Village Roadshow/AOL Time Warner: Globalization of the theme park business

JUST ANSWER THE 2 QUESTIONS:
Refer to the attached Case Study – Village Roadshow/ AOL TimeWarner. In a brief (1-1.5 pages) essay provide answers to the following questions:
1. Based on which segmentation criteria should VR/AOL choose new markets for their future international expansion ? How should they position their offering on the new markets?
2. What are the internal and external factors that should affect VR/AOL choice of a market to enter?
please use GLOBAL MARKETING 6th ed by Svend Hollensen for reference
1
CASE
STUDY
II.5
Village Roadshow/AOL Time Warner:
Globalization of the theme park business
Based in Melbourne, Australia, Village
Roadshow is a leading international media
and entertainment company with its core
businesses in cinema, movie production,
film distribution, radio and theme parks.
Village Roadshow has now exported its
cinema development and management
expertise to 11 countries. Export of management
expertise in Radio and the group’s
movie production business means it now
has operations in 13 countries.
Village Roadshow’s assets include:
l An international cinema circuit of
around 1,139 screens in 134 separate
sites.
l A majority shareholding in Austereo Group Limited,
managing Australia’s leading radio networks –
Triple M and Today.
l A 50 per cent stakeholding in Warner Bros. Movie
World, Sea World and Wet ’n’ Wild Water World,
Australia’s most popular theme parks.
l A major movie production business based in Los
Angeles. In movie production, the company is one
of the most successful independent producers in
Hollywood with recent successes (e.g. ‘The Matrix
Reloaded’).
l A film distribution business with operations in
Australia, New Zealand, Singapore and Greece.
History
Village Roadshow commenced operating in 1954, owning
and managing one of the first drive-in cinemas in
Australia (Melbourne). From these modest beginnings
the company gradually expanded its drive-in
cinema circuit with the addition of more traditional
or ‘hardtop’ cinemas in major population centres. To
strengthen its position through business diversification
Village Roadshow entered the vertically related
businesses of film distribution in the 1960s and film
production in the 1970s.
In the 1980s Village Roadshow was a pioneer in
the development of state of the art multiplex cinema
complexes. The group’s developments raised cinema
exhibition standards to new levels by utilizing stadium
seating, the latest sound systems and advanced projection
technologies. These cinemas were the forerunners
of the high quality multiplexes that operate around the
world today.
In the 1990s Village Roadshow sought to further
strengthen its position by diversifying into entertainment
businesses. This included the purchase and
development of theme parks, which are at focus here.
Theme parks
With its three parks on Australia’s Gold Coast, Village
Roadshow is the country’s largest theme park operator.
Around 3 million people per annum visit the three
parks, Warner Bros. Movie World, Sea World and Wet
’n’ Wild Water World. The group is also a part owner
of Sea World Nara Resort, a 405-room hotel adjacent
to Sea World. A brief comment on each of the parks
follows:
Village Roadshow’s 50 per cent partner in the group’s
theme parks is AOL Time Warner. The combined business,
Village Roadshow and AOL Time Warner is here
abbreviated to VR/AOL.
Warner Bros. Movie World
Based on Warner Bros. successful movies and movie
characters, Warner Bros. Movie World is Australia’s
number one tourist attraction. Conveniently situated
just north of Australia’s Gold Coast, the park covers
over 100 hectares (252 acres), offering a full day of
entertainment for all. Warner Bros. Movie World
has consolidated its position as a worldwide leader
Source: www.movieworld.com.au. Reprinted by permission of Warner Village Theme Parks.
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Part II Deciding which markets to enter
in tourism and theme park marketing by winning
numerous state, national and international awards
in the past ten years, including its membership in the
coveted Australian Tourism Hall of Fame.
Employing approximately 800 staff, the park contains
a number of rides and attractions including behind
the scenes movie action, comedy stunts and animatronics
from Warner Bros. movies and cartoons and
an array of rides. Access to the attractions and rides
is available for a single entry fee. In addition, visitors
can take some of the magic home with them through
Warner Bros. souvenirs, vintage portraits, screen test
photos, video recordings, as well as photos of their
favourite movie stars and characters.
