Harry Potter land universal

Lionsgate investors who presumed there was no more value to wring out of “The Hunger Games” beyond its final installment next year got a nice surprise last week. CEO Jon Feltheimer announced a new way to capitalize on the mega-franchise: A touring exhibition devoted to the movie will kick off next summer, the first element of a bigger plan aimed at putting the studio in the theme park business.

Indeed, blockbuster entertainment franchises are getting integrated into the parks with increasing frequency. Universal Studios Hollywood unveiled Despicable Me: Minion Mayhem in April, expanded with Super Silly Fun Land, the seaside carnival featured in the film. Up next: Universal is teaming with Warner Bros. to open Diagon Alley, a faithful re-creation of the London location from the “Harry Potter” films, on June 20.

Update: Universal will officially open Diagon Alley on July 8. While Universal had originally hoped to open the attraction June 20, it’s using the time leading up to the July launch to present the park to media, analysts, Comcast staffers and business partners, and make it available to buyers of special Harry Potter vacation packages.

As part of the massive expansion of the Wizarding World of Harry Potter, Universal Studios Florida built a Hogwarts Express train that travels to neighboring Islands of Adventure — a shrewd way to encourage guests to purchase a $136 park-hopper pass. Universal and WB will open another Wizarding World in Osaka, Japan, in June, and they are building a third park in Hollywood that will open in 2016.

Walt Disney World also recently completed a major expansion of Fantasyland at the Magic Kingdom, which includes its newest ride, the Seven Dwarfs Mine Train. Themed lands also are being developed by Disney around the megahits “Avatar” and “Pirates of the Caribbean.”

(Disney’s plans for Pirates of the Caribbean: Treasure Cove)

But Disney and Comcast aren’t the only media conglomerates in the theme park business: An existing park in Malaysia will be turned into 20th Century Fox World, with attractions tied to “Titanic,” “Ice Age,” “Rio,” “Alien vs. Predator,” “Night at the Museum” and “24.”

“There’s a symbiotic relationship between the parks and the pictures that feed off each other,” says Mark Woodbury, president of Universal Creative for Universal Parks and Resorts, which develops the company’s attractions. “We like the idea that there is some blockbuster history behind these adventures.”

In each case, the investment is huge: a single ride can easily cost $100 million-$200 million — a themed land close to $500 million. But the results can make the expense seem miniscule: A successful film franchise can impact a park’s bottom line for years to come.

“The Wizarding World was a game changer,” says Tom Williams, chairman and CEO of Universal Parks and Resorts. “It seems trite to say, but it was just that, dramatically improving park attendance, revenue and sales of merchandise. We’ve got happy employees and happy guests. The only logical step was to take it to another phase.”

Of the $6.1 billion in profits Disney generated in 2013, theme parks accounted for $2.2 billion, with revenue up 9% to $14.1 billion, thanks to record attendance at Walt Disney World and the Disneyland resort. Higher ticket prices haven’t hurt. For Comcast, revenue from Universal’s theme parks increased 7.2% to $2.2 billion, while profits have risen from $400 million in 2009 to $1 billion in 2013.

How Hollywood thinks about the theme park business changed in 2010, when the Wizarding World first thrust Universal’s Orlando resorts out from under the looming shadow long cast by nearby Walt Disney World. Ticket sales took off immediately when Wizarding World opened, with attendance at Universal’s Islands of Adventure surging 30% in 2010, and another 29% in 2011, according to the Themed Entertainment Assn., which tracks the amusement biz.

“It keeps (the Potter franchise) out there in a very relevant three-dimensional experiential way,” says Brad Globe, president of Warner Bros. Consumer Products, which manages the Potter and theme parks business for the company. “I don’t think you could do anything more than that to keep the brand alive” in between movies.

That’s particularly useful for a franchise reboot, which Warners and J.K. Rowling will attempt in late 2016, when “Fantastic Beasts and Where to Find Them,” the first film of a planned “Potter” prequel trilogy, hits theaters five years after 2011’s “Harry Potter and the Deathly Hallows: Part 2.”

That kind of branding in perpetuity is why Comcast agreed to pay private equity firm Blackstone Group $1 billion in 2011 for the 50% stake in Universal’s two Florida parks NBCU didn’t already own. Blackstone, which recently bought Las Vegas’ Cosmopolitan hotel and casino, had paid around $275 million for its stake in the parks in 2000.

Other theme parks took notice of the success of Wizarding World. The openings of “Cars Land” at Disney’s California Adventure, and Universal’s new attractions based on “King Kong,” “Transformers” and “Despicable Me,” as well as the construction of Springfield around “The Simpsons” ride, have followed.

(Disney’s plans for the forthcoming Avatar ride)

“Theme park rides must have a long shelf life, so it helps to have a proven popular IP when making a major investment,” says Mark Dvorchak, a managing partner at theme-park ride-designer Pro Forma Advisors.

