Article: Will Disney’s first Marvel ride push Universal?

[Rumors Rocks]

http://www.bizjournals.com/orlando/blog/2013/10/will-disneys-first-marvel-ride-push.html

Holy smokes, an Iron Man ride! Wait, its opening in Hong Kong Disney in 2016?

The world of tourism is buzzing right now thanks to The Walt Disney Co.s (NYSE: DIS) latest announcement of its first Marvel-based ride.

Outside of my disappointment of finding out its halfway around the world, the ride looks to be fun as it appears to be a motion simulator  much like Star Tours  that will have guests following Iron Man as he battles villains.

From the concept art provided in the Disney Parks Blog, it looks like Iron Man and Disney guests will battle with Hydra Octopus Robots, which most fans of the comics recognize.

(Side note: If that reference falls on deaf ears, then I suggest you drive to your nearest comic book store and join the nerd revolution. Were nice, we dont bite.)

As Ive often said, one of the greatest things about Disney is the treasure trove of characters and rich stories we have to draw upon for the immersive experiences we provide our guests around the world. With Marvel joining the Disney family in 2009, our character and story base grew even further, and the anticipation for how Marvel comes to life in our parks and resorts continues to energize our guests and cast, said Tom Staggs, chairman of Walt Disney Parks & Resorts, in a official blog.

This does leave the question of where Disney stands on Marvel experiences in its Orlando parks. There still remains a long-standing agreement with Marvel and Universal Orlando that the Universal parks will house those characters at Islands of Adventure.

But can there ever be a time when Universal lets those characters go back to Walt Disney World?

Disney did not buy Marvel to keep them in the library and look at them at the pages of their books. You have to believe with the success with Iron Man and some of the other characters, they are developing ways you will see more of that in Orlando, said Dennis Speigel, theme park expert and president of Cincinnati-based International Theme Park Services Inc.

Speigel said negotiations between the two companies could become expensive and complicated, but there has to be a plan Disney has in place to no longer allow a competing park to capitalize on its property.

In addition, he said there is a chance if Disney plans to open attractions around the world at other parks, it may force Universals hand to further improve its Marvel-based attraction to keep guests impressed.

Speigel said he cant predict when and how a negotiation for the Marvel character will play out, but it will be intense. This will be a no-holds-barred showdown regarding those characters. Disney didnt buy them to let them stay out of their parks.

Theme park additions and improvements create new jobs and help attract more visitors to Central Florida that help generate revenue for the $50 billion tourism industry.

 

[Robbi]

It would be nice to have an Iron Man ride but I think Universal is doing a good job with the Marvel characters.

 

[Goofyuk]

At the moment the contract Disney have for Marvel is that they cannot build any Marvel attractions within the theme parks in the USA. If they wanted to buy Universal out of their rights to have the Marvel guys in the park, it would cost a small fortune and Universal would be insane to let it go.

There is no chance that we will get Marvel based rides in WDW or DL anytime soon

 

[DPCummerbund]

At the moment the contract Disney have for Marvel is that they cannot build any Marvel attractions within the theme parks in the USA. If they wanted to buy Universal out of their rights to have the Marvel guys in the park, it would cost a small fortune and Universal would be insane to let it go.

There is no chance that we will get Marvel based rides in WDW or DL anytime soon

I agree that it won't happen soon. But if Star Wars and other Disney properties are any indication, the vast majority of the revenue from Marvel will come from merchandise sales, which Disney now owns. So, Universal is now paying its main competitor, Disney, for the rights to sell the stuff in its own stores. That's not good. They're much better off, in the long run, selling the Marvel rights back to Disney & developing/buying their own properties that they don't have to play Disney for.

You're right in that it won't happen soon. If I had to guess, I'd say it would be 10-15 years from now, when the current Marvel stuff at Universal starts to look old, & Universal could tear down the old rides & use Disney's money to build new ones. Or, Universal could sell the rights to all new attractions, but keep the rights to the stuff it already has, or something like that.

The current situation is a lose-lose for everybody. Being profit-oriented, they'll work out a way so that everyone wins.

 

[Mouse14]

I don't care for another motion simulator anyways ... WDW needs another " RRC" type coaster ride

 

[Robbi]

At the moment the contract Disney have for Marvel is that they cannot build any Marvel attractions within the theme parks in the USA. If they wanted to buy Universal out of their rights to have the Marvel guys in the park, it would cost a small fortune and Universal would be insane to let it go.

There is no chance that we will get Marvel based rides in WDW or DL anytime soon

Disney can't build Marvel attractions east of the Mississippi IIRC.

 

[sheetz]

Disney can't build Marvel attractions east of the Mississippi IIRC.

This. In fact there is already an Iron Man exhibit at DL's Innoventions currently.

