Hello, this is <Realworld EXP.>. The immersive market has been heating up lately. In our last issue, we shared news about content giant Netflix opening 'Netflix House,' and this time we'd like to explore how major theme parks are fighting back against these 'immersive theme parks.'
First, let's start with news from Disney, which has announced major investment plans.
Disney Invests 80 Trillion Won in Theme Parks
Walt Disney Company (hereinafter Disney), a comprehensive media entertainment company, announced in September 2023 that it plans to invest $60 billion (approximately 81 trillion won) in its Experiences division over the next 10 years. About 50% of this funding is expected to be used for theme parks and resort business. But why is Disney investing such a large amount in the theme park business?
Looking at Disney's financial structure, which consists of three main divisions - Entertainment, Sports, and Experiences - we can understand the reason. Let's examine Disney's Q3 2024 financial performance announced this past August. While the Entertainment division, which produces and distributes content, has the largest share in terms of revenue, when it comes to operating profit, the Experiences division accounts for over 50%. This Experiences division is the department that oversees Disney's experiential businesses including theme parks, resorts, and cruises.
In other words, Disneyland serves as Disney's cash cow.
According to a synergy map created by Walt Disney in 1957, the final destination for all of Disney's IP is Disneyland. Parents who grew up watching Disney animations bring their children to Disneyland, and children who fall in love with Disneyland's charm seek out Disney animations again, creating a virtuous cycle.
This synergy map is nearly 70 years old but remains valid. If this virtuous cycle breaks, Disney's revenue structure would collapse, so Disney appears to be seeking a theme park revival through major investments.
However, despite announcing large-scale investments, market reaction has not been enthusiastic so far. As of August 2024, Disney's stock price is only half of what it was in 2021, and some analysts attribute this to the theme park industry not performing as well as before. In other words, returns on investment are uncertain, and Disney will need to prove its performance within a few years.
In management commentary on Q3 2024 financial results, it states that 'despite near-term headwinds, we expect this segment (Experiences) to continue delivering meaningful revenue and cash flow growth over the long term.' Disney management seems to acknowledge that the situation will be challenging for a while, but what kind of theme park is Disney preparing? How can they bring people back to Disneyland?
Theme Parks Emphasizing 'Immersive' Experiences
While investment results don't appear immediately, specific plans are gradually taking shape. At the 8th D23 Expo held in Anaheim, California in August 2024, plans to create a Lion King-themed area at Disneyland Paris were revealed. A Frozen-themed zone is also planned to open in 2026. Notably, the use of the word 'immersive' in the plans suggests they will strategically utilize various attractions along with Disney's strength in animatronics.
Meanwhile, Universal, Disney's threatening rival, is also set to open its ambitious project 'Universal Epic Universe' in 2025. The five themed areas utilizing various IP including Nintendo, How to Train Your Dragon, and Harry Potter are impressive, and they too use the expression of implementing an 'immersive' world. We're curious to see how it will differ from existing Universal Studios and whether it can provide experiences that surpass Disneyland.
Original Theme Parks Strike Back: Only Immersive Experiences Survive
Is it a coincidence that both Disney and Universal, these two giant theme parks, used the word 'immersive' while preparing new spaces? Or do they now believe that without immersive content, there's no competitiveness? This can be seen as the original theme parks' counterattack against the recent emergence of immersive theme parks.
Immersive theme parks like Immersive Fort Tokyo and Netflix House are located in well-positioned urban areas but are relatively small in scale. Instead of large attractions, they mainly operate immersive shows that rely on cast interactions. In contrast, major theme parks face the opposite situation. They operate attractions like rides in vast spaces located outside urban centers.
Since theme parks are located far from city centers, they need to provide reasons for visitors to invest time and effort to visit. This means creating immersive spaces utilizing popular IP. While immersive theme parks usually have limitations in space configuration as they mostly locate within large shopping malls rather than creating their own spaces, major theme parks have the advantage of being able to perfectly implement an IP's world in their own spaces.
The emergence of immersive theme parks and the counterattack of existing theme parks. This theme park war seems likely to begin in earnest around 2026, and we're already excited to see what experiences each theme park will offer. Realworld will continue to monitor the transformation of theme parks and deliver trends in the experience industry. Thank you.