Change of ownership at Universal?

[Metro West]

Pure speculation on my part, but it could be they are thinking that HP has made the parks as valuable right now as they are ever going to be, and are maximizing what they can get for the parks by selling now. Seeing a better deal in maximized present value of the parks than in future value of the cash flows.

Given the height of HP popularity at the moment and figuring that cannot last forever, it might not be a bad bet.

Or, HP could end up living on as another Star Wars (or, probably a better comparison, another Lord of the Rings since its maintained popularity will reside in how well the books endure), which would make it a terrible bet!

That does make sense.

 

[ElizabethB]

I agree that Blackstone has decided to strike while the iron is hot. Their investment value is probably at a peak, with no where to go but down. Time to liquidate!

Also, as someone who works for the subsidiary of a large parent company, we always do what the parent company tells us to do. They own us, they control us. We do as we are told!

 

[wingedjojo]

I personally feel that the HP franchise will live on and profit. Look at Disney for example. They've had their foundation rides and concepts and have kept with it and that's what makes it good. We go there for the fantasy of princesses and whatnot. So much investment has gone into HP at IoA already and the fan base is so strong that I can't imagine it falling too dramatically in terms of popularity. It'll become part of IoA's foundation that keeps the people coming.

That being said, it'll be silly for NBC to sell its share and potentially give it up to a third party. And IF that happens and IF Disney were to pick it up, it's going to be bad for us, the consumers. With no direct competition and worry of revenue going elsewhere, it'll mean they can slack off, raise prices, and be half-assed about things. Some may titter about "Disney standards" but what's the point if there's nothing to compare it to? Your standards are only as high as what your competition drives you to be.

 

[DCTooTall]

Very interesting indeed....


I'm wondering how Blackstone backing out would impact the Orlando Flex Ticket deal. Since Blackstone has had ownership in the flex ticket parks, it made some sense... but if they are dropping their Uni ownership, would Uni no longer be included in the Flex Ticket?

And what about Wet & Wild? Who owns it? and would this impact your ability to add W&W admission onto a Uni ticket?



As for the Comcast bit.... IMO the extent of Comcast's input into this would mostly be related to the impact to NBCU's "value". Comcast just dropped a LOT of money into the NBCU deal, and that deal included terms that spelled out the buy-out of the remaining NBCU ownership from GE.... so as a result, I could see them expressing concern if the UNI Orlando situation would cause a drastic drop in NBCU value that could cause an impact to the Comcast Parent's bottomline.

Beyond that..... Comcast is ultimately a holding company that owns 51% of NBCU. I believe the merger conditions were such that Comcast has to operate NBCU at arms length so it does not exactly have a direct say in the matter. That being said, Comcast did place one of it's top execs into the head spot of NBCU.

And that top exec DOES have Theme Park (Disney) exec experience on his resume.

So if the financials make sense, I would see NBCU agreeing to purchase the Blackstone ownership.

 

[Seeker615]

What would all this mean to people who have already booked trips for the fall? Will we lose out on the flex tickets?

 

[anthony2k7]

Wait. If 100% is sold to a different company, what happens to the "No names of already used marvel characters at parks east of the mississippi" rule/aggreement from when disney bought marvel?????

screamscape say Universal will have some interesting issues with other contracts including the HP may become invalid.

 

[TisBit]

screamscape say Universal will have some interesting issues with other contracts including the HP may become invalid.

Which could make Blackstone's move more strategy. IF NBCUniversal buys them out, will they be willing to put more money into expanding HP...or will it be too much of a cash strain after the buyout. Also, if it puts some of the contracts in jeopardy, that could really adversely affect the deal as well. Blackstone might see it as an opportunity to hurt Universal Studios and boost Seaworld/Busch Gardens....who have always played second suit to Disney/Universal.

 

[pilferk]

Wait. If 100% is sold to a different company, what happens to the "No names of already used marvel characters at parks east of the mississippi" rule/aggreement from when disney bought marvel?????

Contracts are with the "park" entity and are structured so they maintain even through changes of ownership. So long as the park entity isn't dismantled....it won't matter.

Think of the Universal Theme parks as their own corporate entity that are owned by another corporate entity which (at least in the case of 50% of the ownership) is owned by still a third corporate entity.

The contracts are with the initial corporate entity, not with the secondary parent(s) or primary parent company.

 

[pilferk]

Glad you have inside information.

I guess we'll see won't we.

It's not "inside information".

It's ECON 101.