 

[OldsDr]

I agree that it won't happen soon. But if Star Wars and other Disney properties are any indication, the vast majority of the revenue from Marvel will come from merchandise sales, which Disney now owns. So, Universal is now paying its main competitor, Disney, for the rights to sell the stuff in its own stores. That's not good. They're much better off, in the long run, selling the Marvel rights back to Disney & developing/buying their own properties that they don't have to play Disney for.

You're right in that it won't happen soon. If I had to guess, I'd say it would be 10-15 years from now, when the current Marvel stuff at Universal starts to look old, & Universal could tear down the old rides & use Disney's money to build new ones. Or, Universal could sell the rights to all new attractions, but keep the rights to the stuff it already has, or something like that.

The current situation is a lose-lose for everybody. Being profit-oriented, they'll work out a way so that everyone wins.

I just don't see disney wanting to spend money for the right to spend more money building new attractions just to move the gift shop 20 minutes down the road to sell the same merchandise that is currently being sold at IOA, which Disney is currently making money on for doing absolutly nothing. They are collecting a check on that merchandise for pretty much a zero investment. They bought marvel to make money on movies, TV shows, and merchandise at wal-mart and target not at themeparks.

Meanwhile UNI spent the money on that contract many years ago, has rides already built, and is also making money on the merchandise that it gives a little off the top to disney for the continued right to sell that stuff. While Disney continues to increase demand for that stuff in their gift shop and their rides by making more movies.

This is no different than Universal advertisements on Disney owned TV networks.

I see it as a win win.

 

[DanBoris]

I just don't see disney wanting to spend money for the right to spend more money building new attractions just to move the gift shop 20 minutes down the road to sell the same merchandise that is currently being sold at IOA, which Disney is currently making money on for doing absolutly nothing. They are collecting a check on that merchandise for pretty much a zero investment. They bought marvel to make money on movies, TV shows, and merchandise at wal-mart and target not at themeparks.

Meanwhile UNI spent the money on that contract many years ago, has rides already built, and is also making money on the merchandise that it gives a little off the top to disney for the continued right to sell that stuff. While Disney continues to increase demand for that stuff in their gift shop and their rides by making more movies.

This is no different than Universal advertisements on Disney owned TV networks.

I see it as a win win.

This! The return on investment for a theme park attraction is difficult to calculate and takes a long time to earn. Avengers 2 will probably make more at the box office in 2 weeks then an Avengers attraction would earn in 2 years (if not more).

 

[Robbi]

This! The return on investment for a theme park attraction is difficult to calculate and takes a long time to earn. Avengers 2 will probably make more at the box office in 2 weeks then an Avengers attraction would earn in 2 years (if not more).

Talk to Universal about The Wizarding World of Harry Potter. It paid for itself in no time.
http://www.ft.com/cms/s/2/fb5a7524-73af-11e1-aab3-00144feab49a.html#axzz2hLJhueZZ
Revenues from the theme parks division of NBC Universal were up 24 per cent to $2bn in the past year, thanks largely to the success of the Harry Potter attraction. Operating cash flow at the theme parks division was up 41 per cent to $835m.

 

[disneylove69]

This. In fact there is already an Iron Man exhibit at DL's Innoventions currently.

I was at "dining with imagineer" and the person we had told us no rides in Florida with Marvel during our life time. Contract states none west as above person stated. We brought up DL display and was told that is different.

 

[twebber55]

not going to happen.... Im sure Universal is completely happy with the deal right now....both companies win...no way Disney pays Universal just for theme park rights at WDW... they can build at all other disney properties... WDW will get Star wars and avatar over the next five years... besides Uni has done a great job with their own marvel rides

 

[pilferk]

At the moment the contract Disney have for Marvel is that they cannot build any Marvel attractions within the theme parks in the USA. If they wanted to buy Universal out of their rights to have the Marvel guys in the park, it would cost a small fortune and Universal would be insane to let it go.

There is no chance that we will get Marvel based rides in WDW or DL anytime soon

The agreement says "East of the Mississippi", specifically:

http://www.sec.gov/Archives/edgar/data/1262449/000119312510008732/dex1057.htm

After such 2 year period, MCA’s exclusive rights will be subject to “shrinkage” or “expansion” as follows:


1. If no action is taken by MCA, such exclusivity shall be limited as follows:


i. East of The Mississippi - any other theme park is limited to using characters not currently being used by MCA at the time such other license is granted. [For purpose of this subsection and subsection iv, a character is “being used by MCA” if (x) it or another character of the same “family” (e.g., any member of THE FANTASTIC FOUR, THE AVENGERS or villains associated with a hero being used) is more than an incidental element of an attraction, is presented as a costumed character, or is more than an incidental element of the theming of a retail store or food facility; and, (y) in addition, if such character or another character from the same “family” is an element in any MCA marketing during the previous year. Any character who is only used as a costume character will not be considered to be “being used by MCA” unless it appears as more than an incidental element in MCA’s marketing.]



