Disneyland at 60: How Did It Grow Into a $15 Billion Business? | QDaily Business History

Meticulous design, family entertainment, the idea of the theme park, a plan of endless expansion — put them together and you get the one and only Disneyland.

Shanghai Disneyland, opening next spring, is the most important thing on Disney's plate right now. It will be the company's sixth theme park in the world, and the whole company has high hopes for it.

Much of that hope comes from past success. Counting from the day the first Disneyland opened to the public, July 18, 1955, Disneyland is now 60 years old.

For a year this important, Disney's celebrations began back in May. On July 15, with the 60th anniversary only days away, Shanghai joined the buildup, releasing the overall plan and some of the details for Shanghai Disneyland, which opens next spring.

At the launch event, Disney played a special opening film: photographs of the Disney castle taken day after day, cut together so fast that the castle seemed to grow taller in front of you.

Robert Weis, executive vice president of Walt Disney Imagineering, then walked through the design of Shanghai Disneyland using a scale model of the park about 30 square meters across. "Treasure Cove" will be the first land in any Disney park anywhere built around an island theme, and "Adventure Isle" will hold what he called "the largest mountain in Shanghai."

A rendering of the Treasure Cove land

The other highlight of the design is the Chinese elements. The "Gardens of Imagination" land draws on the twelve animals of the Chinese zodiac. The restaurant that sits in the Gardens of Imagination will take the shape of a Chinese building, with calligraphy and traditional Chinese paintings inside. On fusing two elements that look so ill-matched — Disney and China — inside one park, Robert Weis said: "This design for Shanghai Disney can be seen as a 'reinvention' of Disneyland."

Forecasts say the park, in Shanghai's Chuansha Town, will draw 25 million visitors a year, far more than the 19 million who go to Disney's park in Orlando, Florida. A crowd that size could bring in more than 5 billion yuan in ticket revenue alone, and drive more than 50 billion yuan of output across the wider service industry.

Over on the other side of the Pacific, the celebration at Disneyland in Los Angeles is no less lavish. Since May 22, every piece of the park's nighttime entertainment has been upgraded. A parade called "Paint the Night" carries characters from Toy Story, Monsters University and other films from the front gate deep into the park. "World of Color," the water show Disneyland launched five years ago, has become "World of Color – Celebrate!" And "Disneyland Forever," the fireworks show that goes off on schedule every night, has picked up more light-show elements and is now streamed online.

The Paint the Night parade

And this is only the start. The Disneyland Diamond Celebration — the name comes from the American habit of calling a 60th wedding anniversary a diamond anniversary — will run a full year. During it, Disneyland will add several refreshed attractions, among them the Matterhorn Bobsleds, Peter Pan's Flight and the Haunted Mansion. Disney will also hold fan sweepstakes, with drawings every day and every week; the prize everyone wants is Cinderella's glass slipper.

For Disney, this really is a day worth celebrating. Over 60 years Disneyland has kept making people happy, and it has also become a very good business.

To get to know Disneyland, let's start with some fun numbers

Disney wholly owns three parks and resorts worldwide, in Florida, California and Hawaii. It also holds 51% of Disneyland Paris, 48% of Hong Kong Disneyland and 43% of Shanghai Disneyland, and licenses Tokyo Disneyland to the Japanese company Oriental Land to run.

The largest of them is in Florida, covering 25,000 acres (more than 100 million square meters); all of Disney's parks together come to nearly 33,000 acres (about 133 million square meters), roughly 1,000 People's Squares in Shanghai.

And according to a report from the Themed Entertainment Association (TEA) and AECOM, the world's largest design and engineering firm, Disneyland leads every theme park on earth on attendance, and not by a little.

Among all the groups that run theme parks, Disney's parks together took 134 million visits in 2014 — a third of the population of the United States. That is more than the second-place Merlin Entertainments Group (owner of Legoland and Madame Tussauds) and the third-place Universal Studios group drew combined.

Ranked park by park, the Magic Kingdom at Disney's Florida resort sits at the top with 19.33 million visits a year. Second is Tokyo Disneyland, and third belongs to Disney again — Disneyland in Los Angeles. Of the world's 25 most popular theme parks, 11 are Disney's.

Crowds that large also eat and drink on a huge scale. Disneyland in Los Angeles reportedly gets through more than 4 million hamburgers a year, plus 1.6 million hot dogs, 3.2 million ice creams and 1.6 million servings of popcorn. Those visitors also leave more than 30 tons of trash a day, out of which Disney recycles more than 4 million pounds of paper and other material a year. The lost and found at the Los Angeles park takes in more than 400 items a day, and since 1971 about 1.65 million pairs of sunglasses have gone unclaimed.

