'Star Wars'-themed lands could offset Disney's 'troubled' TV networks
Fanboys weren't the only ones excited about the idea of bicoastal Star Wars-themed lands at Walt Disney World Resort and Disneyland. Disney CEO Robert Iger's Aug. 15 reveal at the D23 convention in Anaheim got Wall Street's heart racing, too.
Even though Disney probably won't break ground on the new initiatives until 2017, the conglomerate's stock rose 2 percent on Aug. 17. It was a small reversal of its 9 percent plunge Aug. 5, the day after Disney disclosed its quarterly earnings and investors panicked over the cable TV business, where growth of its ESPN-led media networks has slowed.
"Growing theme parks relative to traditional media assets diversifies the company away from the troubled asset," says Northlake Capital Management's Steve Birenberg. The operating income for Disney's parks and resorts grew 9 percent in the most recent quarter, compared with only 4 percent for media networks. "The new Star Wars areas provide reason for optimism about long-term growth potential at Disney theme parks, somewhat alleviating the recent spike in investor fear about the durability of all traditional TV businesses, including Disney's core ESPN unit," says Barton Crockett of FBR & Co.
Disney hasn't said what it plans to spend on the two Star Wars lands, which at 14 acres apiece will become Disney's biggest (the Anaheim land will fill the space behind Big Thunder Mountain Railroad). Crockett figures they will cost a combined $2 billion, twice what the company spent on the 12-acre Cars Land, which opened at Disney California Adventure in 2012, and four times more than Pandora -; the World of Avatar, which is set to open in 2017 at Disney's Animal Kingdom in Florida.
And just like Cars Land attracted more visitors to California Adventure, Crockett also expects Disney's Hollywood Studios in Florida to get a 2 million-person boost when its Star Wars area opens there. Attendance at Hollywood Studios was 10.3 million in 2014, while Magic Kingdom, the most popular of Disney World's four theme parks, boasted 19.3 million visitors.
Iger's D23 announcement before 7,500 Disney devotees also made sense for other business reasons: It serves to promote Star Wars: The Force Awakens (as if it needs it) before the film opens Dec. 18; it further transitions Disney parks from its past focus on lands built around ideas like the future (Tomorrowland) and make-believe (Fantasyland) and toward areas branded around intellectual property it owns (Cars Land); and it promises entertainment buffs an alternative to The Wizarding World of Harry Potter, which Universal Studios already has opened at its theme parks in Florida and Japan and will expand to California next year. Says Birenberg, "Live experiences seem to be of increasing importance to consumers, especially millennials."
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