Harry Potter May Boost Comcast Corp's Theme Park Sales Again

By Markets Fool.com

Comcast 's NBCUniversal recently hiked the price of a one-day pass to Universal Studios Hollywood by up to 20% ahead of the opening of its Wizarding World of Harry Potter attractions on April 7. The tickets, which previously cost between $95 to $105 on the surge pricing model it introduced in February, are now being sold for $115. While many parkgoers will complain about the move, it suggests that the new attractions could generate lots of fresh revenue for the company's growing theme park business.

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Source: Universal Studios.

Why do theme parks matter to Comcast?
To understand why theme parks matter to Comcast, we should first discuss the impact of cord-cutters, who are causing the company to shedcable video subscribers and generate weaker TV ad revenues. Comcast lost 36,000 cable video subscribers in 2015, although price hikes and bundling strategies boosted overall sales 3.6% to $21.5 billion. Its cable networks revenue inched up just 0.7% to $9.6 billion, while its broadcast television revenue dipped 0.1% to $8.5 billion.

Yet its theme park business has been booming, with revenues rising 27.3% to $3.3 billion last year. While that only accounts for 12% of NBCUniversal's sales and 4% of Comcast's total revenues, the weight of that business has steadily risen over the past few years:

Theme parks revenue

2012

2013

2014

2015

YOY growth

4.8%

5.3%

17.3%

27.3%

% of NBCUniversal

8.8%

9.5%

10.3%

11.7%

Source: Comcast annual reports.

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How Comcast saved Universal Studios
After Comcast acquired a controlling stake in NBCUniversal in 2011, it invested billions into renovating Universal Studios' aging parks. It spent $100 million to build Transformers: The Ride at Universal Orlando, which opened in 2013 and arguably raised the bar for 4D rides. It addednew Despicable Me and Fast and Furious rides to its park, and plans to open new King Kong, Hello Kitty, and Nintendo attractions in the near future.

The company added eight new restaurants to Orlando's CityWalk shopping area, with plans to open a new Volcano Bay water park next year. It also invested $1.6 billion in its Hollywood park to build new rides, hotels, and parking spaces. It's evenchasing Disney overseas with planned theme parks in Beijing, Moscow, South Korea, and Dubai. In Japan, it acquired a majority stake in Universal Studios Japan in Osaka, and is currentlymulling the development of a second Japanese park in Okinawa.

Why Harry Potter matters
But despite all those big investments, the centerpiece of the "new" Universal Studios is the Wizarding World of Harry Potter. To add those attractions to its parks, NBCUniversal initially secured a licensing deal with Scholastic and Time Warner's Warner Bros. in 2007.

The first phase of those attractions, which reportedly cost about $250 million to construct, opened in 2010 at Universal Studios' Islands of Adventure. The second phase, Diagon Alley, was announced after the Comcast merger closed in 2011, and opened at its main park in 2014. Thanks to the opening of the Wizarding World of Harry Potter, annual attendance at Islands of Adventurerose 29% to 5.9 million in 2010, reversing a 13% decline in the previous year. Between 2010 and 2014 (the most recentyear of data from market tracker TEA), annual attendance at the park soared 37% to 8.1 million visitors. Attendance at Universal Studios Florida jumped 17% to 8.3 million in 2014, thanks to the opening of Diagon Alley.

Source: Universal Studios.

Those numbers encouraged Universal to build new Wizarding Worlds worldwide. It opened its first overseas Wizarding World in Osaka in 2014, which boosted attendance by 17% to 11.8 million that year. The opening of the new Wizarding World in Los Angeles should have a similar effect on the park, which hosted 6.8 million visitors in 2014. The recent introduction of on-demand pricing should also even out visitors over the year while reducing wait times for visitors.

But it won't catch up to Disney anytime soon
Comcast's ongoing expansion of its theme park business is a solid strategy, but it won't catch up to market leader Disney anytime soon. The House of Mouse's theme park andresorts business generated nearly five times as much revenue as Universal's theme park business, and its new Shanghai Disneyland park could boost annual sales growth back into double-digit territory.

However, the multi-year expansion of Universal Studios could turn the business into a major pillar of growth for Comcast, which could soften the impact of cord-cutters whittling away at its video subscriber and cable revenues.

The article Harry Potter May Boost Comcast Corp's Theme Park Sales Again originally appeared on Fool.com.

Leo Sun owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Time Warner. 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.