Comcast’s (NASDAQ:CMCSA) has been riding high on strong attendance in its theme parks this year. The theme parks business is a part of NBCUniversal, which accounts for close to 25% of its stock value according to our estimates. However, the theme park business demands high capital expenditures. Around 80-90% of the people are repeat visitors and they often look for something new.
In the first half of 2013, NBCU’s capital expenditures increased $256 million to $523 million primarily reflecting increased investments in theme parks.  During the same period, the company also brought a new ride - Transformers – The Ride 3D to Orlando (Read – Universal Studios Brings Transformers The Ride 3D To Orlando Park). Even with the higher capital expenditure, the theme park business is important for NBCU. While it generates stable cash flows for the company, it also provides an opportunity to connect with consumers in a better way and cross-market other company products such as promotion of Universal’s movies and TV programming.
What Drives The Theme Parks Business?
In the latest quarterly filings, Comcast’s theme parks revenues amounted to $546 million, almost at the similar level during the same period previous year, primarily reflecting the shift of holidays to the first quarter this year. The theme parks business is driven by attendance in the parks and per capita guest spending. The attendance has been on a rise. In 2012, more than 34 million visitors came to Universal Studios’ parks compared to 32 million in 2011.  On the other hand, per capita guest spend is also rising due to annual increases in ticket prices. In May this year, Universal raised its single-day, single-park adult admission by 5% to $92 plus tax.  This will aid the revenue growth at the theme parks.
This growth is being driven by the improving U.S. economy and Universal’s investment in new attractions within its parks. Since theme parks are a destination for leisure activities, the attendance is somewhat linked to the state of the economy. The U.S. economy grew at a seasonally adjusted annual rate of 1.7% in the second quarter of 2013, as businesses spent more and the federal government cut less.  We believe Comcast’s theme parks will continue to do well as the economy recovers. Moreover, the company has made continuous efforts to bring in newer rides into the theme parks, and it will be interesting to see how Universal expands with Legendary’s franchises and intellectual property into its theme parks. Comcast inked a partnership with Legendary Films in July (Read More – Comcast Eyes More Theme Park Attractions With Legendary Films Deal).Notes:
- Comcast’s SEC Filings [↩]
- Global Attractions Attendance Report 2012, AECOM [↩]
- Theme Park Inflation: Universal Orlando Becomes First to Cross $90 Admission Mark, Time, May 22, 2013 [↩]
- US economy grew by 1.7% in second quarter as government eases cuts, The Guardian, Jul 31, 2013 [↩]