10

ii. West of The Mississippi - any other theme park may use any Marvel characters whether or not used by MCA.


iii. East or West of The Mississippi - permitted uses shall be limited to the use of specific Marvel characters and Marvel may not permit a licensee to use the name “Marvel” as part of the attraction name or marketing.


iv. East or West of The Mississippi - The foregoing permitted uses will be subject to the following marketing restrictions:


(a)

If the particular character is used by MCA (as defined above), such character will not be advertised or promoted East of The Mississippi, except by means of national Network buys

DL is certainly a possibility.
FYI, the action referred to in the contract is that Universal had an option right on another IOA/Marvel Island...a timed option. It expired 2 years after IOA opened, and they never used it.

 

[pilferk]

We've discussed this before.

There is little chance Disney is going to buy back the park rights, east of the MIssisipi, from Universal.

Because it makes no fiscal sense to do so. Universal would hold every ounce of leverage, here. They would, realistically, ask Disney to pay roughly a billion (yes, BILLION) dollars to get the rights back to cover the initial cost of build, redevelopment of that parcel of land, lost gate for the time it takes to redevelop, AND the cost of the rights themselves.

And, on top of that, Disney would then have to pay to develop the attractions on their own property.

Right now, Disney just collects checks. No risk, whatesoever. They get an annual license fee AND a cut of all the Marvel Merch that Universal sells.

Which do you think is easier to justify to the shareholders?

With all due respect to Dennis Speigel, the theme park expert, it does NOT have to happen. Ever. Disney makes their money off the Marvel properties in an entirely different way. Given Disney knew full well what the contracts were before entering into the deal, I'm pretty sure encorporating Marvel characters into WDW was not their primary (or even secondary) goal when completing the deal....

 

[DPCummerbund]

They bought marvel to make money on movies, TV shows, and merchandise at wal-mart and target not at themeparks.

I'm not sure I agree with this. They probably bought Marvel to make money with it through every possible avenue they can find, INCLUDING theme parks.

According to a recent report http://www.usatoday.com/story/money/business/2013/08/06/walt-disney-earnings/2625121/, the theme parks represent about 30% of Disney's revenue. And, thanks to the fact that Lone Ranger was a dud, the movie division is struggling, and the theme parks are doing really well.

Having paid so much for Marvel, I just don't see Disney saying "Well, we make a third of our money from theme parks, but let's not put Marvel there."


One last point in Disney's favor - yes, they get a license fee from Universal. However, even with that license fee, Universal still keeps its shops open & profitable. Why should Disney share that profit with Universal when it could keep all that profit for itself?


However, I do agree with the previous posters that we'll see Marvel on the West Coast before the East Coast. And Avatar and Star Wars will certainly keep Disney busy for the next decade or more. By then, Universal will be wanting to redo its Marvel attractions anyway. It will happen, eventually.

 

[scfarrell]

Doesn't this contract have a limiting deadline? Surely it can't be in perpetuity.

 

[Robbi]

Doesn't this contract have a limiting deadline? Surely it can't be in perpetuity.

As long as Universal maintains the attractions, they have the Marvel rights east of the Mississippi River. If they're maintained in perpetuity, then Universal keeps the rights.
What people tend to forget is when the contract was signed in the 1990s, no one but Uni had interest in them. It's why Universal got a sweetheart deal.

 

[pilferk]

I'm not sure I agree with this. They probably bought Marvel to make money with it through every possible avenue they can find, INCLUDING theme parks.

According to a recent report http://www.usatoday.com/story/money/business/2013/08/06/walt-disney-earnings/2625121/, the theme parks represent about 30% of Disney's revenue. And, thanks to the fact that Lone Ranger was a dud, the movie division is struggling, and the theme parks are doing really well.

Having paid so much for Marvel, I just don't see Disney saying "Well, we make a third of our money from theme parks, but let's not put Marvel there."

So you don't think they did due diligence?

The contracts were available for Disney to review. They knew (and know) exactly what the terms are in the Uni agreement...and so do we (because the SEC filing is readily available). The only thing we don't know is the dollar amounts.

The contract is very specific that it is in perpetuity, so long as Uni maintains the attractions to a certain specified standard. In other words, they can't become dilapitated messes that damage the brand(s).

So....knowing that...you either have to assume that Disney thought they could break the contract for WDW use (which...year later..hasn't happened, which would mean their legal folks are incompetent) OR that the any theme park use was an afterthought (and, given it's years later and we're only seeing the first incorporation...at HKDL, seems most logical).