To keep Disneyland running, Disney's parks division employs more than 130,000 people; every other division of the group put together employs only 180,000. Those 130,000 include all sorts — the Imagineers who design the rides, the performers who work inside the parks.

Performers at Disneyland

The shows inside the parks are many and varied. Disneyland in Los Angeles alone stages 16 of them. The fireworks show that goes up every night costs between $41,000 and $55,000 per performance. The parade, running since 1955, has covered more than 4,000 miles over the years — about the distance from China's easternmost point to its westernmost.

Disney also tries to please its visitors in the smallest details. Mickey Mouse has more than 290 costumes in the park, and Minnie more than 200. Every Christmas more than 1,500 Christmas trees go up; the biggest, at the main entrance, stands 18 meters tall and carries 70,000 lights and 2,000 ornaments.

Over the years Disney has kept renewing the rides. The Avatar-themed land that broke ground at the Florida park in 2014 cost more than $500 million. In 2015 Disney decided to spend $1 billion expanding the Los Angeles park.

Ticket prices have climbed too. When Disneyland in Los Angeles opened in 1955, an adult ticket cost $1 and children paid half. Today an adult ticket is $99 and a child's ticket $93. You can buy an annual pass instead; it comes at two levels, $779 and $549.

The reasons you love Disneyland are the reasons it succeeded

Disneyland is the world's largest theme park, but it is not the world's oldest amusement park. The oldest is said to be in Denmark, open for business since 1583. Amusement parks in the modern sense appeared as early as the end of the 19th century, and by the beginning of the 20th the lots of Universal Pictures — the predecessor of Universal Studios — were already open to visitors.

Founded in 1955, Disneyland is young in this trade. Yet in 60 short years it became the largest theme park in the world. The reason may go back to what Walt Disney, the founder of the company, was thinking when he set out to build it.

The most popular version of the story runs like this. One day Mr. Disney took his two daughters to Griffith Park in Los Angeles. While the girls rode the carousel, he did not ride with them. Nobody knows exactly why. Perhaps he thought the carousel too babyish; perhaps he found it too girlish for his taste. Either way, Mr. Disney did not share the fun his daughters were having.

That made him thoroughly unhappy. He began to ask why an amusement park could not offer entertainment that children and adults could both enjoy. In the end he decided to build a park of his own, where grown-ups and children would both be happy.

Building a park was the easy part. Mr. Disney bought about 160 acres southeast of Los Angeles, near Orange County. The Walt Disney Company and ABC each put in $500,000, Western Printing put in $200,000, and Mr. Disney himself added $250,000 — and the money question was settled.

The earliest Disneyland

The hard part was making a park where adults and children could play together. Mr. Disney's answer was to join the rides to the stories in Disney's films. It looks like an ordinary idea, and it changed what an amusement park felt like.

Take a simple example. At an ordinary amusement park — Happy Valley, say — visitors say, let's ride the carousel, or let's ride the roller coaster. A carousel sounds like a gentle machine, one girls may like more than boys. A roller coaster may pull in more boys. That kind of "bias" narrows the audience for each ride.

Once a ride is joined to a film's story, the experience it offers gets much richer. Even a carousel, wrapped in the story of Cars, with the wooden horses swapped for little cars, loses some of that girlish air and catches boys' interest. And since a carousel still isn't a frightening machine, girls will ride it too.

If you follow that example, you can see why folding film stories into rides produces entertainment fit for a family. Disney's films are made for the whole family to watch together, so stories that suit young and old alike, once built into a ride, can draw in every member of a family. That makes what Disney offers different in kind from other amusement parks. In a sense, it is precisely because film themes were added to the rides that Disneyland is a real "theme park."

Truly folding a film's scenes into a ride is not easy. Every detail of the ride has to be designed with unusual care.

There is a small story about Walt Disney on this point. Before the Pirates of the Caribbean attraction opened, Mr. Disney rode it himself and could find nothing to improve. So he called in a few construction workers, sent them through for a ride, and asked them what they thought.

Pirates of the Caribbean at Disneyland

One of the workers kept feeling that something was wrong but could not say what. So Mr. Disney had him ride it again, and again. In the end the young man worked it out: the Caribbean should be full of fireflies, and there were none in the ride. That was why the attraction, for all its name, never felt quite real.

Mr. Disney was delighted. He pushed the design team to fix it at once and oversaw the work himself. One by one, fireflies appeared in the ride. We have no way of knowing how much they improved the experience, but without Mr. Disney's appetite for detail, Disneyland would not be the interesting, charming place it is today.

