlier this year, Shopify kind of abruptly shuttered its shipping and logistics business. And shop, so now Shopify and Amazon have teamed up to allow Shopify mergers to slap that buy with prime label, which has led to more business for Amazon. So all of a sudden, you had this major player that was competing against Amazon in terms of shipping, in terms of logistics saying, we wave the white flag, Amazon, you're too big,

you're too good at this. We're actually going to team up with you. So there is kind of this Shopify-sized hole that I do think Amazon is saying, we got to fill way more orders this year because Shopify is a major player in the e-commerce space as well. So I do think that's another angle that's contributing to this really bullish hiring schedule. Yeah. And meanwhile, Amazon, there's been this trend over the past couple of years of retailers moving

up their holiday shopping sales. Earlier and earlier. Black Friday is seen as, you know, you're late to the game if you shop on Black Friday. Amazon already hosted a prime event over the summer, which juiced retail sales overall in the economy. And it's holding another sales event on October 10th and 11th, where it's hoping that you'll buy all your Christmas or holiday gifts then, which is in three weeks. So are you ready? I'm so not ready. I'm not a very good planner ahead.

So people please write in and tell me some good Christmas gifts ideas. The Caton cookbook. Okay, yes. We talked about that. That's a great idea. All right, Neil, before we jump into the next story, we're going to take a quick break. Today we helped a...

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You feel it. Your life deserves music. Your music deserves Bose. Find your perfect product at Bose.com. All right. On Tuesday, you get to do a Toby trend, but today I want to take a spin behind the trend wheel and tell you about a growing movement at business schools. I think people will find interesting.

MBA grads are increasingly spurning cushy consulting gigs at McKinsey and instead are pursuing entrepreneurship. But it's not exactly what you think. Rather than starting a company from scratch and going through the grueling startup process, NBA grads search for existing small businesses to buy raise funds, acquire the business, and then run it. The practice is called entrepreneurship through acquisition, or ETA, and it started at Harvard Business School in 1984, but has recently become more widely adopted, Bloomberg reported. MBA programs at Yale, the University of Michigan,

the University of Chicago, and more have all expanded their ETA offerings to teach students about this alternative path to owning a business. And why is it getting so popular now? Well, the job market for MBA grads is the worst it's been since 2009, with tech, consulting, and finance positions, not as plentiful as they've been in the past. As of June, about half of Harvard Business School grad students hadn't found a job compared to an average year when 80% of students have accepted offers by graduation. So acquiring an existing small business is seen as a compelling way to get ownership experience without breaking your back to found a company of your own. What do you think of this? I feel like this trend is getting, there's a push factor. and a pull factor. I think the push factor is what you said is that it's just a little bit of a

dim job market for MBA prospects, especially because there's not as much demand for generalist degrees. There's a lot of demand for specialists in areas like machine learning or data analytics, anything involved in AI, basically. So a lot of these companies are looking at these expensive MBA grads and saying, yeah, you can read a business plan, but we actually just want someone with more specialized skill. But then the pull factor is also this idea that there's all these aging baby boomers who are kind of moving into retirement. So they want to offload these profitable, these cash-flowing businesses. So if you're a young MBA grad, you're like, I'll take over the age vacucus from my business from my uncle. And so, yeah, I think there's kind of you're seeing pushing factors and

pulling factors. Yeah. And as someone who started at a business that was very young, it takes so much work just to build the building blocks and create processes. And I mean, you're working so many hours. It is really grueling. So imagine if you're an MBA and you're like, oh, I really want to get ownership experience starting a business or running a business. You know, oh, I can go into this company that already has employees, already has processes built in.

I can pay myself immediately. That's another big thing. Probably a better work life balance where maybe I can take off the weekends, which is certainly not possible when you have a source. startup. So I can see why this is enticing and it's definitely not this romantic version of going from scratch and starting from zero and building your beautiful vision. But you don't have to find product market fit because these small businesses already exist. They've already been running. So I think it's pretty interesting. I don't think it's obviously like it's not always a guarantee.

And a lot of these, what happens is there are these searches that go on from six, six months to two years. That seems to be like most of the process where you gather a team, you gather investors and then you go out and look for potential small businesses to acquire. Sounds kind of fun, honestly. It takes a long time, and it's not a guarantee of success. And I think one in three searches don't even end up with you finding a target business to acquire. Right. It sounds fun to be the searchers, because that was another part of this angle,

is that there's this whole kind of budding job market of just being kind of a matchmaker where you find a business and you find a person who wants to run it. And, yeah, it's kind of like almost say you're a sooth. or you have to convince the business owners to sell and you have to convince that this is the right person to take over your business. So I don't know, being a seeker or a searcher, it's got a nice ring to it.

All right, Neil, let's move on. New York Fashion Week recently wrapped up here in the Big Apple, but it's Washington, D.C. that is making fashion headlines these days. As of yesterday, Majority Leader Chuck Schumer directed the Chamber's sergeant-at-arms to no longer enforce the unwritten rule that Senate members wear business attire.