The Warner Roadshow Movie World Studios are
located next to the Warner Bros. Movie World theme
park. The Studios are purpose built – a one-stop shop
of studio and production facilities incorporating sound
stages, casting production offices, water tanks, editing
suites, wardrobe, make-up, construction workshops,
preview theatrette, visual effects studio, film processing,
post production, travel and freight services, and much
more.
Over the past ten years the studios have been home
to countless feature films, telemovies, TV series and
mini series.
For more information on the attractions of
Warner Bros. Movie World visit its website at
www.movieworld.com.au.
Sea World
Sea World originally opened in 1971 to showcase the
Water Ski Spectacular and has since grown to become
Australia’s premier marine park. For a single entry fee
visitors can experience all of the park’s attractions
covering 25 hectares (55 acres), a few minutes north of
Queensland’s Gold Coast.
Visitors to the park are able to participate in a range
of interactive activities including marine mammal
interactive programmes involving dolphins and seals, a
behind the scenes tour of Polar Bear Shores as well as a
range of watersports. Through Sea World Helicopters
the park also offers scenic helicopter flights around the
Gold Coast and hinterland.
Sea World Research and Rescue Foundation is an
independent, non-profit organization supported by Sea
World. The foundation has been responsible for countless
rescues of marine mammals, turtles and sea birds
throughout Australia and its expertise in the care of
these animals is sought worldwide. In addition to conducting
its own marine research, the Foundation also
funds a number of independent marine research projects.
Sea World employs over 600 staff and is a pioneer in
Gold Coast tourism. The first theme park in Australia
to be inducted into the Australian Tourism Hall of
Fame in 1992 and winner of Major Tourist Attraction
in the 2001 Queensland Tourism Awards, Sea World
has set the standards other Australian theme parks have
followed.
For more information about the attractions visit the
Sea World Website at www.seaworld.com.au.
Wet ’n’ Wild Water World
Located alongside Warner Bros. Movie World, Wet ’n’
Wild Water World is Australia’s premier water theme
park. The park comprises a wide range of water-based
fun, including Australia’s largest water slides, a giant
wave pool and a variety of leisure pools.
Wet ’n’ Wild Water World has been one of the
group’s most successful theme parks, with consistent
growth in attendances. The park relies to a large extent
on local visitors although the introduction of the
Three-Park Super Pass in conjunction with Warner
Bros. Movie World and Sea World has increased both
the awareness of the park and interstate attendances.
The park employs over 70 people with employee
numbers swelling to over 250 in peak periods. Wet ’n’
Wild Water World was judged Best Major Attraction
in the 2001 Brisbane Tourism Awards.
For more information visit the Wet ’n’ Wild Water
World Website at www.wetnwild.com.au.
Theme parks in international tourism
The theme park has several historical antecedents,
including the ride-based amusement parks of the early
twentieth-century United States and the garden parks
of Europe (e.g. the Tivoli in Copenhagen). The birth of
the modern theme park, however, is commonly recognized
as occurring with the opening of Disneyland
about 30 years ago.
Economics Research Associates (ERA) has completed
many assignments for the Walt Disney Company over
the years, and since Disneyland, theme parks have
multiplied throughout the world. And they all bear the
following primary characteristics:
l They have family appeal.
l They contain one or more themed environments.
l They have some form of ‘ambient entertainment’,
that is, strolling musicians, performers, costumed
characters and so on, who perform for ‘free’.
l They have a high investment level per unit of ride or
show capacity.
l They have high standards of service, maintenance
and cleanliness.
l They contain enough activities (entertainment
content) to create an average visitor length of stay of
typically five to seven hours.
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Case II.5 Village Roadshow/AOL Time Warner: Globalization of the theme park business
l They will usually, but not always, have a pay-oneprice
admission policy.
Recently there have been variations from the
formula. These include theme parks oriented around
one theme or towards one market, for example aquatic
parks and children’s parks. A second departure from
the traditional theme park is indoor theme parks
combined with retail shopping centres. The largest
examples of these are West Edmonton Mall in
Canada, Lotte World in Seoul and Mall of America
in Minneapolis.
