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How Disney’s Theme Parks Amount to Another Worry

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Domestic theme parks

The Walt Disney Company (DIS) stated in its last earnings call that it expected its Theme Parks segment to be impacted in fiscal 3Q16 by the Easter holiday’s happening in fiscal 2Q16 instead of 3Q16.

In March this year, Disney also announced that it was looking at adding two more cruise ships to its fleet, taking the number to six. However, the company expects that these cruise ships will become operational only in 2021 or 2023.

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These are all measures taken by Disney to withstand rising competition from companies such as Comcast (CMCSA) in the theme parks business. Comcast stated at the Guggenheim Securities TMT Symposium in New York in June that in cities such as Orlando, Florida, Disney has traditionally had a 75% market share, while Comcast’s Universal theme parks have had a 25% market share.

Disney has also introduced three-tier pricing at its US theme parks to increase revenue. The company stated at a MoffettNathanson conference in May that an important component of the success of its domestic theme parks was its focus on adding attractions revolving around its core franchises and brands. Also, the company has been successful in growing its operating margins for its Theme Parks business by managing its costs well.

The company is in the process of adding Star Wars attractions at its parks in Orlando and Anaheim, California. As the above chart indicates, Disney’s Theme Parks segment made up 30% of Disney’s total revenue of $12.9 billion in fiscal 2Q16.

International theme parks

In June this year, Disney announced the opening of Shanghai Disneyland, the company’s first resort in mainland China. Disney expects pre-opening expenses for the Shanghai resort to be around $300 million in fiscal 2016.

Disney is also looking at expanding in Hong Kong (EWH) by adding an Iron Man attraction and constructing a new hotel. Disney also plans to further develop its Tokyo Disneyland and Tokyo DisneySea theme parks in Japan (EWJ). It plans to complete these developments by 2020.

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