The change was made with Democratic. Senator John Federman in mind, who's a big fan of wearing gym shorts and hoodies, but other senators like independent Kristen Sinema have also pushed the unspoken attire rules by wearing denim vests and neon tiger print at times. Neil, this was a divisive decision for sure because there is a crowd who thinks the Senate floor should be a professional place with a certain level of decorum, but others see it as a natural evolution that brings the Senate in line with a more modern way of dressing at work. Neil, what do you think about the business casual wave hitting the Senate. I think it's just the way things are going. If you look at all American workplaces,

the trend has become more at leisure, especially out of, it was going that direction before COVID. And then I think COVID completely supercharged the casual vibe of the workplace. You saw ties going out. There's nobody wears suits anymore. So I think this is just the Senate kind of pushing toward what is happening in American workplaces. And it definitely seems to be catering towards one particular person, which may not, which has ruffled some feathers. And there was actually a lot of pushback from a bunch of other senators, Republican and Democrats, who said, you're not really respecting this place when you put on gym shorts in a hoodie. And it got into this more philosophical discussion of how you dress. What does that portray about you? How does that reflect

your values and the respect you show a certain workplace or physical space? Yeah, I'm of two minds on this as well because on the one hand, there has been dress code changes in the past that looking back seemed ridiculously logical in 2017, which was 100 years after the first women was elected to Congress and at a time when a record 21% of Congress was female, women in the House of Representatives finally fought for a change in dress code that would allow open-toed shoes and bare arms. So at a certain point, like back in 2017, maybe that was also a very divisive issue that, again, probably the same arguments for me. made like show decorum, show respect for this place. But looking at it now, you're like, well, of course, like women can wear open-toed shoes. So maybe this is something we look back in five years and say, or 10 years and say, why were we even debating this? Of course, senators should dress like the majority of Americans dress. But also at the same time, it does feel like there should be a certain level of you wear business attire when you're conducting important business

for the, that impacts the direction of the country. So, again, yeah, I'm on two minds of this. Yeah, well, the a leisure trend has definitely been supercharged and at a time when a bunch of other retail apparel companies have been doing terribly. Lulu Lemon is just on the up.

We haven't really talked about it much on this show, but its stock is up 145% over the past year and 18% this year alone. So it is just riding this wave of people wearing these like sweatpants slash Chino hybrids to work. All right, let's finish things off with a fun story from the art world.

on Monday, a court ruled that Danish artist Jens Honing had to return the Konstan Museum of Modern Art about $70,000. It had paid him for two artworks he called Take the Money and Run, which he took very literally. Here's how he got here. It's a wild story. This museum had commissioned the artist to reproduce two of its previous artworks that displayed cash affixed to a canvas in a frame. The pieces, which depicted the average income of a Dane and an Austrian, were intended to highlight pay disparities within the European Union. But when Hanning sent the museum his new pieces in 2021, the curators opened the box to discover that the new canvases were entirely blank. The museum sued the artist, accusing him of violating their agreement and demanded repayment. Haaning,

meanwhile, said him taking the museum 70K was itself the art. That was the piece. He said, I will go so far to say that the piece is that I have taken the money. The two empty frames is actually a representation is actually a representation of the concept. So more important than the absence of money is that I've taken the money. For sure, bro. The funny part is the museum actually put the canvases up. And so actually in the court's judgment, they deducted roughly $5,700 from the full loan amount because they said that that's the artist's fee and the viewing fee since the museum exhibited the blank canvases. And the museum even wrote a guide in everything explaining the concept behind the piece

saying that take the money and run is a recognition that works of art despite intentions to the contrary are part of this capitalist system. So it did look like at the end of the day the museum did participate in kind of this narrative that the artist was trying to portray. But

ultimately I don't think I'm on the artist's side here because I do feel bad for the museum. There's a quote that says we are not a wealthy museum. We had to think carefully how we spend our funds and then imagine loaning an artist $74,000 and you get a blank canvas in return. So ultimately, I think I'm on the museum side here. I think, yeah, I love this guy's gaslighting a little bit where he's like, I didn't,

the work is that I have taken their money. It's not theft. It is breach of contract. And breach of contract is part of the worth. Yeah, like, that is serious gaslighting right there. So in the court did not end up siding with him. So, but now the artist is trying to say like, oh, now poor me, like I am not going to be able to afford the work, even though my work has had a greater profile since this incident.

So it is like this very interesting capitalist question about how art and money are tied together. So I guess he's got us talking about. I wish I had those skill, like those persuasive skills that I could just weasel out of anything. Obviously, he didn't do it successfully. But I would just never go there. But maybe I could learn a few tricks from him. All right, that's all the time we have for today. I think Toby, I got to kick it to you for a little announcement.

Yes, it is my brother's birthday. He's a loyal pod listener. So if you're listening to this hen, happy birthday. Love you. All right, Neil, roll the credits. Let's roll the credits. Emily Milliron is our editor and producer, Samantha Velas, and Raymond Lue, our associate producers. Eugenwa Ogu is our technical director. Billy Minino is on audio, hair and makeup took the money and ran. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great. Show today, Neil. Let's run it back tomorrow.

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