State of the industry
The theme park industry has witnessed fairly rapid
international expansion in recent years, with growth
focused mostly in Europe and Japan. It is instructive to
compare industry development in the United States
with where other world markets stand.
The US industry has had about a 30-year growth to
maturity. This is characterized by an inception period
pioneered by Disney in the late 1950s and early 1960s,
rapid growth through the 1970s, and maturity in the
1980s. Europe and North Asia are currently in the rapid
growth phase of their theme park industries with the
developing countries in the inception period. While the
US experience cannot be directly translated to foreign
markets, we can be reasonably assured that Europe and
North Asia will continue to have fairly strong growth
over the next ten years or so, and it will be five years
or more before we see any significant growth in the
developing countries.
In the following the main theme park regions in
North America, Europe, North Asia and the developing
world will be discussed.
North America
The US theme park industry is by far the largest in
the world. There are approximately 40 large-scale
parks with annual attendance of over 1 million, and
approximately 55 moderate-scale parks with attendance
between 500,000 and 1 million. Annual attendance at
these attractions totals 159 million, with revenue of
$4.5 billion. The US industry dominates the world, in
scale, product innovation, marketing savvy, and operating
knowledge.
The United States has a mature industry. Growth has
been at a compounded annual rate of about 3 per cent
over the past ten years. About half of this growth has
come from the addition of new parks and not from
increased attendance in existing parks. Per capita
expenditure has slightly exceeded the rate of inflation,
reflecting admission price increases and strong growth
in merchandise sales and games revenue. When we
combine attendance growth with per capita expenditure
increases we see an annual revenue growth of
about 9 per cent over the past ten years.
The watchwords for the US industry are: (1) maturation,
(2) consolidation, (3) diversification and
(4) destination tourism.
1 Maturation
The majority of US markets capable of supporting
large-scale, outdoor theme parks already have them. It
is unlikely that a significant number of major regional
theme parks will be developed in the future. Growth in
this industry has stabilized, and there should not be
any huge fluctuations in attendance or development
activity. However, there are opportunities for adjusting
product to suit changing markets and to effectively
compete with other entertainment for consumers’
leisure time and expenditure.
2 Consolidation
Typical of a maturing industry, there have been numerous
changes in theme park ownership over the
last several years. This indicates a strong consolidation
trend. Much of the control of the industry is now
focused into a few multipark operating companies:
Disney, Time Warner/Six Flags, Paramount/KECO,
Anheuser Busch and MCA-Universal.
Three major corporations have left the industry
(Taft Broadcasting, Marriott Corporation and Harcourt
Brace Jovanovich (HBJ)). The Marriott Corporation
sold its two parks to divest itself of the industry. One
was in Santa Clara and is now owned by KECO, and the
other was in the Chicago area and is now owned by Six
Flags. HBJ, previous owners of the Sea World parks,
sold all its parks to Busch, which already owned two
parks. Busch’s theme park holdings now total seven,
with a planned attraction in Spain.
The seven Six Flags parks have been sold as a group
several times and are now owned by Time/Warner.
Four of the Six Flags parks were started by independent
operators.
Disney continues to increase its leadership in the
industry by building more attractions. Within the last
several years they have opened three: the Disney/
MGM Studio Tour, Typhoon Lagoon and Pleasure
Island. Disney has also announced plans for additional
attractions in Anaheim on property adjacent to
Disneyland.
3 Diversification
The US theme park industry is diversifying into new,
smaller-scale targeted products for ‘niche’ markets that
may not be covered by the large-scale theme parks.
ERA feels that this trend is being driven by market
opportunities such as those that drove expansion of the
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Part II Deciding which markets to enter
theme park industry several decades ago. The theme
park development boom in the 1970s represented a
massive, heavily capitalized response to the need to provide
baby boomers with family entertainment. Theme
parks fit into the urban fabric of the United States
by being located next to large, built-up metropolitan
markets, and on relatively inexpensive land.
The 1980s witnessed a narrowing of market and
product focus with the smaller investment waterparks.
This was the first major diversification of the industry.
Waterparks appealed to a narrower market, usually
teens and young families, and were suitable for smaller,
secondary markets.
