Someone at Comcast did not get the memo that holiday weeks are not when companies typically make major business announcements. Last week, Comcast dropped the news that it would spin off NBCUniversal into a separate company.
The split between the cable giant and one of Hollywood’s leading studios continues the recent Wall Street chaos in the entertainment industry. This time, the future of some of America’s most popular theme parks might be at stake.
Older fans likely remember the days when Universal and its theme parks passed from owner to owner, from Seagram’s to Vivendi to General Electric. Private equity firm Blackstone also owned half of the Universal Orlando Resort for many years during that time, too.
Comcast provided Universal with welcomed financial and management stability. Under its watch, Universal’s theme parks have thrived. The opening of The Wizarding World of Harry Potter at Universal Orlando in 2010 was the catalyst that drove Universal’s recent success. But Comcast did well not to fumble that bag after it acquired NBCUniversal from GE in 2011. Comcast invested smartly to add Potter-themed lands to more Universal parks while also expanding them with popular Universal IP.
What happens to the parks without Comcast? The independent NBCUniversal will retain its current leadership, including Michael J. Cavanagh as CEO and Mark Woodbury heading the theme park segment at Universal Destinations & Experiences. The question is how long NBCUniversal itself will stay independent as Hollywood consolidates.
The most consistently profitable segment within NBCUniversal in recent years has been its theme parks. But the value of parks to a studio extends beyond ticket and merchandise sales. Theme parks reinforce and extend the public’s love affair with a studio’s franchises. Attractions based on a studio’s characters make those characters more valuable.
Any business that bids for NBCUniversal after the Comcast split would do well to remember that. NBCUniversal could find plenty of private equity players willing to buy the company’s theme parks, given their profitability. But NBCUniversal would lose its most valuable long-term promotional asset if it sold its parks. That’s not worth any one-time payday.
The parks would suffer under outside ownership, as well. Private equity profits by killing companies to sell their corpses. Money spent on royalties to NBCUniversal and rent to private equity real estate partners is money not spent on employees providing great customer service and designers creating amazing new attraction experiences.
Warner Bros.’ corporate parent once owned Six Flags. Paramount sold its theme parks to Cedar Fair. Eventually, both studios recognized the value of themed entertainment and reinvested in the attractions business. Yet both companies recognized some of their best successes by licensing to the Universal theme parks. If more Wall Street moves force NBCUniversal out of theme parks, the big winner will be Disney, which then would rule the industry without challenge.
I hope that NBCUniversal stays independent. If it ends up with yet another owner, I hope that buyer understands the value that Universal’s parks create for NBCUniversal and the industry.