Comcast owns NBCUniversal. The Execs at NBCUniversal can't spend hundreds of millions of dollars without Comcast's approval. The final decision (really, the ENTIRE decision) is going to fall to Comcast. Sure, they'll listen to the NBCUniversal Execs "feedback", but ultimately....it's all about what Comcast wants to do.

 

[pilferk]

It would be interesting to see the clauses that were involved in the leasing of those brands/characters. It wouldn't surprise me if they expire upon sale/closing of the park.

They don't. There was a pretty good breakdown (which I can't find, now) by one of the "comic geek" sites concerning Universal's contract for the Marvel characters. It's basically iron clad, perpetuates through changes of ownership (unless they disolve the entire corporate entity through merger) and leaves pretty much zero wiggle room. The only thing that would violate the contract is if Universal didn't maintain the rides to an "acceptable standard" or if they tried to change them significantly (and only because Disney would veto their request to change the rides to open that loop hole.

The problem is infrastructure. Disney will not want to run seperate parks so far away. They would need some other type of bus service, etc to get guests there from WDW and vice versa. No one would really want to only visit one or the other...especially if the tickets permit entrance to those parks. The rides/parks are also not set in the Disney standard (layout, theming, etc....not saying bad, just different thought process was used) and likely would be more heartburn than benefit.

I think if Disney wanted to buy more parks they would have made serious bids on Busch Gardens, at least that could have opened up other markets to them.....WDW could likely build two more parks with the costs that it would take to buy Universal, they already have the land and that is the most expensive part.

Disney also isn't going to want to instill any sort of brand erosion or brand confusion by renaming/retheming/rebranding Universal's parks.

Sure, they could buy out the company, and then operate them as a seperate brand/entity...but then you eradicate the economies of scale that make the purchase attractive, in the first place.

Unless it was fire sale pricing (and it can't be...it has to be at least 90% of value given the situation/option used by Blackstone), it doesn't look like it would make a lot of sense.

 

[pilferk]

Pure speculation on my part, but it could be they are thinking that HP has made the parks as valuable right now as they are ever going to be, and are maximizing what they can get for the parks by selling now. Seeing a better deal in maximized present value of the parks than in future value of the cash flows.

Given the height of HP popularity at the moment and figuring that cannot last forever, it might not be a bad bet.

Or, HP could end up living on as another Star Wars (or, probably a better comparison, another Lord of the Rings since its maintained popularity will reside in how well the books endure), which would make it a terrible bet!

Hmm...depends.

Cash now plus the revenue generated FROM that cash (either via investment or further Mergers and Aquisitions) might not make it a bad bet.

Typically, as theme parks age they become more costly to maintain (and IOA, especially, has some high tech attractions embedded in it) and require more frequent refreshing. WWOHP was a great shot in the arm, and can probably carry the park for years to come. The question is: Can it generate enough revenue to offset the increased maintenance costs or costs to refresh older attractions (ex: the Jurrasic Park area is starting to look a little long in the tooth) AND have the park still generate the kinds of profits it has over the past 2 years.

I'm guessing Blackstone is willing to go the less risky route, take the short term return on their investment (and reuse the resulting cash to invest elsewhere) rather than ride the wave, no matter what the result ends up being.

Sometimes "sure thing good bet" is better than "maybe a better bet". When you're part of a group like Blackstone.....they're usually going to take that "sure thing good bet", anyway.

 

[ChrisFL]

Hmm...depends.

Cash now plus the revenue generated FROM that cash (either via investment or further Mergers and Aquisitions) might not make it a bad bet.

Typically, as theme parks age they become more costly to maintain (and IOA, especially, has some high tech attractions embedded in it) and require more frequent refreshing. WWOHP was a great shot in the arm, and can probably carry the park for years to come. The question is: Can it generate enough revenue to offset the increased maintenance costs or costs to refresh older attractions (ex: the Jurrasic Park area is starting to look a little long in the tooth) AND have the park still generate the kinds of profits it has over the past 2 years.

I'm guessing Blackstone is willing to go the less risky route, take the short term return on their investment (and reuse the resulting cash to invest elsewhere) rather than ride the wave, no matter what the result ends up being.

Sometimes "sure thing good bet" is better than "maybe a better bet". When you're part of a group like Blackstone.....they're usually going to take that "sure thing good bet", anyway.

Agreed with this, while Blackstone has seemed to have done good things for the parks they've owned, they are in the end an investment group and want to maximize their profits. I'm just glad they've been pretty good with it and not just cut corners constantly to do it.

 

[pilferk]

screamscape say Universal will have some interesting issues with other contracts including the HP may become invalid.