That appetite for detail was handed down. Inside Disney there is a group called Imagineers — the word is imagination and engineer joined together, a sign that the people who design and build the parks need runaway imagination and an engineer's rigor at the same time.

Under their careful design, Disneyland is full of Easter eggs. On the park's Main Street USA, to bring back the style of the American West, they put antiques on the shelves inside the little shops. Visitors often reach out to touch them and find they are not cheap plastic copies but the real thing. The Imagineers believe that discovering the objects were fake would leave visitors disappointed. So that every visitor enjoys the trip, they work to a rule: anything a visitor can touch must be real, and anything a visitor cannot touch must look real.

The rides hold plenty of detail as well. The music playing in a scene changes with the time of day, and a ride may run along several different tracks, showing visitors different sides of the film — so sometimes you have to ride an attraction many times before you have found everything in it.

Sometimes the Imagineers' insistence on detail causes Disney trouble. To keep up with the digital age, Disney wanted to bring a MagicBand into the parks to help visitors get more out of a visit. A guest would tap the band against a special reader shaped like Mickey's head to enter a ride.

The Disney MagicBand

That Mickey-head reader had to go on every ride, and some Imagineers resisted the idea. Different rides have different themes, they argued, and Mickey's outline turning up on a Western-styled attraction would spoil its look and hurt the visit. They also thought that seeing Mickey again and again all over the park would make the whole place monotonous.

Joe Rohde, a retired Imagineer, put it this way: "If I'm here to experience a fantasy world, then that fantasy world shouldn't have a MagicBand in it."

Whether the MagicBand is good or bad for Disneyland is still unclear. But the quarrel shows how tightly the Imagineers hold to Disneyland's founding idea: build a dream world where adults and children can both be happy.

Another secret of Disneyland's success is that it keeps adding new things to pull visitors in. Speaking of the park, Mr. Disney once said: "Disneyland will never be completed. It should be a place that keeps growing, that can always add something new."

In 1977, the arch on Main Street USA was finished; the Imagineers hung several thousand of the kind of colored bulbs that go on Christmas trees to make it glitter. Today every one of them has been replaced by LEDs, 1.5 million of them, each bulb controlled on its own, which means the arch can show far richer pictures and patterns.

The biggest changes come from rebuilding and enlarging rides, and from Disney's habit of pulling its newest hit films into the park. In 1995 Toy Story came out and took $364 million worldwide, one of the most popular films of the year.

A little over two years later, Disney decided to bring elements of Toy Story into the park. In January 1998 Disneyland closed an existing ride and began turning it into what is now Buzz Lightyear Astro Blasters. Ten months later the ride opened. It drew crowds of Toy Story fans and warmed up the audience for Toy Story 2, out the following year.

For a theme park like Disneyland, however rich the design details, the day comes when visitors tire of them. Once a park can no longer feel new, its life is over. Constant building, rebuilding and renewal is therefore the best way for Disneyland to stay alive.

The strategy has worked. From 2009, Hong Kong Disneyland — then the smallest Disney park in the world — spent $465 million to enlarge its grounds by 25%. After the new ground opened, visitor numbers rose 14%, losses kept shrinking, and in 2013 the park finally moved into profit.

Disneyland's expansion will not stop there. This year Disney has already announced a batch of new rides for its Orlando resort in Florida. And in 2017 the Avatar land in Orlando will open, in the same year as the long-awaited Avatar 2 — a pairing that should bring in many new visitors.

Disneyland's success also shows up in Disney's accounts

With so many visitors contributing revenue, the parks and resorts business that Disneyland belongs to has become one of the most important sources of income in the Disney group.

In fiscal 2014, Disneyland's total revenue reached $15.1 billion, over 30% of the whole group's revenue — more than twice the revenue of the film division that turns out blockbuster after blockbuster, just under four times that of the consumer products division that sells countless toys, and exceeded only by the television networks, which reach 100 million users worldwide.

Disneyland's profit contribution came to $2.66 billion, more than 20% of all profit. That share has slipped because running parks costs a lot, but the number is still impressive — about equal to the profits of the film and consumer products divisions combined.

And the parks revenue Disney reports is not all the money Disneyland makes, because Disney does not wholly own the parks in Tokyo, Hong Kong and Paris. Take Japan. That park belongs to a Japanese company called Oriental Land, which needs only to pay Disney a licensing fee each year in order to run Tokyo Disneyland. Oriental Land's revenue in fiscal 2013 was 473.6 billion yen, about $3.8 billion, with profit of 70.5 billion yen, about $580 million. Those are not small numbers.

