August 28, 1989

Park Wars: Shamu Is the Big Prize Buyer of Sea World Will Get for Its Money  

By Peter Waldman and Richard Turner
Staff Reporters of The Wall Street Journal

Baby Shamu is an orphan now. The infant killer whale, whose father died last year just days after she was born, lost her mother, Kandu, in a whale fight last Monday at Sea World in San Diego. The bloody event was on the network news, and a lot of people are grieving.

"Anybody who hasn't heard of Shamu must be living in an igloo," says Thomas Francis, a New York truck driver vacationing with his family at the Orlando, Fla., tourist haven that includes a Sea World theme park and Walt Disney World.

Actually, people living in igloos are probably more familiar with killer whales than most other people, but Mr. Francis does have a point. In the booming theme park business, success requires a cast of identifiable characters amenable to marketing. And if millions know Shamu now, just wait till the trademarked character falls into the hands of whoever is about to pay a mint for her.

Look for the Shamu TV series sure to follow.

The peculiar dynamics of the theme park business were thrown into bold relief last June when Harcourt Brace Jovanovich Inc., the debt-plagued publishing and insurance giant that owns the four Sea Worlds (the other two are in Aurora, Ohio, and San Antonio, Texas) announced the parks were for sale. Potential buyers from Japan, Europe and the U.S. have flooded Harcourt with inquiries, leading to predictions that the Sea Worlds, along with some other minor real-estate and amusement-park assets, could fetch up to $1.5 billion. That is more than 23 times what Harcourt paid for its first three Sea Worlds in 1976. Interested parties are said to include MCA Inc., Anheuser-Busch Cos., Walt Disney Co. and Wesray Capital Corp., 80%-owner of the Six Flags park chain.

All that money for an Aurora park that is closed eight months of the year yet requires year-round care of the marine mammals by their paid trainers. All that money for a brand-new, $200 million park in economically stressed San Antonio that analysts say is twice as big as the city can support. All that for two smaller parks near Orlando -- one called Boardwalk and Baseball, the other Cypress Gardens -- that "compete with each other, believe it or not," says Abraham Pizam, director of the Institute of Tourism Studies at the University of Central Florida.

The Orlando and San Diego Sea Worlds are far more successful properties, but what the buyers really are after is Shamu -- and the potential to take the lucrative, lovable character overseas. (Shamu actually is not one but several whales that perform under the name, a sort of Sea World generic.)

"The biggest market in the world right now is Japan, South Korean, Taiwan," says Larry Cochran, the president of Six Flags. Europe, Australia and Latin America are huge potential markets as well.

Theme parks depend for their business on creating a unique fantasy experience on which parents will lavish vacation money. Shamu (like the prototypical Mickey Mouse, who continues to enrich Disney) is an indispensable character of the sort that can be used to entertain visitors to the parks, to adorn the ubiquitous souvenirs, and to grace marketing blitzes for the parks and various consumer goods. Mickey Mouse on Pampers sells diapers.

Disney Chairman Michael Eisner says the use of characters isn't just an aspect of the company, "that is all our company is. We are nothing else."

Caroline Todd, an eight-year-old from Manchester, England, bolsters the point. She has never heard of the Statue of Liberty, the Golden Gate Bridge or the Grand Canyon. But this child with a broad smile and a Daisy Duck hat knows exactly what she wants from her trip to America: to meet Mickey Mouse and the gang at Walt Disney World.

"You hear of Disney everywhere in England," says Jean Todd, Caroline's mother. "It is America to us."

And there is no way not to spend money at a theme park. "How can you say no?" asks Tammy Enriquez of Miami, whose two-year-old son, Justin, can't say much of anything yet, but blurts out "Shamoooo" at the sight of his souvenir whale. Mrs. Enriquez says she and her husband, Felix, come back to Orlando every summer: That's where Justin was conceived, she says, on a trip to Sea World.