Comcast’s executives also have used the success of Wizarding World to grow Universal’s resorts business. In addition to building more of the Potter-themed areas, the company has given the parks division money to develop other attractions, spending $1.2 billion last year alone to invest in upgrades.

“In the past, we were constrained by limited budgets,” says Larry Kurzweil, president and chief operating officer of Universal Studios Hollywood, who chalks up the change to a “passionate owner that believes in the future of theme parks in its business portfolio.”

Diagon Alley is a detailed re-creation carefully overseen by production designer Stuart Craig, complete with secret brick-walled entrance (see photos below). A fire-breathing dragon is perched on top of Gringotts Bank, which houses the new area’s signature ride, featuring 360-degree themed sets, 4K digital HD animation, state-of-the-art 3D-projection systems and live special effects.

(Inside Diagon Alley)

(Inside Diagon Alley)

(the Hogwarts Express)

While the decision to build the Hogwarts Express train may have been based around selling more expensive park-hopper passes, “our intent was always to have the train,” Williams says.

“When you think about Harry Potter, there’s Hogsmeade village, Hogwarts castle, the train and Diagon Alley. The thing we needed to figure out was how to create it.”
– Tom Williams, chairman and CEO of Universal Parks and Resorts

One idea was to build a motion simulation ride, similar to “Transformers” or “The Amazing Spider-Man,” “but we said, why not make it a real train that actually travels,” Williams adds. “Then came the question, well, where would it go?”

“The experience is becoming much more involved, with the stories brought to life through technologies that make them super real,” Woodbury says. “Technological enhancements enable us to do things that we’ve never been able to
do before.”

“It takes so many people to bring this to life,” says Williams, who credits Universal’s Ron Meyer and WB’s Barry Meyer for being willing to get their studios to collaborate on making Wizarding World a reality.

“That opened the door to show how we could do it and now have done it,” Williams says. Attractions like the Potter parks “are very few and far between. There are so many movie franchises that have had four or more films but very few have lent themselves to the theme park application the way Harry Potter has. It goes back to the stories, the characters and the environments. It’s evergreen in nature. The popularity will not wane.”

Disney also has been busy. A two-year expansion of Fantasyland at Magic Kingdom — its first major development since it opened in 1971 — culminates this month in the introduction of the Seven Dwarfs Mine Train, a roller-coaster designed for families, and based on Disney’s first animated film. It’s the main attraction in that area of the park, which also added the castle from “Beauty and the Beast,” the Be Our Guest restaurant and the high-tech “Enchanted Tales With Belle” interactive story theater.

Disney has also introduced its MyMagic+ wristbands for visitors, meant not only to digitally access hotel room keys and credit card for purchases, but also to better manage the distribution of Fast Passes for traffic flow inside the parks. A pet project of Disney chief Bob Iger, the company invested more than $1 billion into the development of the technology that operates the bands, now available only at Walt Disney World.

Disney has experienced the impact that new themed lands built around popular properties can have on its parks. After California Adventure struggled to attract crossover guests going to neighboring Disneyland, and left area hotels wanting for overnight guests, the company invested $1.1 billion in the park, and built “Cars Land,” based on the popular Pixar franchise. In 2010, California Adventure attracted approximately 6.3 million guests. That number rose 22.6% to 7.7 million the year “Cars Land” opened, in 2012, according to TEA.

While Disney has previously created smaller lands based on “A Bug’s Life” and “Toy Story,” “Cars Land is easily the biggest single land based on a film we’ve ever done,” says Tom Staggs, chairman, Walt Disney Parks and Resorts. “The idea to build it actually came from Bob Iger, who felt that the world of ‘Cars’ had timeless appeal. He also recognized that Radiator Springs was a big part of what made ‘Cars’ so special and that by building the town nestled beneath the Cadillac Range we could make people feel they had literally stepped into the film. It has been a hit from the beginning.”

“On the opening day of Cars Land, I overheard one little boy asking his mother if this was where the movie was filmed. At that point, I knew we’d hit the mark.” — Tom Staggs, chairman, Walt Disney Parks and Resorts

In fact, the success of “Cars Land” is starting to steal guests away from Disneyland, which, in 2012 and 2013, saw attendance levels decline.

(Universal Studios Fast & Furious attraction)

Disney is working with James Cameron’s Lightstorm on the new “Avatar” land at Animal Kingdom, hoping for similar park-defining results. “We obviously have great stories of our own, but we’ve also been thoughtful about finding new stories to add to the experience for our guests,” Staggs says. “ ‘Avatar’ is a uniquely powerful franchise that has global appeal with audiences of all ages.”

Williams and Woodbury originally approached Warner Bros. to build the Wizarding World in 1999, but the studio held off, wanting to establish the film franchise first.

“Warner Bros. wisely opted to hold off,” Williams says. The success of Wizarding World wound up topping even internal estimates. “I was not at all surprised that it would be successful, but it was even bigger than I thought.”

For Diagon Alley, Universal says it has taken what it’s learned from dealing with heavy foot traffic and long lines and is ready for the throngs of people expected to flood into Diagon Alley this summer. But it can only do so much.

