) Disneyland resort in Tokyo has closed down for about 10 days
following the natural disaster that shook the country recently.
Disney competes with other media conglomerates like News Corp.
), CBS (
), Time Warner (
), Viacom (
) and New York Times (NYT) in the media and entertainment
The theme park has been closed along with Tokyo DisneySea while
various safety checks are being carried out. Although it seems like
the damage to theme parks has not been significant, it provokes a
question as to how much Tokyo's Disneyland matters to Disney?
Although the recent disaster was extreme, Japan is generally prone
to earthquakes. Thus, it is worthwhile peeking into Disney's value
that might be at risk.
Our price estimate for Disney stands at $45.20
, which is a premium of roughly 7% to the market price.
Brief Overview of Disney's Parks & Resorts
We estimate that Disney's parks & resorts business
constitutes a little over 8% to the company's value. Thus overall
this business fairly less significant when compared to filmed
entertainment and TV programming businesses. The primary reason
behind this is high capital investments that are required for theme
Outside the U.S. the main Disney theme parks & resorts
include Disneyland Paris, Disneyland Hong Kong and Disneyland
Tokyo. The company has 51% ownership in Disneyland Paris and 47% in
Disneyland HongKong. However, Tokyo Disneyland is different in the
sense that Disney has licensing agreement with OLC group that
operates the theme parks, hotels and resorts in Tokyo.
Tokyo Disneyland is Significant Part of Parks &
Under the licensing agreement that Disney reached with OLC group
in 1979, OLC agreed to pay 10% of its admission revenues and 5% of
its food and souvenir revenues as royalty to Disney. To take a
rough figure we assume that OLC pays 7.5% of its revenues earned
from theme parks to Disney as royalties. Out of about revenues of
371, 415 million Yen that OLC Group earned in its fiscal year ended
March 2010, about 77% was attributable to theme parks Tokyo
Disneyland and Tokyo DisneySea. If we do math, this amounts to
royalties of roughly 21,450 million Yen. This will be somewhere
close to $230 million based on exchange rates around March
Now these are pure profits. Looking at overall cash profits, it
seems that a significant part of Disney's cash profits from parks
& resorts is coming from Tokyo theme parks. Thus Tokyo resort
operations hold significance for Disney, even though Disney is not
directly involved in it.
You can see
the complete $45.20 Trefis price estimate for