What MCA theme park chief Jay Stein calls the characters' "mesmerizing effect on children" is why most people go to theme parks -- and the proprietors know it. Mr. Eisner, since becoming chairman of Disney in 1984, has counted on parental love in jacking up ticket prices at Disney World nearly 100%, to $30 a day. This year a four-day ticket costs $100 per person.

"There isn't a lot of price resistance by tourists," says consultant John Gerner, of Economics Research Associates in Fort Lauderdale. "They've already invested a lot of money to come to the area, they've got the kids with them, and they're not going to turn around, especially if the park provides a unique experience."

Disney, of course, remains the undisputed master of character creation and exploitation, having parlayed its animated images into $4 billion a year in revenue from theme parks, movies, and consumer goods. On a given summer's day, some 150,000 people pass through the turnstiles of Disney's parks, estimates Tom Powell, the editor of Amusement Business magazine. They spend at least $10 each on food and souvenirs, he says, and they are happy, or at least willing, to stand in hour-long lines.

Under Mr. Eisner, Disney has pumped money into new attractions, including the hot Disney-MGM Studio at Walt Disney World, and the company has increased advertising and cross-promotional activities. By revitalizing Disney's film business, Mr. Eisner has greatly expanded the cross-marketing possibilities of Disney's parks, movies and TV shows.

Witness eight-year-old Ernie Ballesteros of Los Angeles, making his fourth trip to a Disney park, his first to Disney-MGM Studio. "Mom, Mom, you're not looking! Here's what Roger Rabbit did," he shouts, as he crashes his body repeatedly against a barrier at the end of some railroad tracks. Ernie is in Toontown, a reproduction of the animated ghetto where cartoon characters resided in the hit Disney film "Who Framed Roger Rabbit."

Roger Rabbit is an "arriviste" among Disney characters, and the company is always on the prowl for more. Disney is reportedly on the brink of buying The Muppets from Henson Associates Inc. to further expand its stable of characters. Neither side will comment.

"We're one of the few companies in America where each of the pieces supports {the others}, and the sum of all these pieces makes them greater," says Mr. Eisner. "The television supports the motion pictures, which support the animation, which supports the parks."

The synergy has worked so well at Disney that others try to copy it. MCA is pouring $600 million into a Universal Studio park in Orlando where it hopes to capitalize on such popular characters as "E.T." and the shark from "Jaws." Whoever buys Sea World is likely to invest heavily in touting Shamu, if anything an underdeveloped character.

Sea World's parks could use a little work, too. Two years ago, Harcourt, which is based in Orlando, fought off a hostile takeover attempt by British publisher Robert Maxwell, plunging the company into more than $2 billion of debt. The financial burden forced Harcourt to curtail spending on the Sea World attractions. The company fired 731 workers last year, or 10% of the parks' work force, and it cut marketing and advertising. Moreover, it hasn't built major new attractions since it added a penguin exhibit more than two years ago. Attendance, analysts say, has slipped as a result.

"In this business, it's essential to reinvest," says Michael Demetrias, the president of Marine World-Africa USA in Vallejo, Calif., which is also looking for expansion money. A rule of thumb, he says, is that it takes an investment of between $5 million and $15 million in new attractions to increase attendance 10% to 20%. Six Flags' Mr. Cochran says his company spends $30 million a year for new attractions and an additional $23 million for maintenance, just to keep abreast of the competition in such markets as Texas and Southern California.

Harcourt's painful recapitalization merely added to what some company insiders believed was a deteriorating cash situation at its parks. In 1984, William Jovanovich, Harcourt's chairman, committed the company to building the largest of the four Sea Worlds in San Antonio, despite objections from Sea World executives. Determined to proceed with the only Harcourt-built park, Mr. Jovanovich killed a feasibility study by Harrison Price Co., a firm that did similar research for Disney's parks. Harrison Price favored a park half the size and cost of what Mr. Jovanovich envisioned, according to former Harcourt executives.

These executives say the Texas Sea World eventually cost nearly $200 million to build, putting it some $60 million over budget. Last year, they say, with heavy local promotions, discounting and some loose tabulating at the gate, the park drew 3.3 million visitors. This year, attendance is off about 40%, say the former insiders.

