Brooks Barnes
Pull down your lap bars: Universal Studios, the theme park chain now controlled by Comcast, is rolling out new weapons in its battle against Walt Disney Parks and Resorts?and Disney is fortifying its defenses.
Universal?s parks have always languished in the shadow of mouse ears, and that will not change anytime soon. Disney has eight parks in California and Florida that attract over 73 million visitors each year, with summer the busiest season. Universal operates three parks, with annual attendance totaling about 18 million.
But Universal is starting to look a lot less puny. A $265 million Harry Potter-themed addition to its resort here sent 2010 attendance soaring 30% over the year before, draining attention from Walt Disney World in the process. Universal is now racing to replicate the attraction at its parks in California and Japan while expanding the boy wizard?s presence in Orlando.
To maintain momentum, Universal?with more Comcast money?is introducing a swarm of offerings. A major 3-D ride themed to Michael Bay?s Transformers movies opens this Friday at Universal Studios Hollywood, at an estimated cost of $100 million. New draws at Universal Orlando include a refurbished Spider-Man ride, a lavish parade, a high-tech fountain and pyrotechnics show and a ride based on Despicable Me.
?There is an incredible sense of energy and forward motion around here, no doubt about it,? said Thomas L Williams, chief executive of Universal Parks & Resorts.
Disney is watching all of this with a clenched jaw. Although it has publicly dismissed a Potter-enhanced Universal as being even a remote threat, arguing (accurately, analysts say) that a rising tide in Orlando lifts all boats, Disney is privately concerned about preventing market share erosion on both coasts.
Competition with Universal, for instance, factored into Disney?s decision to beef up a previously planned expansion to its Magic Kingdom park in Orlando and spend an estimated $500 million on an Avatar-themed addition to its nearby Animal Kingdom park. The $425 million Magic Kingdom expansion opens in phases starting this year. Avatar construction is set to begin next year and open in 2015. Design details are secret, but James Cameron, who directed Avatar and is working on two sequels, has said part of the project will include a ride that simulates flight.
Disney declined to comment for this article.
Theme parks represent one of the few areas of stable growth outside of cable television for media and entertainment conglomerates like Comcast and Disney. Parks can be vulnerable to swings in the economy and require costly and continuous investments in new rides; escalating labor costs threaten margins. But for a media industry challenged by piracy, a fading DVD business and broadcast networks that continue to struggle, parks have emerged as a bright spot. For reasons that economists can?t quite pin down, Americans have not cut back on expensive theme park vacations the same way they have pared retail spending and other discretionary purchases.
Comcast?s movie division, for instance, recorded operating cash flow of only $6 million in the most recent quarter; the current quarter is also looking troubled, with the costly Battleship taking in a weak $25.4 million in theaters over the weekend. Comcast?s broadcast network, NBC, recorded an operating cash flow loss of $10 million in the recent quarter.
In contrast, Universal?s parks had operating cash flow of $157 million in the last quarter, a 17% increase from the same period a year ago. For 2011, the parks supplied 8% of NBCUniversal?s total revenue but made up 20% of its total operating cash flow, the second-largest contributor behind cable television.
Disney reported similar results May 8. While the company?s movie studio had a loss of $84 million ? mostly because of a huge write-down for John Carter?operating income at its theme parks surged 53%, to $222 million.
The rivalry between the two parks operators, which dates to the late 1980s, when Disney scrambled to open its Hollywood Studios park here to beat Universal?s planned arrival, next moves to California. Universal will soon open its Transformers ride; Disney will unveil a $450 million Cars-themed addition to its California Adventure park in Anaheim on June 15.