Like Disney (
) and Comcast's (
) Universal, 21st Century Fox (
) has plans of entering the theme parks business. The first park
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.
How a Company's Products Impact its Stock Price at
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
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.
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.
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. 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,
Malaysia attracted more than 1 million visitors in the first year.
The admission price per adult at
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.