How Will Viacom Benefit From Licensing Its Brands To Theme Parks In China?
Viacom (NASDAQ:VIA) is making good use of its Nickelodeon brand by licensing the name to various theme parks and attractions. The company recently announced a deal for a Nickelodeon based theme park in China. The theme park will be developed by China based Sanshui New Town Management Committee and Elite Global. [1] For Viacom, the mere presence of its brands could be fruitful for the company’s other products and services in China. Theme parks provide a platform to cross-market products and services and in this case Nickelodeon can boost its merchandise related to its popular movies and television shows, including Spongebob Squarepants and Teenage Mutant Ninja Turtles, among others. China is a big market for movies and it is expected to be the largest movie market in the world by 2020. As such, several U.S. based studios are eyeing Chinese market. Disney (NYSE:DIS) is also developing a massive theme park in Shanghai, which will also aid its studio business. It thus appears to be a good move for Viacom to expand its presence in China through licensing its brands. In fact, Viacom’s studio, Paramount, may also sell a stake to China based Alibaba Group, which could further extend Viacom’s foothold in China.
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Theme Parks Are Likely To Do Well In China And This Will Aid The Nickelodeon Brand And Its Merchandise Sales
Viacom’s popular kids network – Nickelodeon – has licensed its name to the new theme park to be developed in Southern China. The park will be part of the Foshan Cultural and Ecological Coastal Project, which aims to build a culture oriented city. The proposed park will feature attractions based on Nickelodeon’s characters and will be developed by two Chinese firms for $1.85 billion and it is expected to open in 2020. [1]
Nickelodeon has a few attractions outside of China, including SeaWorld on Australia’s Gold Coast, Wet n’ Wild in Sydney, the Nickelodeon Land at Blackpool, U.K. and Madrid, Spain, Nickland at Movie Park, Germany and Nickelodeon Lost Lagoon, which is to open in Kuala Lumpur. It should be noted that Nickelodeon has only licensed its brands to the parks. Even then, such deals could provide a provide a significant boost to Nickelodeon’s franchises and brands. A lot of it will depend on how many visitors these parks attract.
Theme parks have been successful in China, fueled by a growing middle class. China’s amusement park industry has grown at an average annual rate of 11% in the last five years and generates over $3 billion in annual revenues. The figure is expected to grow to close to $5 billion by 2020. [2] The uptick in China theme parks industry can be attributed to the fundamental market growth, as the increases in wealth and tourism have driven visitation. One can argue that a lot of tourism and visitation will be driven by Disney’s Shanghai theme park and Comcast’s Universal Studios Beijing in the coming years, thereby impacting the attendance at other theme parks. However, China has about 200 cities (excluding Beijing and Shanghai) with a population of one million or higher. In comparison, every city in the U.S. with the equivalent population has some form of amusement park attraction. Accordingly, China can support significant numbers of new parks in the long run. [3]
In terms of tourism, both inbound and outbound, China is seeing solid growth. In fact, World Tourism Organization predicts that China will become the largest travel destination and the fourth largest source country by 2020 with inbound 137 million international travelers, representing close to 9% of the global share. [4] All these factors do point towards a massive market for theme parks and Nickelodeon can benefit from this. It will also open up more opportunities for Viacom in Asia. Nickelodeon’s various brands and franchises will be more visible at these theme parks, which will also provide Nickelodeon a platform to cross market its television products, movies and consumer products (also see – Viacom: Entry Into Chinese Movie Market Could Bode Well For Paramount).
- Trefis has a $75 price estimate for Viacom’s shares, translating into a $30 billion market cap.
- We estimate the company’s revenues to be around $14 billion for earnings per share of $5.53 for the calendar year 2015.
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- Nickelodeon Strikes Deal for Attraction in China, The Hollywood Reporter, Dec 21, 2015 [↩] [↩]
- Theme park building boom hits the skids in smaller Chinese markets, Los Angles Times, Dec 22, 2015 [↩]
- 2014 Theme Index, Themed Entertainment Association [↩]
- China Tourism, Travel China Guide [↩]