Should Warner Bros. dive back into the theme park business?

Should the Big Two in the theme park business expand to become the Big Three?

Disney and Universal dominate the list of the world's most-visited theme parks — all 10 of the world's top 10 parks, 14 of the top 15, and 17 of the top 25 parks are branded to either Disney or Universal. (That's all of their theme parks, by the way.) With movie studios, animation companies, and television networks in their corporate families, Disney and Universal have the intellectual property and marketing channels necessary to make their parks into what millions of consumers around the world now believe are "must see" destinations.

But Disney and Universal aren't the only big media companies with that kind of library and reach. With its recent acquisition by AT&T, Warner Bros. — as part of Warner Media — offers a line-up of studios, networks and distribution channels that looks a lot like those at Disney and Universal. The three have stood atop the Hollywood box office for the past two years, with Warner Bros. sandwiched between the others.

And this summer, Warner Bros. took another step into the theme park business, too, opening a branded theme park with development partner Miral in the United Arab Emirates. Unlike Warner Bros.' previous entries in the business, Warner Bros. World Abu Dhabi is every bit the thematic equal of many Disney and Universal theme parks, signaling that Warner Bros. is ready to play the game dominated by its two biggest rivals.

So should it? Should Warner Bros. dive back into the theme park business with full force?

Younger or more recent theme park fans might not know that Warner Bros. used to own a theme park chain. But it wasn't branded to the movie studio. Warner Bros.'s theme park chain was... Six Flags. (Yes, that is why Six Flags has the American theme park rights to the Warner-owned DC Comics and Looney Tunes characters.) But the studio chose to bail on the theme park business in the 1990s, selling the chain to Premier Parks, which then renamed its company "Six Flags."

Even after the sale, Warner Bros. has remained connected to the theme park business as a licensor. Six Flags pays the studio for the right to put Bugs Bunny in its parks and to name roller coasters after various members (and foes) of the Justice League. But even its rivals do business with Warner Bros., too, most notably Universal, which pays a, uh, decent amount of money for the rights to use Harry Potter and the Wizarding World in its theme parks worldwide.

Licensing can be a sweet deal for a movie studio. Your development partners pay the costs of designing, building, and operating a park, while you just collect royalty checks. If a partner is developing in a marginal market than might not yet be ready for a world-class theme park, the developer gets stuck with the losses while the licensor continues to make bank.

But big studios didn't conquer Hollywood by being risk averse. When a park hits, as Disney's and Universal's parks have, they can generate billions of dollars for their owners. As much as Warner Bros. is making by having its Harry Potter franchise in Universal's theme parks, Universal is making far, far more from having The Wizarding World. But is the promise of that kind of payday enough to lure Warner Bros. to put more of its own skin in the game?

Warner Bros. World Abu Dhabi is another licensing deal for the studio, despite its name on the door. While Universal now owns its park in Japan and Disney has bought its theme parks in France, their other international parks have been either licensing or partial ownership deals. As Dave Cobb explained in our podcast episode about the development of Warner Bros. World Abu Dhabi, companies are looking for markets with a growing middle class with expanding spending power in which to build new theme parks. The biggest markets that meet those requirements are in China and the Middle East, not the United States. But political and business environments pretty much dictate that U.S. studios will need local partners to develop their branded parks in those regions, as Disney, Universal, and now Warner Bros. have done.

So if Warner Bros. is ever going to own its own theme parks again, they likely would have to be in more established markets in the United States and Europe, where Warners would have the freedom to buy outright. But if those market are too mature to support the construction of new theme park resorts, where's the incentive for Warner Bros. to invest?

Warner Bros. management understands the theme park business. Kevin Tsujihara, the chairman Warner Bros Entertainment, got his start in the studio managing the company's interest in Six Flags. Warner Bros. has watched closely as its partner Universal grew attendance, revenue, and profit with the Wizarding World franchise. It has enlisted many former Universal and Disney theme park designers in hiring companies such as Thinkwell Group and Mycotoo to help develop its parks and studio tours. A lack of industry knowledge will not keep Warner Bros. from a successful reentry to theme park ownership. But that industry knowledge likely will guide Warner Bros. to call its shots with great care.

Warner Bros. has been expanding its studio tours in Burbank and Leavesden into theme park-quality attractions. While neither operates at theme park-level capacity (at least, not yet), they are both outstanding destinations for themed entertainment fans visiting Southern California or London. Both provide the opportunity for the studio to get a taste of the theme park business — that it can keep entirely to itself — without enduring the expense and risk of building an entire park from scratch.

But Warner Bros. might soon need more if it is to protect the income now coming from franchise licensing. The Thinkwell-designed park in Abu Dhabi has shown Warner Bros. how much better it can do by its DC and Looney Tunes franchises than once-cash-strapped Six Flags has. That licensing deal expires within the next decade, according to SEC documents. And with Universal needing room in its parks for its own franchises, including those from recently acquired DreamWorks Animation, owning parks might soon provide the most viable path to getting Warner Bros.' franchises in front of theme park fans in the United States and Europe.

That doesn't mean that Warner Bros. would have to build its own parks. It could buy existing ones. Buying an established park offers the advantage of taking out a competitor, as well as providing a head start with infrastructure. But it's only a head start. Buying someone else's park still would entail significant capital investment costs to change theming and bring the park up to higher quality standards. Buying Six Flags or Cedar Fair would give Warner Bros. a lot of reach, but does it need a huge collection of unthemed roller coasters scattered around the country? SeaWorld offers some very attractive sites, especially for its flagship park in Orlando, but what would the studio do with all the animals? Releasing animals born in captivity into the wild is a death sentence, and Warner Bros. won't want any part of that PR mess. So who takes them? New marine mammal parks in China? That would seem the only realistic option.

Given what Warner Bros. has on its hands in the Middle East, I would be shocked if the company didn't move ahead in the next few years with studio-branded licensed parks in China, using the Abu Dhabi template as a guide. And I do believe that Warner Bros. is now taking a long look at opportunities for deeper involvement in the industry in Europe and the United States. The studio tours in Hollywood and London will continue to grow. But it might take a fire-sale price on SeaWorld Orlando or Six Flags parks major markets such as LA or Chicago to entice Warner Bros. to buy its own parks.

If you were running Warner Bros., what would you do about theme parks?

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