The Risks of Riding the Hollywood Theme Park Craze
Jimmy Fallon gets his own attraction as Fox, Lionsgate and more enter the crowded space owned by Disney and Universal.
A version of this story first appeared in the Nov. 20 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
Has Hollywood reached peak park?
Fox said Nov. 4 that it has partnered with Al Ahli Holding Group for a theme park in Dubai with rides based on the studio's films and TV shows, and one is already in the works in Malaysia, both based on a licensing model so Fox won't have to shell out the $850 million needed to build each park. Similarly, Lionsgate has pacted for attractions based on The Hunger Games, Divergent, Now You See Me and Step Up in New York, London, Atlanta, Dubai and China, while Paramount has licensed its name and IP for a resort in London. Sources say Paramount and Warner Bros. are considering opening parks in China, where DreamWorks Animation is planning DreamCenter (in addition to three indoor parks in Russia and a Shrek attraction in London).
That's on top of aggressive expansion by Disney and Universal (considered the "big two" of the parks business), including a Harry Potter world at Universal Studios Hollywood and a Jimmy Fallon-themed ride in Orlando; Star Wars lands coming to Disney parks in Florida and California; and Pandora — The World of Avatar, set to open in 2017 at Disney's Animal Kingdom.
20th Century Fox World will have attractions based on 'Titanic,' 'Ice Age,' 'Sons of Anarchy' and 'The Simpsons.'
Media analyst Hal Vogel says Fox's deal is "a sign of a top" and that there are several reasons for Hollywood to cool theme park expansion. Of the top 20 parks in North America, six saw attendance decline in 2014, according to the Themed Entertainment Association. The top 10 parks groups worldwide collectively grew attendance 5.1 percent in 2014 compared with 2013, but four — Six Flags, SeaWorld Parks & Entertainment, Cedar Fair Entertainment and Parques Reunidos in Spain — saw attendance dip. "After the first year or so, the new themes wear off," says Vogel. "So unless there's constant, major new capital expenditure, the cash flow starts to shrink." He also says "newbies" don't realize how cyclical the parks business is, and when interest rates rise — perhaps within the next year — the economy will slow, chasing consumers.
But the numbers are too compelling to ignore: More people visited Universal theme parks this summer than in any previous season, sparking a 14 percent quarterly gain in cash flow and revenue. Disney said Nov. 4 that parks revenue for its fiscal year rose 7 percent to $16.1 billion as operating income rose 14 percent to $3 billion.
Plus, the new focus is on foreign markets with growing middle classes. In the United Arab Emirates, theme park revenue should grow 78 percent to $837 million by 2019, according to Euromonitor. Such growth ought to be music to the ears of Warner Bros., which could have a theme park opening in Abu Dhabi as early as 2018 via a partnership with Miral Asset Management. "We're definitely seeing a lot more announcements than we're used to," says Christian Aaen of Entertainment + Culture Advisors, which conducted a feasibility study for Universal's $3.3 billion Beijing park set to open around 2020. "All the studios are interested in either their own parks or lands within parks."
Analysts also note that parks branded around popular movies and TV shows have been faring much better than other parks, further minimizing the risk to media conglomerates venturing into the business. The two Fox parks could include attractions based on Sons of Anarchy, The Simpsons, Titanic, Ice Age, Rio, Planet of the Apes, Aliens and Night at the Museum. In Dubai, the park will take up 45 acres with an additional 30 acres dedicated to Fox-branded hotel resorts. In Malaysia, Fox is building a 38-acre park at Genting Highlands, a tourist attraction that includes a casino and restaurants and already draws 20 million people annually. The deal calls for a new shopping mall at the site and 3,000 additional hotel rooms, taking the total to 13,000.
Universal also is building a park near the capital of China, a country sporting economic growth that is about twice the world average, and it already has parks in Singapore and Japan. "We want to expand our theme park business around the world," NBCUniversal CEO Steve Burke said Sep. 29 when announcing NBCU was purchasing a 51 percent stake in Universal Studios Japan for $1.5 billion.
Meanwhile, Disney CEO Bob Iger's mandate for more synergies between the parks and film studio has been a boon. Disney practically resurrected California Adventure with a $1 billion upgrade focused on Cars Land, and when Disneyland converted its submarines into a Finding Nemo attraction, consumers waited more than four hours to experience the 13-minute ride. Other movie-based Disney attractions in the pipeline include Frozen Ever After and Toy Story Land in Florida and a Pirates of the Caribbean-themed land called Treasure Cove set for a park in Shanghai that opens next year. Disney, in fact, spent $8 billion on theme parks between 2010 and 2014, representing "nothing short of historic expansion," says one insider.
"I have very high confidence in what Universal is doing," says Wunderlich Securities analyst Matthew Harrigan in rounding up the theme park activity. But what about Lionsgate's plans for a Hunger Games attraction? "Lionsgate will always be very circumspect in limiting capital exposure and being realistic in deriving some location-based upside from brands such as Hunger Games," adds Harrigan. "However, this is not an easy business. Disney and Universal will remain in a different league."