"The Texas situation had a tremendous impact on all the parks because it left a lot less money for new paint, maintenance and basic upkeep," says a former Sea World official. This is most clearly seen at Harcourt's Cypress Gardens outside Orlando. Driving up, a visitor, still dazzled by the order and spotlessness of Walt Disney World, is jolted by the rust coating the huge white letters spelling out the park's name on the front lawn. Inside, a jumble of wires and pipes protrudes from a dry fountain. In another corner, a sign reads: "Please Excuse the Mess. More Improvements Being Made."

Margaret Mary McQuillan, senior vice president and secretary of Harcourt, declines comment in behalf of the company and Mr. Jovanovich, citing the sale talks. Harcourt's president and chief executive, Ralph Caulo, who has said he would leave the company to run the parks for new owners, didn't return phone calls.

But it's Shamu, anyway, that buyers are after, not Cypress Gardens. It isn't just the trademark that is so valuable. Killer whales are hard to come by because of the rigid permit process now required to capture them in the wild. Kandu, who was killed last week, may have been worth $1 million. But Sea World still has 15 killer whales at its parks, including five young ones born in captivity.

The many inquiries that have come in from around the world about Sea World suggest that Shamu and the "fish park" concept could thrive overseas. With the Florida and Southern California areas awash in theme parks, with Texas still reeling economically and with the rest of the country less hospitable because of weather, theme-park people have reason to be looking abroad.

In Europe, parks definitely are taking off. Two large, $100 million-plus theme attractions recently opened in France, and Disney's $2 billion joint venture outside Paris is scheduled to open in 1992. In Spain, Anheuser-Busch is going ahead with plans for a $300 million park and resort complex near Barcelona, and Six Flags has a contract to develop a park on the Costa del Sol. MCA is looking at sites in Britain, France and Japan.

Sea World has tremendous domestic appeal, too. Theme-park watchers say both Anheuser-Busch and MCA could use the Harcourt parks to create cross-marketing and ticket packages with which to attack dominant Disney. Shamu in the hands of MCA, which owns Universal Studios and is building its theme park in Orlando, could be a natural for further exploitation on TV and film.

MCA won't comment on what interest it might have in Sea World, but officials acknowledge that promoting it in tandem with its new Orlando park, offering admission packages for both attractions, would make sense, given that Disney has long tried to monopolize the time tourists spend in Orlando.

Then, too, Busch's "Dark Continent" African and zoological park in Tampa is just 80 miles from Orlando. Though declining comment on Sea World, W. Randolph Baker, the president of Busch's entertainment unit, says the company wants to expand its park operations. They include a small park outside Philadelphia based on "Sesame Street," a Williamsburg, Va., park with a European village theme, and the zoo theme park in Tampa.

But Busch isn't in the same league as Disney and MCA when it comes to characters that can be exploited on TV. "Busch's parks will never be more than a public-relations arm of the company," claims a competitor. And though Busch balks at this characterization -- its parks are profitable, Mr. Baker says -- the first "Busch Gardens" began as a beer and bird park adjacent to the company's brewery in Van Nuys, Calif. When faced with the choice of keeping the gardens or expanding the plant to make more beer, beer won.

Disney too is said to have expressed an interest in Sea World, but it probably won't buy the parks because it prefers to build its own projects from scratch. The company won't comment. Acting as a bidder, Disney would get to see Harcourt's books, and if "they could make it more expensive for MCA to buy it, they'd be happy to do that," says Mara Balsbaugh, an entertainment analyst with Smith Barney.

The competition may sound a bit cutthroat for a business that thrives on making children smile. But Joseph Barbera, who with his partner William Hannah created "Yogi Bear" and "The Flintstones," says big business can hide small truths: "People love the characters because they're lovable," he says. "They don't take drugs. They don't drink." And, except now and then in Sea World's aquariums, they don't die.



Copyright © 1989, Dow Jones & Co., Inc.