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Fox To Enter The Theme Park Business

Dec 20 2013, 2:31pm CST | by

Fox To Enter The Theme Park Business

Photo Credit: Forbes
 
 

Like Disney and Comcast’s Universal, 21st Century Fox has plans of entering the theme parks business. The first park named Twentieth Century Fox World will open in 2016 in Malaysia, and will feature various rides based on the studio’s franchises, along with themed restaurant and retail outlets. We believe this is a good move for the company as the overall theme parks business is both attractive and growing. The new park will add a steady source to the cash flows of the company, as is evident from the performance of Disney’s and Universal’s theme parks businesses. The media company will also have an added advantage of being able to promote its movies and characters with the rides and other attractions at the theme park.

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Fox’s Entry Into Theme Park Business

Twentieth Century Fox World will be part of Malaysia’s Resorts World Genting, a leisure and entertainment complex outside of Kuala Lumpur. The 25-acre park will feature more than 25 rides and attractions based on the studio’s franchises such as Ice Age, Rio, Alien vs. Predator, Planet of the Apes and Night at the Museum. The company has teamed up with leisure and hospitality corporation Genting Malaysia, which will be investing $300 million in the park. The park will attract visitors primarily from China and Southeast Asia.

Why Malaysia?

Fox has chosen Malaysia as the first destination due to the success of other big brand parks in the Asia region, fueled by a growing middle class. Legoland opened in Malaysia in 2012, and has recently added a new water-park attraction to its resort. Universal Studios at Singapore is also doing well with more than 3.5 million annual visitors. The primary drivers for a theme park are attendance and per capita guest spend. Theme parks are destinations for leisure and entertainment activities, hence the driving factors for such a business are linked to the state of the economy and consumer spending.

The Malaysian economy has been doing well, and is expected to grow by 4.6% in 2013 and 5% in 2014. Domestic demand will continue to get support from the growth in wages and a stable employment outlook. The expected recovery in external demand will also boost the economy. Consumer spending is on the rise, increasing sequentially by 9% to 108,046 MYR million in the third quarter of 2013. [title="Malaysia Consumer Spending, Trading Economics">4] The chart below shows the trend of consumer spending in Malaysia since 2008.

What It Means For Fox?

While Universal Studios at Singapore attracted 3.5 million visitors last year, Legoland Malaysia attracted more than 1 million visitors in the first year. The admission price per adult at Legoland Malaysia is around $36 as compared to $58 for Universal Studios Singapore. Ticket prices account for estimated 75% of the per capita guest spend for the theme parks. If we take an average of attendance and per capita guest spend, we get annual revenue of over $105 million for the Fox’s theme park in Malaysia. If we assume similar EBITDA (earnings before interest, taxes, depreciation and amortization) margins as that of Disney’s theme park business, Fox’s annual earnings from the theme parks business will be around $30 million. While the figure appears to be small, it must be noted that the company plans to develop theme parks across the globe. The Theme park business has proved significant for media companies as it offers a platform to cross-market the company’s other products and services, such as Fox’s movies and characters.

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Source: Forbes

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