They make money off merch...billions, actually, across all their properties. It's likely where they'll make their lions share off Lucas, too. And we haven't seen the effect of Disney's marvel movies on their bottom line...because we've really only seen 2 of them (Avengers and Iron Man 3). Given the release schedule over the next 3 years or so....unless these movies bomb...that's likely to be quite different.

One last point in Disney's favor - yes, they get a license fee from Universal. However, even with that license fee, Universal still keeps its shops open & profitable. Why should Disney share that profit with Universal when it could keep all that profit for itself?

Risk/reward?

Say a billion to "convince" Uni to release the rights, another 500 million + to develop at WDW, plus time to market factors (because they'd need at least 18 months to build a "land" at WDW and probably more like 24 to 36) balanced with exactly how many MORE people (not people who were already coming that will just go do a different park on their Multi-day pass) it will draw into the park and exactly how much MORE merch % they would keep (vs the overhead they would incur by running their own shops). All that considering their use of space plans over the next 5 years and optimum dollar per acre (or sq ft) considerations.

Vs

Collecting guaranteed checks covering a license fee and a merch % from universal. No overhead to maintain. No development costs. No need for physical space. No cost to re-aquire the rights from Uni. Just profit.

There's your reason.

However, I do agree with the previous posters that we'll see Marvel on the West Coast before the East Coast. And Avatar and Star Wars will certainly keep Disney busy for the next decade or more. By then, Universal will be wanting to redo its Marvel attractions anyway. It will happen, eventually.

Maybe, 15 years from now, possibly. But...quite frankly, history shows Hulk won't need refreshing other than general maintenance (coasters seem to stand up well in draw and appeal over time). Spiderman just got refreshed, with Disney's at least tacit approval. So you have basically 2 minor attractions that might need some sort of updating....and I'd be shocked if Disney stood in their way. And while neither one of those attractions (Doom and Storm) are all time classics...they also aren't very tech reliant. And they're ride types that have stood a pretty decent test of time in other parks/settings.

Eventually? Maybe, possibly, someday (over the rainbow). Any time within the next couple decades? Probably not. Not unless Uni decides they want to turn IOA into HP-world, and rip everything else out. Heck, toon lagoon and Jurassic park are more likely to go than Marvel Island, at this point.

 

[pilferk]

Doesn't this contract have a limiting deadline? Surely it can't be in perpetuity.

In perpetuity, with no provisions for review, renewal, or buyout. The only provision is that Uni pays their money to Marvel (Disney) and maintains the attractions to a certain standard (ie: they function, don't look like they're going to fall apart, and don't do anything to damage the brand through their operation and appearance).

So, in short, no limiting deadline.

If you look back a few posts, I linked the SEC filing. It's pretty much all there, except specific monetary amounts.

 

[OldsDr]

I'm not sure I agree with this. They probably bought Marvel to make money with it through every possible avenue they can find, INCLUDING theme parks.

According to a recent report http://www.usatoday.com/story/money/business/2013/08/06/walt-disney-earnings/2625121/, the theme parks represent about 30% of Disney's revenue. And, thanks to the fact that Lone Ranger was a dud, the movie division is struggling, and the theme parks are doing really well.

Having paid so much for Marvel, I just don't see Disney saying "Well, we make a third of our money from theme parks, but let's not put Marvel there."


One last point in Disney's favor - yes, they get a license fee from Universal. However, even with that license fee, Universal still keeps its shops open & profitable. Why should Disney share that profit with Universal when it could keep all that profit for itself?


However, I do agree with the previous posters that we'll see Marvel on the West Coast before the East Coast. And Avatar and Star Wars will certainly keep Disney busy for the next decade or more. By then, Universal will be wanting to redo its Marvel attractions anyway. It will happen, eventually.

It may be 30% of revenue, but what they are getting from UNI is pure profit a check for doing nothing, zero investment except however much they have to pay the people who ensure the contract requirements are met.

The reason they should share profit with UNI is the same reason they share profit with every third party vendor at their own property. To make money with zero investment.

a little off topc, but there is no real competition between UNI and WDW they are mutually bennificial when it come to Orlando area tourism. I can't see local visitors buying many gift shop items, so the people buy stuff in the gift shop are most likely tourists. How many touists visting UNI are not going to also visit WDW, I doubt it is many. So anything that WDW would make on gift shop items above and beyon their share of UNI sales would take even longer to make a return on investment because the same person will probably be buying that merchandise no matter where it is located, so te only additiopn profit is the difference between what they currently collect to what they will collect. How many years of red would that be after spending hundereds of millions or even multiple billions on the trabsaction? I don't know, but I can't see anyone signing up for that and keeping their job.