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Friday, July 18, 2008

Reader mail: shared ownership of SeaWorld/Busch?

My readers always have better speculation than I do:

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You forgot another maybe in the Busch parks: NBC Universal. Yeah, NBC barely wants the ones they already have, but there are a whole lot of reasons NBC will be looking into an attempt. First and foremost, as you have shown on your site, Disney is really starting to hurt Universal in Orlando by keeping everyone onsite. So how can Universal reverse that trend? Copy the business model! Buying SeaWorld would give them three parks, two water parks, one boutique park, the hippest late-night hangout and the best tourist street in Orlando connecting them all. All they'd have to do is add airport shuttles, shuttles between the two resorts with stops at various hotels between them, and you've got a compact WDW. And their fourth park and third water park, while an hour away, would actually benefit them, because if you shuttle people out to Tampa one or two days a week then they REALLY can't sneak into WDW.

There are other reasons Universal Orlando needs the parks. They may be losing Wet 'n' Wild, unless they finally decide to lose a planned onsite hotel. SeaWorld has far more land available, making it easier to add more themed hotels, water parks, CityWalk 2, what have you. More things to do makes it easier to keep people away from the Mouse. SeaWorld Orlando and Busch Gardens Tampa or Africa or whatever they call it this week are both more stable parks than WDW or UO. After 9/11, SWO was the only park that didn't freefall, and BGToA thrives year after year with their theme park/water park Annual Passes. On that note, a new Universal/SeaWorld/Busch conglomerate would mean Annual Passes for all four parks (or for four parks and three water parks) and they've suddenly made it difficult for the four million citizens of the Tampa Bay area to buy APs for both the big players. And with BG right in! their midst, Universal could cut into Disney's local market too.

But NBC Universal certainly wouldn't buy them, and couldn't afford them either. Well, there are lots of interesting little factoids swirling about:

Universal Orlando is half-owned by Blackstone Group, who also partners with NBC Universal in other deals when NBC doesn't want to spend their own money, like the current buyout of The Weather Channel. Merlin Entertainments, the second-largest theme park company in the world, has a majority shareholder: Blackstone Group. Another large shareholder of Merlin Entertainments (20%) is Dubai International Capital.

Suddenly, there are all kinds of interested parties. Blackstone is highly interested in theme parks AND in diversification, and they've got major capital. Dubai International Capital has been buying things up left and right; they were the ones who first bought Tussauds and who then sold them to Merlin Entertainments. Merlin Entertainments, interestingly enough, then sold off some of the lesser parks, but kept the biggies, including Heide Park (Germany's second biggest park) and Gardaland (Italy's biggest park, as well as its insanely popular water park). These parks also have hotels, also owned by ME. They are clearly interested in theme park resorts, as they are also trying to buy the huge PortAventura resort in Spain. The resort Tussauds built, then sold to Universal. The bonds between Universal and Blackstone keep strengthening.

So Merlin Entertainments buying the parks isn't really such a longshot with the Blackstone connection. But there are so many options:

1) Blackstone and Universal could go halfsies yet again, keeping investment on both sides very low and expanding the Universal name to more quality parks. This would be a slam-dunk for the Orlando market, but Legoland would still be a Merlin Entertainments park and wouldn't be under the "Universal" umbrella.

2) Blackstone and Universal could go halfsies on Busch Entertainment, with Blackstone paying more since Universal owns USH outright, and then they could spin the parks off into their own IPO, which is a definite possibility considering Blackstone IPO'd themselves last year for $4B. But there's still that Legoland problem.

3) Blackstone could partner with Universal but pay more than 50%, becoming yet another majority shareholder, another action they seem to prefer to outright ownership, or they could buy Busch Entertainment alone (they could probably afford it) and pay Universal a licensing fee for the new parks, a la Tokyo Disney. This could bring Legoland into the fold, as the licensing fee could easily cover that park.

4) Merlin Entertainments could buy the parks, as Blackstone and Dubai both have deep pockets, and pay Universal the licensing fee. (The parks need to be under the Universal umbrella if they want to follow the WDW model.) But USH would be totally outside the Blackstone fold, making SoCal less of a "resort", not that it could ever be a real resort, but that Universal name is important for that feeling of "resortness".

5) Merlin Entertainments could buy the parks, and not bother with Universal at all. All they would have to do is build a new Legoland somewhere in the area (there's not much room very near, but still open land in the area), build their own hotels (both Blackstone and DIC own hotel chains), add some nightlife and they have their own mini-WDW. With the Blackstone/Universal partnership right up the road, they could still fight Disney, but true success depends on the amount of Universal support of their partner's other venture.

Normally I'd go with #3, but with Universal and Blackstone currently spending billions on The Weather Channel, #4 is probably the most likely. I think #1 and #2 would be better for Universal in their war against Disney, but if Universal doesn't come to the table, Blackstone simply has to as they're far more interested in making UO work than NBC is.

#5 is only the best outcome if they build a Legoland here. Otherwise, challenging WDW's business plan is going to be a tough road. Though, this outcome would probably ensure SeaWorld gets some hotels, which would probably scare WDW into putting some Disneyland-style quality back into their parks.

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