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Photo: NBC Universal
Although Walt Disney Co. and Universal Studios' iconic U.S.-based theme parks have done quite well in recent years, both companies are focusing on international expansion as a key component for long-term growth.
Of course, the companies have been competing internationally for years. In 1986, Disney took its House of Mouse to Tokyo, Japan, and Universal Studios, which is owned by Comcast , arrived in Osaka 15 years later. Then in 2005, Disney opened Hong Kong Disneyland, and Universal opened its resort in Singapore five years later.
Now, both rivals are vying for a greater share of the Chinese market. Disney plans to open its next park in mainland China, near the southern main city of Shanghai, in 2016.To counter Disney's coming resort, Comcast is placing its new Universal Studios theme park near the capital city of Beijing, which is further north in China and set to open three years after Disney Shanghai.
Here's why China matters so much to these companies and what investors can expect with Universal Studios Beijing.
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Why China is so important for Universal Studios
According to McKinsey research, more than 75% of urban Chinese will be in the "middle class" by 2022, up from just 4% in 2000. Domestic travel and the film industry are both exploding as these consumers spend their newly available discretionary income. In fact, domestic travel is rising by 10% year over year, while China's film industry, as tallied by box office revenue, is projected to surpass the U.S. box office revenue by 2017 and double it by 2025.
Naturally,Disney and Universal Studios stand to profit immensely from this trend. Hollywood movies often do well in China, especially action genre movies such as theTransformers series, which is a Universal Studios highlight at its other parks in Asia. The most recent Transformers movie,Transformers: Age of Extinction,made over $300 million in China, which eclipsed the $245 million it earned in the U.S.
While Comcast's own theme parks do not provide nearly as much total revenue and incomeas Disney's, they have been successful and are growing quickly. In fact, Comcast's theme park revenue jumped nearly 20% year over year in the most recent reported quarter. With growing success in theme parks and a ripe consumer market, another Universal Studios is well-positioned to profit from a Hollywood-themed resort in China.
Universal Studios Beijing, a classic Hollywood attraction
Comcast is teaming up with Beijing Shouhuan Cultural Tourism Investment Co. (a conglomerate of four state-owned companies) to build a new theme park in a Beijing suburb. While Comcast plans to invest $3.3 billion in the project, theXinhua News Agencyreported the total investment from all partners could reach nearly $8 billion.
Plans for the Beijing resort include 1,000 square acres of space (which roughly mirrors the size of Disney Shangai), along with resorts, hotels, and other entertainment facilities similar to its U.S. parks, such as City Walk and Hollywood-themed hotels. While the park will have Chinese-specific attractions and themes, it is still expected to maintain its classic Hollywood feel. In fact, iconic Hollywood director Steven Spielberg will assist with the park's design.
Conceptual image of what Universal Studios Beijing is expected to look like. Image: NBCUniversal
This town ain't big enough for theboth of us! Well...
Disney is by far the leader in global theme parks, and its resort in China should be no exception. Disney Shanghai will also have the benefit of opening a full three years before the Universal Studios resort. However, the distance between Beijing and Disney is more than 800 miles (1,280 kilometers), meaning there won't be too much local competition between the theme parks. Also, both Beijing and Shanghai each have incredibly large populations of 11 million and 14 million people, respectively, or about three times and four times the population of Los Angeles.
With that in mind, investors can expect that China is sufficiently large-enough economy to allow both parks to succeed. With Universal's unique advantages of coming into a Chinese market that already has a liking for Hollywood movies, this could be its best resort yet.
The article Will Universal Studios Outshine Disney With Its New Theme Park in China? originally appeared on Fool.com.
Bradley Seth McNew owns shares of Walt Disney and not Comcast, but will take the "Transformers 3D" ride at Universal Studios over the "It's a Small World" ride at Disney ANY DAY OF THE WEEK! The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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