By Ben Fritz
Walt Disney Co. is betting that the most successful movie of all
time will help continue a hot streak for its theme park business
eight years after the film came out.
The media giant this week opens the $500 million Pandora --
World of Avatar at Walt Disney World's Animal Kingdom near Orlando,
Fla., the biggest expansion of one of its American theme parks in
more than a decade. Based on James Cameron's 2009 movie "Avatar,"
which grossed nearly $2.8 billion, it is part of a
multibillion-dollar effort by Disney to expand its theme parks
around the world.
The spending is a sign of Disney's confidence that it can keep
its parks and resorts business growing even after it posted record
profits recently. Operating income grew 73% between fiscal 2012 and
2016 to $3.3 billion. Revenue in the same period rose 31% to just
shy of $17 billion.
It is also something of a gamble. The movie has been out of the
public eye for years, owed at least some of its success to
then-groundbreaking technology, and lacks the marketable characters
of Disney blockbusters like "Frozen."
Disney executives say the quality of the parks' attractions will
draw people to Pandora regardless of their interest in the film
that inspired it.
Five years ago, Disney executives indicated they had reached a
peak in annual capital spending. After a brief lull, though, such
expenditures have again accelerated, with parks investment doubling
to $4.2 billion a year between fiscal 2013 and fiscal 2016. Much of
that is due to the opening last year of the $5.5 billion Shanghai
park, in which Disney holds 43% interest. But the company has also
increased its annual investment in its two domestic parks by a
total of $1 billion.
Disney has new "Star Wars" lands in the works at Disney World
near Orlando and Disneyland in Anaheim, Calif., as well as a "Toy
Story"-themed land at Shanghai Disneyland, "Marvel" and "Frozen"
lands at Hong Kong Disneyland, and rides based on "Finding Nemo,"
"Beauty and the Beast" and "Big Hero Six" in Tokyo. The company
also is planning "long-term investment" in Disney Paris, Chief
Executive Robert Iger said on a recent earnings call.
Disney wants to expand its parks business and also represent as
many of its franchises as possible, said Robert Chapek, chairman of
its parks and resorts business.
Attendance at its domestic parks has grown substantially, with a
rising number of days at which Walt Disney World and Disneyland
parks have had to turn away guests. To address that issue, the
company last year introduced seasonal pricing at its domestic parks
and launched Shanghai Disneyland in June with a similar policy.
As a result, attendance at its domestic parks fell 1% in fiscal
2016, the first drop since fiscal 2010, but per-capita guest
spending increased 7%; the company doesn't disclose the actual
per-guest figure, just the change.
The 12-acre "Avatar" attraction marks an effort to increase both
capacity and guest spending. Disney hopes it will turn Animal
Kingdom, one of four parks at Walt Disney World, from a place where
guests typically spend a few hours to one where they can spend a
full day. It features a flight simulator, a river journey and a
huge mountain that appears to float in the air.
"It was not a park that had a lot of demand in the evening,"
said Mr. Chapek.
Disney made a deal with Mr. Cameron's Lightstorm Entertainment
and studio Twentieth Century Fox, owned by 21st Century Fox, in
2011, before it bought "Star Wars" or "Frozen" had made its debut.
The company pursued the rights aggressively, driven in part by
frustration it had let the rights to "Harry Potter" go to
competitor Universal Studios, which had a large attendance and
earnings boost from new lands based on the boy wizard, according to
people with knowledge of the deal.
Mr. Iger and then-parks chief Tom Staggs had brunch with Mr.
Cameron and his producing partner Jon Landau at the home of
then-Fox co-chief Jim Gianopulos. They pitched their ideas to
collaborate on a series of "Avatar" attractions in Animal
Kingdom.
"They said they wanted to create a totally immersive experience
and that it would have an ethos behind it," recalled Mr. Landau.
The film's message of conservation was important to Mr. Cameron and
Disney convinced him that it would be a good fit with the similarly
themed Animal Kingdom.
Disney agreed to pay Fox and Lightstorm tens of millions of
dollars a year, in addition to a cut of "Avatar" merchandise sales,
according to people with knowledge of the agreement. It also has
rights to open "Avatar" rides at its other parks, though none are
planned.
At the time of the deal, the parties expected a sequel to
"Avatar" would be released by the time the theme park opened. But
due to delays, the first of a planned four sequels won't come out
until 2020.
That has raised concerns about whether tourists will be as drawn
to the theme park area the way they are to rides based on newer
hits like "Frozen" and "Star Wars."
In addition, the success of "Avatar" was due at least in part to
its 3-D technology, rather than the characters and world that have
informed the new attractions. "Avatar" merchandise didn't sell well
around the movie's release, said a person with knowledge of the
matter. A Fox spokesman declined to comment on merchandise
sales.
Mr. Chapek said that thanks to a marketing campaign by Disney,
interest in Avatar theme-park attractions doesn't appear to be
diminished by the delayed sequels, according to internal research.
Merchandise sales, he added, have been robust during trial
operations.
Mr. Landau said he was pleased that Pandora was designed so that
it doesn't require prior knowledge of the movie it is based on.
Write to Ben Fritz at ben.fritz@wsj.com
(END) Dow Jones Newswires
May 22, 2017 11:36 ET (15:36 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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