A Walk in the Park

Licensing opportunities are opening up internationally as consumer markets spread and theme parks go back to their family-friendly roots.

If you could pin down a trend in theme park development it would be twofold. Firstly, new markets are opening for the leisure sector, so locations like Dubai, South Korea and China are bringing opportunities in previously untapped markets. At the same time, the trend for big scary rides that pull in teenagers is waning – it's all about family again for the next generation of theme parks as well as for refurbishments at existing locations.

However, the underlying opportunities for licensing businesses is the development of themed attractions in a much wider sense – attractions that involve retail, dining, hotel, and even residential facilities.

And it is not surprising that licensing businesses are looking for new ways of expanding their brands. The theme park industry has seen some tough times over the past few years, but the trend is once again upward. According to researcher Mintel International in its most recent international theme park analysis in July 2006, the $25 billion revenue business was in need of a rethink in order to connect with visitors emotionally and evoke positive connotations.

Using PricewaterhouseCoopers figures the report estimated that the business would grow to $27 billion in 2009, excluding any analysis of themed hotels, shopping malls and resorts.

While developing markets have space for organic growth, mature markets such as the United States, United Kingdom, Germany, and Japan have to supply an increasingly sophisticated market, Mintel reports, which demands an emotional pull.

And it seems that theme park operators have understood this shift as a slate of new developments and refurbishments are planned across the globe.

This is not a simple, nor a short-term licensing sector. Identifying the locations, outline planning permissions, development partners, financial backing, construction lead times, creating detailed designs, and consolidating partnerships that run into decades, make licensing the brand in leisure formats a time consuming, management-rich operation.

For the developing licensee and their consortiums, the investment runs into hundreds of millions of dollars. Even the partial re-theming of an existing park can cost developers upward of $10 million.

Paramount Pictures is actively pursuing theme park development using a licensing model and has agreements in place in the UAE, and also in South Korea for the Daewoo Motor Sales Corp. theme park and resort at Incheon, scheduled for opening in 2012. It is also looking at opportunities in other parts of Asia.

Michael Corcoran, president, consumer products and recreation group, says: "The gestation period is long. We are in preliminary talks on a number of parks across our portfolio, but nothing else specific. We believe that a number of our properties are right for a physical environment – for example Titanic and Mission Impossible lend themselves to a physical manifestation."

Warner Bros Consumer Products is another studio chasing themed development globally. Senior vice president, global toys and themed entertainment Kelly Gillmore says: "Whether in existing parks, such as Six Flags in the United States and Movie World parks in Spain and Australia, or parks to come like The Wizarding World of Harry Potter at Universal Orlando Resort in Florida, or our significant presence in Abu Dhabi, our brands are experienced by millions of additional consumers every year."

Gillmore adds: "The key to a great location is one that is easily accessible for the consumer and in an area that can be purchased by the theme park operator to create a footprint for current and future expansion opportunities. There is currently a lot of activity in the Middle East, especially in Dubai and Abu Dhabi, where the mission is to create major entertainment destinations designed to attract visitors from all over the world. Most major theme park and media companies are entertaining different types of facilities, including theme parks, hotels and full-fledged entertainment complexes that will include retail malls and water parks."

The benefit of an attraction is similar to that of a live show, Hit Entertainment's Philip Ranger, senior vice president, corporate and commercial communications, maintains. "They provide children with an opportunity to interact with the brand. Seeing a hero on stage or in a full emersion-type operation of a heavily themed ride or environment, like our plans for Little Big Clubs, give our fans a much higher level of experience, and a greater reward for the time spent."

Hit opened its second Thomas Land attraction in the United Kingdom in March at Drayton Manor Theme Park, joining the first Thomas Land, which was opened within the Fujikuya Corp attraction in Japan in 1998. The indoor/outdoor Little Big Club in the Global Village in Tatweer's Dubailand is scheduled to open before the end of this year and is designed around Barney, Pingu, Bob the Builder, and Thomas & Friends.

With its portfolio of children's properties, Hit could benefit from the trend back to family-friendly attractions. Teri Ruffley, Hit's general manager, live events and attractions, makes the point that theme parks are moving away from "big scary rides, back to the pushchair and younger markets."

Ruffley says: "Mature parks need as broad a demographic as they can. A family brings in a whole range of ages right up to grandparents, and that's an opportunity for us and for parks to exploit. And because of the high capital investment over years, the themes for rides or areas have to work over long periods of time. As longevity is important, we have a bit of an edge because of our evergreen properties."

Hit is in discussions in what Ruffley describes as key locations: "Where our properties are already strong in the market, where the demographic fits, when the business criterion are right, and where there is a top-quality operator."

These markets include the Middle East, India and China, and Hit is also in discussions in the United States.

Cartoon Network Enterprises senior vice president John Friend agrees that one of the trends is back to family-friendly theme parks suitable for whole family days out. "It's true internationally that kids today are much more engaged with being part of the family than they were 20 or 30 years ago. That's new generationally. Our research shows that children now name members of their own families as among their heroes, and they also name relations among those that they look up to and want to be like."

Cartoon Network has a number of theme parks in the pipeline. "Cartoon Network's strategy for developing properties could be described as a three-legged stool: 'On air,' 'on line' and 'in life.' Theme parks are part of the 'in life' leg. If you do it well you can give fans an emotional attachment to the brand. It's a rare place when you can actually step into a story," Friend says.