The new entertainment attractions of the 1990s
represent a further diversification. These attractions
narrow the niche appeal even more, with smaller capital
investment, and an appeal usually to very specific
market groups such as children, teens, young singles,
etc. Many of these attractions tap the ‘baby boomlet’
sector, and respond to the need to regenerate underperforming
suburban real estate properties by locating
in shopping centres.
Examples of the new entertainment attractions
include the family entertainment centres being
developed in malls, the expansion of outdoor family
recreation and mini-golf attractions, entertainment
centres combined with urban mixed-use projects,
sports bars, themed restaurants, children’s attractions,
mini-aquariums, and a host of others.
Diversification should continue as entrepreneurs
attempt to seek out untapped entertainment markets.
4 Destination Tourism
Within the past ten years the only major parks
developed in the United States have been destination
market parks focusing on the tourist markets of the
sunbelt states of Florida and Texas. These attractions
have included Disney’s EPCOT Center, Disney’s MGM
Studio Theme Park, Universal Studios – Florida, and
Sea World Texas in San Antonio. One exception was
Marine World Africa USA, which was relocated from
one area of the San Francisco Bay region to another.
Additionally, the major planned attractions, Disney’s
new California attraction, Fiesta Texas in San Antonio,
and the possible Columbia Pictures attraction in
California, will all be destination in nature.
Theme park development in the United States has
changed from selling a seven-hour experience to a
seven-day experience. Disney, of course, is the pioneer
in this way of thinking. Developers have realized the
huge economic value created by the impact of a
tourism-oriented theme park on surrounding complementary
properties such as hotels, resorts and shopping
centres.
Europe
Europe has a number of parks spread throughout western
Europe, with a large concentration of attractions
in Germany, France, the Benelux countries and the
United Kingdom. Expansion of the industry into southern
Europe is now taking place, with several planned
or implemented projects in Spain, Italy, Turkey and
Greece. There are also a number of proposed projects in
North Africa and the Middle East.
Currently the European theme park industry consists
of 19 major attractions, with annual attendance
of over 1 million, and some 45 moderate-scale attractions
with attendance between 500,000 and 1 million.
Europe’s parks generate annual attendance of about
70 million, and revenue of around $1.5 billion. The
European industry is about one-third the size of the
US industry in terms of revenue.
The European market changed with the opening of
EuroDisney:
l EuroDisney (ED) will expand the overall European
theme park industry and focus the industry in
Paris by creating a multi park destination attraction
complex.
l Disney will educate the market as to the theme park
product, the quality of the theme park experience,
and the value of the pay-one-price admission for a
day of quality entertainment.
l Disney will provide price leadership in the market.
This will allow others to price up to Disney levels.
l EuroDisney will create marketing awareness through
its well-established and creative marketing programmes
and will also enlighten competitors as to
the use of effective marketing techniques.
l EuroDisney will improve management expertise in
the European theme park business. ED will train
and create a labour pool of experienced theme park
managers that will in the future help to enhance the
performance of the European theme park business
as a whole.
The key words for Europe are: (1) anticipation,
(2) repositioning, (3) expansion and (4) consolidation.
1 Anticipation
Wherever Disney theme parks enter new markets there
are significant structural changes to the indigenous
theme park industries. In the United States, Disney’s
first attraction, Disneyland, founded the industry. In
Florida Disney’s attraction converted an unknown swamp
into the United States’ premier tourist destination and
attraction market, and in Japan Tokyo Disneyland
spurred growth of the Japanese theme park industry. It
is believed Disney will have a significant impact on the
attractions’ industry in France and Europe.
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Case II.5 Village Roadshow/AOL Time Warner: Globalization of the theme park business
2 Repositioning
Many of the European parks have been expanding and
repositioning with a renewed emphasis on reinvestment
and marketing. Many have undertaken major
expansion programmes, increasing ride and show
capacity and expanding visitor services such as restaurants
and merchandise areas (areas where European
parks have traditionally lagged behind those in the
United States). Major expansion programmes have
occurred at, among others, Alton Towers in England,
De Efteling in Holland, Gardaland in Italy, Parc Asterix
in France, Walibi in Belgium.