While some stores are larger, the size of the new land needed to still be kept in check in order to bring to life the illusion that guests are actually in the tight alleys of the London location.

“We are wiser, but at the same time, it’s really important for us to be as authentic to the fiction as you can be,” Williams says. “It was no secret to us that the stores were on the small size and therefore would be crowded, but they’re authentic (to what’s seen in the films) and our guests appreciated that. It all adds up to an immersive environment that we created. When people come to these environments they’re transported emotionally. If some of the alley ways are too narrow or some of the stores are too small, that’s okay because that’s how it would have been in the film.”

Clearly, park ownership isn’t the only way to cash in on the theme-park business. DreamWorks Animation, for instance, has been active via licensing deals, operating “Shrek” attractions at Universal since 2003. It now has its characters in parks in Germany, Russia, Singapore and Macau, China, as well.

Fox, before deciding to go full throttle on theme parks in Malaysia, brokered one-off deals to build “The Simpsons” ride at Universal and an “Ice Age” attraction in parks in the U.K. and Italy. “For us, it was about learning,” says Jeffrey Godsick, president of Twentieth Century Fox consumer products. “Now that we’ve seen success, our strategy has evolved, and we’re taking it to another level.”

“Our guests continue to tell us that one of the things they love most about a visit to our parks is having the chance to step into amazing worlds that only exist in our imaginations or on film,” Staggs says. “This is uniquely powerful and something Walt recognized from the outset with Disneyland. However, we will continue to pursue original stories as well, because we believe that our guests want to discover new experiences and new worlds with us,” noting Hong Kong Disneyland’s newest addition Mystic Point, and the reverse trend of the “Pirates of the Caribbean” ride making the transition to the big screen.

But like a roller-coaster, theme park ownership isn’t for those with weak stomachs. Time Warner and CBS found that out the hard way with their stakes in Six Flags and Paramount-branded parks during the late 1990s. Flat attendance levels and rising costs, caused in part by the need to invest in new, more expensive rides, prompted the companies to pull out.

Time Warner, which bought the 50% of Six Flags it didn’t own in 1993, sold the company to Premier Parks in 1998 for nearly $1.9 billion. It had formed Six Flags Entertainment with the Blackstone Group in 1991, and used the parks as a way to promote its DC comicbook and Looney Tunes characters. The characters remain in the parks through rides like a Batman and Superman roller coaster, through a licensing deal. The company also held stakes in Australia-based Warner Bros. Movie World until 2006. CBS, which inherited the Paramount Parks business through its 2000 merger with Viacom, sold the six resorts to Cedar Fair for $1.2 billion in cash in 2006.

The amusement park business just wasn’t a high growth business for either company, compared to its studio and TV stations, with CBS’ chief financial officer Fredrick Reynolds saying they were just too pricey to maintain given the mere single digits in profits they were contributing to the bottom line. “Each ride costs $8 million to $12 million; we don’t spend that in five years at a TV station,” Reynolds said at the time.

It hasn’t been hard to entice content creators to make the leap to developing theme park IP.

“The idea of taking something they create and bringing it to a new dimension is really exciting to people,” Godsick says. “For some creators, it’s a way to take a brand or story further.”
– Jeffrey Godsick, president of Twentieth Century Fox consumer products

That’s certainly true for Legendary Entertainment, which left Warner Bros. for Universal, in part for the opportunity to build theme park attractions around its tentpoles, like “Pacific Rim” and “Godzilla.”

For filmmakers, too, the parks are a place to mint money, though rich deals like Steven Spielberg’s 20-year-old pact with Universal — which, in return for his consulting on new rides, pays him 2% of all park receipts and concession sales, skimming $30 million-$50 million off park profits each year — will never be seen again.

Yet Chris Meledandri, Cameron, Michael Bay, Peter Jackson and Justin Lin are also guaranteed to walk away with millions from their “Despicable Me,” “Avatar,” “Transformers,” “King Kong” and “Fast & Furious” attractions, respectively. Bay earns 8% from toy sales and other merchandise tied to his “Transformers” franchise, so it was no surprise that he was also heavily involved in the development of the Universal attraction. In fact, the director says he returned to helm the fourth “Transformers” because of the long lines generated by the theme-park rides.

There’s also a symbiotic relationship between merchandise and theme parks: After finding that Minion tchotchkes sell better than anything else at the resort, Universal was prompted to build a store near its entrance dedicated solely to products featuring the characters — including a $250 giant Minion, an inflatable remote-controlled version and a banana-scented fart gun.

The size of Springfield at Universal’s Hollywood park will double in 2015, with the area to include eateries like a Krusty Burger, Moe’s Tavern and the Frying Dutchman. The addition of food outlets and merchandise stands isn’t a coincidence. With guests spending a greater amount of time within a themed area, they’re also likely to want to spend more money. But Godsick warns that studios need to be careful in how they erect attractions based on franchises.

“It’s not a facade,” he says. “It’s something you can now walk into and experience, and it better be genuine.”

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