Cartoon Network is looking "all over the globe" at developing themed entertainment for the overall brand as well as individual properties including Ben 10 and Power Puff Girls. "It's not a cliché to say we want to create 360 degree brands – for our brands to be relevant and available through all different touch points." This means that CNE is looking at fully branded Cartoon Network parks as well as themed areas or sets of rides. And commercially, Friend describes themed attraction as "a very real business opportunity. In fact it's as much a business opportunity as it is a brand opportunity."

Cartoon Network's involvement includes Mundo Cartoon located inside Buenos Aires shopping mall Alto Palermo, and a further outdoor theme destination is in development stage. Pogo Planet in India opens this autumn, and TN Townville, also in India, opens in summer 2009. Cartoon Network Theme Park in Kuwait City is set to open this year.

Also in the kids' market, Nickelodeon is working on three new projects – Nickland within Germany's Movie Park Bottrop-Kirchellen; the Al Ahil Park in Dubai; and a development deal with Marriott hotels for 20 hotels under construction internationally by 2020. It already has 11 branded destinations within theme parks and has just opened its first Nick-branded standalone park at Mall of America in Minneapolis.

Howard Smith, executive vice president for recreation at Nickelodeon, says: "From our research we know that some of the most memorable experiences for kids and their families is going to a theme park. Certain locations are big destinations for families, and there is a difference between regional and more national or international destinations. They give the ability for us to provide the consumer with a deeper relationship with our brand in addition to the financial benefit."

While MGM executive director of Location-based entertainment Michael Sinks concurs that "almost all of the major theme park players are going back to family-friendly licenses," it is themed retail experiences and multiple leisure attractions that are the latest trend. "The mega malls are starting to wane," Sinks says, "and the newer trend is for lifestyle malls that offer a themed experience. This has set the stage for the next phase, which includes residential." So themed locations are set to include retail, restaurants, dining, entertainment, hotels, and residential facilities.

A number of such MGM locations are proposed in the United States and internationally, and are described as the "MGM sweet spot" by Travis Rutherford, executive vice president, MGM consumer goods, LBE. MGM concepts include large-scale resorts, waterparks, retail, dining and MGM Hollywood Way – which includes a film making concept – that capitalize on its Hollywood heritage. "We're looking to find ways to create a highly themed sense of place in both indoor and outdoor locations."

As far as MGM is concerned, the way forward for themed developments is mixed use real estate, according to Sinks and the key future quantifiable will be the spending profile of visitors, rather than their number. "In creating immersive projects we are starting to ask what will be the profitability per head, and we are planning models that have less attendance but higher per caps."

MGM is developing a number of projects now. In Shanghai it has signed a licensing agreement with Hong Kong's Tengxun Entertainment and Management with Shanghai Tianhong Real Estate Investment, for MGM Studio World, a lifestyle center scheduled for opening in summer 2010. In Abu Dhabi, it has signed a development exploration agreement with Sorouh Real Estate and technology "edutainment" business Rubicon for a large-scale entertainment destination. It has also signed a memorandum of understanding with a consortium led by MSC Korea to green light an MGM Studios Park in Incheon in South Korea.

These are all long-term projects. MGM is already four years into creative work on the South Korea development, to the tune of $10 million, yet "all the pieces of the puzzle," as Travis describes them, are not finally in place.

Travis says that mixed entertainment locations are "easier to put together, not as costly, have shorter time lines and less risk" than traditional ride-based theme parks, and expects there to eventually be between 10 and 15 MGM projects internationally

The attractions experience is not limited to entertainment properties. Ferrari has signed up to be part of the Yas Island development by Aldar Properties in Abu Dhabi, which will incorporate a Formula One race rack. Both aspects are due to complete in summer 2009.

The Ferrari Theme Park will feature 24 themed attractions designed to entice family visitors including a roller coaster, driving simulations, and driving and racing schools for children.

The return for licensors for themed destinations can be significant. An upfront fee is accompanied by ongoing license fees based on different indicators that typically range from between 5 percent to 10 percent of revenues. There are, of course, on-site sales of consumer goods, often exclusive to the location, and a brand boosting effect for general retail sales.

Nick's Howard Smith says: "Sales occur in the parks themselves, but also beyond the parks because of the effect they have on building the brand."

Paramount's Corcoran adds: "Theme parks are excellent venues in which to offer consumers their favorite as well as newly introduced licensed products. This includes standard items as well as custom souvenirs that are tailored to the unique theme-park setting."

"Merchandise sales can represent a sizable percentage of a theme park's revenues, and they also offer a unique opportunity to strengthen the bond between the brand and the consumer. Consumers link the items they buy with their experience for the day, and the emotional connection carries on as the visitor takes that plush or apparel home. The affinity thus developed for the brand can only add to future licensed product sales in the general consumer marketplace."

The reality is that not all of the developments under discussion will come to fruition. The competition in the Incheon development in South Korea is fierce – one executive says that although South Korea is in need of entertainment locations, it cannot support the number of developments currently in the early stages. And some players are skeptical that Dubai will see as much themed leisure development as is currently being muted. However, the fact remains that themed attractions are moving into a new phase of international development and that the concepts are compelling, sophisticated and emotional.