I don't know about the HP contract, specifically (haven' ever seen it broken down), but I'd be SHOCKED if that was true. It would show VERY poor planning by the executive group who vetted the contract. Universal Orlando Resort is it's OWN company (though it's often referred to as a "division" of NBCUniversal). It has it's own executive structure, etc.

I'm not sure how change of ownership (unless it's specifically denoted in the contract) would violate a contract.

The logic would be the same as saying that, when Disney bought Marvel, all the contracts made previously and signed by Marvel would have been voided. That's not typically how it works.

Edit: In reading the screamscape article...it sounds like they did, indeed, numerate specifically that if "Universal was forced to sell the parks" it would end the deal. The question is, what's the exact language? If NBCUniversal sells the parks, or if Universal Orlando Parks and Resort has to sell the parks. Very different animals.

 

[pilferk]

What would all this mean to people who have already booked trips for the fall? Will we lose out on the flex tickets?

If you've bought the tickets...almost assuredly: nothing.

They may stop SELLING the tickets, and at some point they may stop honoring them, but it wouldn't be remotely that quickly.

 

[doconeill]

Agreed...a change in the overall ownership should not cause an automatic breaking of the contract, unless there is some bizarre clause in it. The contract should be with Universal Orlando.

I find it highly interesting that Blackstone can force the sale of NBCUniversal's stake in the park...is that a typical thing?

 

[pilferk]

And what about Wet & Wild? Who owns it? and would this impact your ability to add W&W admission onto a Uni ticket?

Wet and Wild is interesting. Universal owns the one in Orlando...but it's on leased (not owned) land. That lease was signed back in the 70's, and was a LONG term (as in, still the same one) lease. Nobody is quite sure when it expires.

The sentinel HAS reported that the group that owns the land has said that when this lease expires, they will NOT sign another long term lease.

Not sure what that means (if it means anything)..but it's interesting.

 

[pilferk]

Agreed...a change in the overall ownership should not cause an automatic breaking of the contract, unless there is some bizarre clause in it. The contract should be with Universal Orlando.

I find it highly interesting that Blackstone can force the sale of NBCUniversal's stake in the park...is that a typical thing?

The only reason they could activate their right of first refusal is because of the Comcast purchase of NBCUniversal. It was drawn into the partnership agreement between NBCUniversal (ie: GE, at the time, I think) that if either of the partners changed ownership, the other could pop a right of first refusal option.

It's NOT atypical for that type of thing to be embedded in partnership agreements. It's a "buy out or get out" option that forces the "sold" partner to either aquire 100% of the company or agree to sell their share (becuase it's often tough for the remaining partners to realize full value when they're only selling pieces). It protects the partners from being in business with someone they don't want to be OR from a radical shift in corporate climate/direction resulting from the sale of one of the partners. It's also often used as a convenient excuse when one partner wants to cash in.

 

[Galen_50]

Agreed...a change in the overall ownership should not cause an automatic breaking of the contract, unless there is some bizarre clause in it. The contract should be with Universal Orlando.


Accually, a change in ownership can cause an automatic breaking of the contract in this case. It has to do with which side of the contract is being sold. When the owner of the licenced property is sold, the contract has to be upheald. This is to protect the company that licenced the product and put money out. So when Marvel was sold, all the money and infrustructure put out by the companies licencing the character was safe. But when a company that licences the product is sold, almost all licencing contract has a clause that the main company can then void the contract. This is to protect the main company from letting their product be used by a company they do not want to have access to. This would protect Marvel, say if Warner Brothers (which owns Six Flags and DC comics) were to buy the park. Marvel would not want DC to be able to use their characters.

This is most likely only would be the case if the park is sold out right. If one of the partners buys out the other, this clause should not be activated.

 

[pilferk]

Accually, a change in ownership can cause an automatic breaking of the contract in this case. It has to do with which side of the contract is being sold. When the owner of the licenced property is sold, the contract has to be upheald. This is to protect the company that licenced the product and put money out. So when Marvel was sold, all the money and infrustructure put out by the companies licencing the character was safe. But when a company that licences the product is sold, almost all licencing contract has a clause that the main company can then void the contract. This is to protect the main company from letting their product be used by a company they do not want to have access to. This would protect Marvel, say if Warner Brothers (which owns Six Flags and DC comics) were to buy the park. Marvel would not want DC to be able to use their characters.

This is most likely only would be the case if the park is sold out right. If one of the partners buys out the other, this clause should not be activated.

Do you have any examples?