Several European parks have repositioned themselves
in the marketplace. In the past the parks relied on
steady repeat business from the immediate resident
market. This market responded to the attraction’s low
admission prices, picnic areas and relatively passive
environments, which offered a quasi-public park experience.
Through recent reinvestment programmes parks
have repositioned themselves as more active and commercial
attractions with higher admission prices, thus
drawing from somewhat larger markets. EDL will create
the need for proper product positioning to complement
Disney in the market area.
3 Expansion
The European theme park industry has also been
marked by new development activity in recent years.
In the last four years new attraction development has
been focused primarily on France. EuroDisney opened
in 1992 but was preceded (perhaps unwisely) by four
other new attractions: Parc Asterix, The Smurf Park,
Mirapolis and Zygofolis.
Disney has yet to be well accepted by the French
market although it does quite well with tourists. The
other new French parks have struggled financially, due
to flaws in design, development and management. Two
(Mirapolis and Zygofolis) have gone bankrupt and
significantly damaged the enthusiasm of investors and
lenders. Busch is proceeding with its park in Tarragona,
Spain and several other new projects are proposed in
southern Europe.
Legoland is also expanding to several new key
markets, including United States, UK, Germany and
Japan.
4 Consolidation
A final trend in the European theme park business is
the consolidation of the industry into key ownership
groups. This occurs in industries as they mature and
has also been a trend in the United States. In Europe,
several attraction acquisitions have begun this process.
In 1990 Madame Tussauds purchased Alton Towers
(Madame Tussauds also owns several smaller attractions
on the continent and the Rock Circus attraction
in London). The Walibi organization purchased The
Smurf Park (now called Walibi Smurf), increasing its
theme park industry holdings to four parks. Finally,
Accor, France’s largest hotel operator, acquired a
controlling interest in Parc Asterix. With European
unification and the continuing maturation of the
European theme park industry this trend will continue.
It is too early to determine trends for eastern Europe
but a number of schemes have surfaced, including
theme parks oriented towards increasing tourism-based
foreign exchange. Because of the rapid changes in these
markets we may have to wait some time before we see
any significant development in the amusement and
theme park industry. However, we should keep our eye
on them.
North Asia
Asia is the world’s next leading international theme
park market. It includes a mature industry in Japan,
strong growth in Korea, strong performance in Hong
Kong, underserved markets in Taiwan, and a rapidly
changing China.
A substantial amusement park industry has been
established in Japan since the recovery from the
post-war period. A variety of themed attractions and
numerous amusement parks are located throughout
the country. The growth of this business has been
assisted by the presence of major amusement ride
manufacturers in Japan.
There are strong concentrations of amusement and
theme parks in the Kanto region around Tokyo and the
Kansai region near Osaka and Kobe. These are the two
main urban areas in Japan and they both have huge
population bases that support a variety of attractions.
A third concentration, now in the formative stages, is
on the southern island of Kyushu, which is developing
as a resort destination area and has several parks and
attractions, including Harmonyland.
Tokyo Disneyland, which opened in 1983, brought
the large-scale theme park product to Japan, and since
that time several large projects have been built, including
the $630 million Puroland in Tama, and Nippon
Space World in Kyushu. Several other large projects are
currently being planned or are under way.
The Japanese industry at present has about 29 large
parks with annual attendance over 1 million, and 30
moderate-scale parks with attendance between 500,000
persons and 1 million. As a whole, the Japanese industry
generates about 75 million attendees and about
$1.5 billion in annual revenue. This places the Japanese
industry at about 30 per cent of the US industry in
terms of revenue. On a revenue per capita basis, however,
they are reasonably close.
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Part II Deciding which markets to enter
The watchwords for Asia are: (1) selective growth
and (2) short-term retrenchment.
1 Growth
For the past five to seven years there has been strong
interest in theme park development in Japan and Korea.
Much of this was catalysed by the success of Tokyo
Disneyland. Other factors driving Japanese interest in
theme parks have been the high level of discretionary
income available for entertainment and a heightened
national interest in leisure. Also, the Japanese government,
until very recently, has provided strong incentives
for leisure development.
