NBCUniversal has made a half-billion-dollar bet that a boy wizard will help its theme park division take a little bit of the magic away from industry leader Walt Disney Co.
Its Universal Studios Hollywood theme park is set to officially open its latest attraction, the Wizarding World of Harry Potter, this week after two months of “soft” operations. The $500 million it spent on the Hollywood version of Hogwarts, along with an attraction based on TV zombie hit “The Walking Dead” set to open this summer and other branded offerings, is part of the media giant’s $1.6 billion redevelopment plan for its 391-acre property in Universal City.
The investment comes as rival Disney is doubling down on its theme park efforts, adding both “Star Wars”- and “Avatar”-themed attractions.
“Universal and Disney are in the biggest armaments war they’ve ever been in,” said Dennis Speigel, president of Cincinnati consulting firm International Theme Park Services Inc. “They’re in the boxing ring for products, attendance, and revenue.”
The U.S. theme park industry generated about $15 billion in revenue in 2014, the most recent data available, and NBCUniversal claims a stake of about 20 percent of that market. Disney, by contrast, has roughly 53 percent, according to latest industry report figures.
NBCUniversal, a unit of Philadelphia-based Comcast Corp., has boosted its capital expenditures on its park division in recent years. In its latest annual report, Comcast said NBCUniversal spent $1.4 billion on capital expenditures last year – a 13.5 percent increase over 2014 – “primarily due to continued investment in our Universal theme parks, including a purchase of land in 2015.”
Analysts said Comcast’s renewed focus on NBCUniversal’s theme parks is driven by solid profit margins and is a way to capitalize on existing media properties, such as the Potter franchise.
The parent company’s revenue from the segment grew by more than 27 percent last year and while the division remains a relatively small part of Comcast’s overall business, the company’s September purchase of a controlling stake in Universal Studios Japan underlines the new focus. The parent company had operating income of $16 billion in 2015, of which theme parks generated $1.5 billion, an increase of 34 percent from the prior year.
“They’re consistently putting money into theme parks and seeing good returns on those capital investments,” said Dave Heger, a senior equity analyst at Edward D. Jones & Co. in St. Louis. “They seem pretty serious about that growth even though it’s relatively small compared to the cable business segment.”