Kenversations: Disney’s Changing Playing Field (Part 3 of 3) - Feb 20, 2007

Kenversations: Disney’s Changing Playing Field (Part 3 of 3)
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by Ken Pellman (archives)
February 20, 2007
Ken concludes his three part series taking a detailed look at Disney's recent history and competition in theme parks, animation and other areas.

Disney’s Changing Playing Field (Part III)

Welcome to the third (and final) installment of this series on the changes in the industries and media in which Disney operates and entertains.

In part one of this series, I focused on changes in the structure of the corporations with which Disney both competes and does business, changes in Disney’s live action film strategy, changes in the animation business.

In part two of this series, I focused on changes in the cinema business, home viewing, network television, telecom companies, and more.

Now, before I wrap it all together, I turn my attention toward that stepchild of the entertainment industry - major theme parks, which are near and dear to my heart.

It seems like only yesterday that the film studios were all clamoring to follow the lead of Disney and develop namesake theme park and location-based entertainment businesses. Walt Disney was enthused about the difference between films and theme parks, noting that he could keep growing and developing a theme park while a movie was finished and static for the rest of history. You have to understand - this was before George Lucas figured out he could do with “Star Wars�? what Chubby Checker has done with “The Twist�?.

Businessmen at other studios see a drawback - ongoing costs. While a major hit film can be produced, distributed, and marketed in two years for $150 million, and then can be left untouched and can earn hundreds of millions of dollars over the next several years in theaters, on pay-per-view, on basic cable, on broadcast television, on DVD, etc., theme parks need major new attractions that cost tens of millions of dollars every few years, take a lot of time and other resources to develop, and cost money to operate and maintain. A flop movie disappears, but a flop attraction sits there and festers. Plus, you as a customer can’t really pack them up and take them with you – you have to go to them, often taking a full-blown vacation to get there and experience them. With their other businesses, studios don’t have to physically host and interact with their audience all day. When the corporations are looking at their core businesses, such a movies, television shows, cable service, radio, and book and magazine publishing, theme parks stick out as being different and overhead-heavy. Thus, when a corporation was looking to simplify, the stepchild was kicked out.

Back in 1998, Time Warner sold their Six Flags parks to Premier Parks, which subsequently adopted the Six Flags name. Six Flags continues to use Warner theming, as does a park in Australia. An anomaly to the trend is Parque Warner Madrid, which opened in 2002 under Six Flag management. In 2004, Time Warner took over management.

In May 2006, fresh off the Viacom/CBS split, CBS announced it had reached an agreement to unload Paramount Parks to Cedar Fair (Paramount Pictures had gone to Viacom in the split, while the Paramount TV shows and theme parks had gone to CBS). This has reduced the six major theme park operators in the United States to five: Disney, Universal, Busch, Cedar Fair, and Six Flags – all of which are represented in southern California, three of which are represented in central Florida.

All of them are dealing with the changing realities of home and regional entertainment, both of which are getting more sophisticated. Six Flags, which had grown tremendously with mergers and acquisitions, found itself with a pile of debt, rising real estate values, and natural disasters. The result has been the closure or sale of various Six Flags parks, in part because land sales can bring in immediate revenue. This wave started in 2004. Most recently, in January, Six Flags announced the sale of seven parks. There had been talk of selling the two-park property in Valencia, California (northern Los Angeles County), which could have been razed for housing developments given the popularity of new housing in the area, but Six Flags has decided to keep the parks for now.

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