There are several large-scale theme park projects
under consideration at this time. These include a
second-gate attraction at Tokyo Disneyland, which may
be a movie studio park or the Disney Sea attraction
originally planned for Long Beach, California; a major
sea life park in the Awaji area near Osaka; a large-scale
theme park proposed for a landfill area in Kobe; MCA’s
Universal Studios Japan project; expansion of Yongin
Farmland in Korea; expansion of Ocean Park, Hong
Kong; several proposed projects in Taiwan; and a push
by China to encourage theme park investment. There
are also numerous other projects being discussed.
2 Retrenchment
In the past year or so there has been something of a
retrenchment of the theme park industry in Japan. In
the late 1980s major Japanese corporations entered the
industry with gusto. Unfortunately their efforts were
met in many cases with design, operating and financial
difficulties at some of the major projects. Several poorly
performing projects that have been financial drains on
the major corporations which developed them have
created an air of caution in Japan about the theme park
business. This, combined with economic ills being
faced in different segments of the country’s economy,
have slowed down the growth of the theme park industry
as the Japanese reassess what makes the industry
work, and what the model for Japan should be.
The developing world
Developing countries are concerned with many economic
and social development issues. Some see tourism
as a major force for economic improvement and look
to themed attractions as part of the tourism product.
There is also a growing resident market with the income
necessary to afford attractions.
It is instructive to look at the world’s population distribution.
Right now, 78 per cent of the world’s 5.4 billion
people, or 4.2 billion people, live in developing
countries. By the year 2010 82 per cent of the world’s
population will live in these countries. Even if 20 per
cent of these people are income qualified for a theme
park product, that is a market approaching 1 billion
people! And many of these economies, particularly in
Asia, are expanding and have rising income levels.
It will be some time before the developing countries
have major theme or amusement park industries, but
some countries should be seeing development activity
in the near future. Countries to keep an eye on are
Brazil, Mexico, India, Thailand, the Middle East, and
the south-east Asian growth triangle of Singapore,
Malaysia and Indonesia.
Theme parks and tourism
Let us turn now to the relationship of theme parks to
tourism. The relationship is complex and highly
dependent on the park’s scale, quality and uniqueness.
Typically residents (from within 1.5 to 2 hours travelling
distance) will account for 80 per cent of traditional
theme park visitation. Even the tourist visitors
are often in the area for other reasons (such as visiting
friends and relatives). Thus just having a theme park
does not automatically insure an influx of tourism.
Rather, to impact on destination tourism, a theme park
must meet the following criteria.
Be unique, a ‘must see’ destination
This can be accomplished through character development
(Mickey and his friends), architectural form,
natural features, special events and programming
(Opryland) or a combination thereof.
Have large-scale and a critical mass of attractions
Investment levels to impact on international tourism
generally must exceed $150 million. There should be a
combination of high technology with human scale and
quality service. Investments in the ‘thrill hardware’
must be combined with a high level of service from the
‘hosts and hostesses’ so that a unique local culture
and friendly human contact is balanced with the high
technology.
Encourage overnight stays
The principal economic benefits of tourism comes when
overnight stays are generated. Day visitors or tourists
who stay with friends and relatives generate only 20 per
cent of the economic impact of tourists staying in hotels
and motels ($50 versus $250 per day). Thus in designing
a theme park for tourism a multiple attraction destination
(with experiences that can occupy two or three
days) is more likely to have the desired impact.
Have complementary destination activities
Tourist-oriented theme parks should be part of a mix
of recreation and leisure activities. A true tourist
destination would also have supporting recreation uses
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Case II.5 Village Roadshow/AOL Time Warner: Globalization of the theme park business
such as high quality hotels, convention and conference
facilities, resorts, recreational shopping and dining
experiences, and sports activities including golf, tennis,
and water-related activities, and excursions into nearby
local tourism areas.
Support media (TV) coverage and exposure
As with many other things in life, future theme parks
must be designed for television. The use of theme parks
and resorts as backdrops for variety programmes,
celebrity games, sports competitions, and convention/
conference broadcasting is increasing rapidly and the
resultant TV exposure is very important in creating
awareness in tourism markets.
Given that these criteria are part of the theme park/
tourist destination programme, the results can be
dramatic and

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