More than 100 million visits are made to Disney's parks every year, and yet Disneyland does not make its money selling tickets. According to Forbes, ticket money is just enough to cover operating costs. The money comes instead from hotels, merchandise, food and drink.

What really sets Disneyland apart is the merchandise. Inside the park, selling merchandise and running rides are almost tied together. At the exit of the Star Wars attraction, Disney has put a very large merchandise shop. Visitors who have just felt the pull of the Star Wars world cannot resist the goods, and out come the wallets.

Figures from Oriental Land, which runs Tokyo Disneyland, show that in fiscal 2014 the average visitor spent 10,955 yen at the park, of which 4,660 yen went on admission — only about 42%. The rest went on merchandise and food.

Disneyland Paris has not told us how much it makes from merchandise and how much from food, but its hotel revenue is high. In fiscal 2014 the hotels took €490 million, close to 40% of the park's total revenue.

The reason goes back to Disneyland's design philosophy. Because the rides are tied so closely to the film themes, the films improve the visit and bring in more visitors, and the visit in turn makes people want to buy the merchandise.

Run the logic the other way, and Disneyland lifts Disney's own film business. The most famous case is Pirates of the Caribbean. It began as nothing more than an attraction in the park, opened in 1967, the last ride Walt Disney oversaw in his lifetime.

In 2003 Disney decided to turn that ride into a film series, and the result was an enormous success. The four films released between 2003 and 2011 took more than $3.7 billion worldwide, the highest average box office of any film series.

Tomorrowland, released in 2015, was likewise adapted from a land at Disneyland. During the campaign for the film, its selling point was that the park had been built to Mr. Disney's own vision of the future. The box office was not high in the end, but it still counts as one way Disneyland pushes the film business along.

The film Tomorrowland

From park to merchandise, from film to park, from park back to film: in Disney's business any end point — a ride in the park, a character in a film — can become a starting point. From that point all kinds of other forms grow, which is how Disney ties its businesses together. That is the core competitive strength of Disney as a business.

Disneyland is one link in the chain. It is not necessarily the biggest link, or the most creative one. But without Disneyland, Disney's other businesses probably would not be doing as well as they are.

How a business this big grew, step by step

In the 1950s, once Mr. Disney had the idea of building Disneyland, he wanted only a small park at first: the earliest plan was for a park on 8 acres of land. But as his idea turned into drawings, he found that 8 acres could not hold his imagination.

So he brought in Harrison Price of the Stanford Research Institute to look for a new site that could hold the theme park and any future expansion. There were two requirements. Transport had to be good — Mr. Disney wanted the park inside the Los Angeles metropolitan area, reachable by freeway. And the land had to be cheap, since his means at the time were limited. In the end a plot of about 160 acres southeast of Los Angeles, near Orange County, came into view, and it became Disneyland's permanent home.

After $17 million and a year of construction, Disneyland finally opened. Mr. Disney had sent out 6,000 invitations; on July 18 more than 28,000 people turned up, most of them with forged tickets, just to get a look at the place.

The success of that first day carried on, thanks to Mr. Disney's positioning of the park as family entertainment and to the care in every detail of its design. By 1965, 50 million people had visited the Los Angeles park.

As he had said, Mr. Disney thought of Disneyland as a project that could never stop. So even as the Los Angeles park was succeeding, he was planning another one — what became the Disney resort in Florida.

At the start, worried about the future of humanity, he wanted to build a city fit for people to live in, free of the diseases of the modern metropolis. For that dream he settled on a 27,000-acre plot in Florida, not because the weather there was good but because Florida had enough empty land, and big enough.

Mr. Disney never saw his idea come true. He died in 1966. After his death Roy Disney hoped to carry out his brother's dream, but Disney's board thought the plan too risky and turned it down in the end. All that survived is the Magic Kingdom we can see today.

The Magic Kingdom at Disney's Florida resort

By the late 1970s, Card Walker, then Disney's CEO, wanted to restart Mr. Disney's plan, but the board still had doubts. After a long tug of war, the planned new city turned into what we now know as Epcot — closer to a world's fair than to the livable city of the future Mr. Disney had imagined.

The year after Epcot was finished, Disney's first overseas park, Tokyo Disneyland, opened as well. Disney at the time was in the middle of a power struggle between Roy Disney and Ron Miller, and the whole company was shaking. At its weakest moment, Japan, then growing fast, held out an olive branch: Oriental Land wanted to build a Disneyland in Japan. In the talks, Oriental Land offered $20 million a year in licensing fees to buy out ownership and operating rights to the Japanese park outright, and the struggling Disney agreed.