I've never seen (or heard) of that as being standard contract language. So long as the licensee maintains their status as a business (no matter who owns the majority of it's stock), the license should maintain. Now, if Universal Orlando Theme Parks and Resorts SOLD the parks to someone else (and not the company, as it exists), that would be different. I mean..that's one of the reasons you create the seperate entity to "hold" the resort...to maintain continuity of assets and contracts.

Again, if you're right.....every time the majority stock holder changes (be it institutional investor or private shareholder), or someone/something makes a significant investment in a company, the license grantor would be able to negate their licensing deal.

While I know that Universal Orlando Theme Park and Resorts is held by a partnership, and that brings some new wrinkles, I would suspect that UOTPR is still a corporate entity and not an LLC or LLP (and that seems to be borne out by their executive structure, etc). I'll grant that I'm guessing...since there don't appear to be available articles of incorporation/partnership for review. But the LLC/LLP is likely the holding company. At brass tacks, this is actually a 100% (private, probably) stock sale...provided NBCUniversal doesn't just gobble up the other 50%.

In your example with Marvel and Time Warner...the issue is that DC couldn't use their characters. Only IOA could. And TW couldn't significantly change the way they're being used right now..they'd have to stick to the terms of the contract. And they couldn't "impinge" upon the Marvel area with DC characters, or depict the two together, or Marvel would argue misuse and brand harm, and it would negate the contract.

Now, I haven't seen the Marvel or HP contracts first hand...so it's all speculation on my part. I know a pretty reputable web site broke the Marvel/Universal contract down after the Disney purchase and specifically addressed the issue of UOTPR being sold, and that even THAT would not break the contract.

HP...according to screamscape...apparently DOES have a clause in it.

 

[Galen_50]

Do you have any examples?

I've never seen (or heard) of that as being standard contract language. So long as the licensee maintains their status as a business (no matter who owns the majority of it's stock), the license should maintain. Now, if Universal Orlando Theme Parks and Resorts SOLD the parks to someone else (and not the company, as it exists), that would be different. I mean..that's one of the reasons you create the seperate entity to "hold" the resort...to maintain continuity of assets and contracts.

Again, if you're right.....every time the majority stock holder changes (be it institutional investor or private shareholder), or someone/something makes a significant investment in a company, the license grantor would be able to negate their licensing deal.

While I know that Universal Orlando Theme Park and Resorts is held by a partnership, and that brings some new wrinkles, I would suspect that UOTPR is still a corporate entity and not an LLC or LLP (and that seems to be borne out by their executive structure, etc). I'll grant that I'm guessing...since there don't appear to be available articles of incorporation/partnership for review. But the LLC/LLP is likely the holding company. At brass tacks, this is actually a 100% (private, probably) stock sale...provided NBCUniversal doesn't just gobble up the other 50%.

In your example with Marvel and Time Warner...the issue is that DC couldn't use their characters. Only IOA could. And TW couldn't significantly change the way they're being used right now..they'd have to stick to the terms of the contract. And they couldn't "impinge" upon the Marvel area with DC characters, or depict the two together, or Marvel would argue misuse and brand harm, and it would negate the contract.

Now, I haven't seen the Marvel or HP contracts first hand...so it's all speculation on my part. I know a pretty reputable web site broke the Marvel/Universal contract down after the Disney purchase and specifically addressed the issue of UOTPR being sold, and that even THAT would not break the contract.

HP...according to screamscape...apparently DOES have a clause in it.

That is standard contact language when dealing with licensing or distributing rights. I know first hand because the company I was working was sold. We had to get a signed letter of intect from every one were in contract with that they were willing to continue on with the new owners. The basis of the sale price for the company was based on how many of the contracts were continue and not ended. I can not name any names, but about 25% of the contracts were voided by the sale because they did not like the company purchasing us.

There are different rules when companies get a contolling share of a company through stocks. This is not th case here. This is an out right sale of the park and its assets. That is why the partner either has to buy the other out or the whole park is up for sale. In terms of a sale, contracts are an intangliable asset that have value. And if it were to go to sale, all the licensing would probably be in question, Marvel, Harry Potter, Simpson, and even the Universal name on the park. When Cedar Fair (owner of Cedar Point) bought the Paramount parks, the Paramount name and all their licensing left with Paramount.

I have also not seen the contracts, but the companies will do anything protect their properties. If Warner/DC were to buy the park and Marvel did not have an out, Warner may not be able to change the Marvel areas of the park per contact but they could make a DC area that is three times bigger than the Marvel area making the DC characters seem more important and better than the Marvel characters. This in turn could hurt the image of the Marvel characters.

This whole conversation may be pointless because I think Universal would be crazy not to buy their partner out and have complete contol of the park.