What nobody expected was how well the Japanese park would do. Four years after it opened, Tokyo Disneyland was taking 12 million visitors a year; in under a decade the figure rose to 16 million. This turned out to be the worst blunder in Disneyland's history of global expansion: for $20 million a year in licensing fees, Disney lost a highly profitable park.

In 1984 the power struggle inside Disney finally ended, with Roy Disney the winner, and he brought in Michael Eisner — who had rescued a near-bankrupt Paramount — to take charge of Disney. Eisner was somewhat autocratic, but he also had formidable powers of execution and an appetite for expansion. It was he who, more or less single-handed, drove Disneyland's renewal, adding Disney California Adventure in Los Angeles and Animal Kingdom in Florida.

More important, he sold Disneyland to more of the world. The French government wanted a Disneyland to lift French tourism, and Eisner seized the chance and nailed down that $4.4 billion investment. Disneyland Paris opened for business in 1992.

Also under Eisner, in 1999, Disney and the Hong Kong government announced they would build Hong Kong Disneyland together. Hong Kong had just shaken off the 1998 Southeast Asian financial crisis, and to pull itself clear of it the government hoped a Disneyland would boost its tourism. Disney, for its part, wanted to use Hong Kong as a springboard into the East Asian market, above all China — so the two sides agreed quickly. Six years later, in 2005, Hong Kong Disneyland opened. That same year, Eisner, shut out by the board for his overbearing management style, left Disney in disgrace.

The Shanghai project came together much the same way as the ones before it. Shanghai needed an attraction strong enough to shake off the embarrassment of being a day-trip stop, and Disney needed the Chinese market to lift its business further. Talks and approvals began in 2009, and in October 2010 the project formally started.

Theme parks are a complicated business, and even Disney can't rest easy

Disney's annual reports show Disneyland's revenue rising year after year, but that does not mean Disney can rest easy. Several problems keep nagging at the company.

One of the larger ones is how to take the parks to the rest of the world and make money there. Of Disney's three overseas parks, Tokyo runs best. Much of the credit goes to the Japanese custom of bringing gifts home after a trip, which makes merchandise sales at the Japanese park very high. And for historical reasons Japan feels naturally close to American culture, so Japanese enthusiasm for a day at Disneyland runs high as well.

That approach did not work in Paris. The haughty Old World looked down on the New World's nouveau riche and had no time for Disneyland. When the park first arrived in Paris, it briefly drew resistance from the French. In recent years, with the economic crisis on the continent unresolved, attendance has been slowly falling: 15.4 million in 2009, only 14.2 million in 2014. Disneyland Paris's results have been sliding ever since. In fiscal 2014 it lost €114 million, €35 million more than the year before.

In Hong Kong things are a little better. Because Hong Kong Disneyland is the smallest Disney park in the world, it does not pull visitors hard enough. Hong Kong also has the larger Ocean Park, which puts real competitive pressure on Disneyland.

After a series of expansions, Hong Kong Disneyland moved into profit from 2012, and profits have grown fairly fast — mainly because more and more mainland visitors have been coming. That may not last much longer, though: a string of disturbances in Hong Kong in recent years has badly damaged its tourism, and Shanghai Disneyland opens for business next spring. When it does, life for Hong Kong Disneyland could get harder still.

Beyond the problem of fitting in around the world, Disneyland also faces the digital age. As smartphones, the internet and virtual reality advance, will a physical park still be so attractive? People once had to travel to Disneyland to see its dreamlike scenes; now the internet and virtual reality can meet part of that need.

Two episodes suggest how serious the challenge is. In 2005, to celebrate Disneyland's 50th anniversary, Disney launched an online game modeled on the park. When it decided to shut the game down in 2008, it met fierce protest from the players.

Disney's online virtual park

At about the same time, Disney found that half of first-time visitors said they probably would not come again, citing long queues for rides, high ticket prices and other reasons. In short, Disney found many of the important numbers in running a park were falling.

A Fast Company report quoted a former Disneyland employee: "We didn't really recognize that the way people were interacting with the Disney brand had changed. If we can't attract the next generation of visitors, then Disneyland is in real trouble."

So Disney spent $1 billion developing the MagicBand. It is the ticket into the park, the wallet at mealtimes, the key to the hotel room. Disney hoped a smart device of this kind would make the Disneyland experience feel more advanced, and along the way solve some operating problems, such as evening out the flow of people between different parts of the park.

But one Disney employee said: "Frankly, the MagicBand isn't all that magical. Apart from paying and unlocking your room door, it can't do anything."

Graphics: Lin Yuyao