Universal makes big bet on Harry Potter — again
finance.yahoo.com | 2014-06-25 13:25

Universal Orlando Resort has been teasing the opening of Diagon Alley, the second installment of its hugely successful Wizarding World of Harry Potter attraction, for months. Ahead of its official opening, set for July 8, Universal gave journalists and stars of the Harry Potter film series a tour of the new area, which included a mini adventure — an unplanned rescue mission.

Harry Potter and the Escape from Gringotts, the roller coaster that’s the marquee attraction of Diagon Alley, malfunctioned shortly after reporters climbed aboard. One person attending Wednesday’s media reception said the Gringotts car he and other passengers were riding in suddenly stopped about 22 feet above the ground. They stayed in that position for roughly 45 minutes, until Universal employees rescued passengers one by one with a ladder. (Even so, this person said the ride, other than the glitches, was “lots of fun.”)

“[This] was a preview. We use previews to refine and perfect what we do,” said Universal spokesperson Tom Schroder, explaining the malfunction. “The people who did get to ride — they have told us they had an incredible time. And their faces as they got off the ride showed it.”

Technical glitches aside, millions of Harry Potter fans are likely to visit Diagon Alley when it opens to the public. The expansion comes four years after Universal debuted the Wizarding World of Harry Potter – Hogsmeade. Universal has spent an estimated $1 billion on the Wizarding World, and so far its gamble has paid off: Attendance at the park shot up nearly 40% after the Wizarding World debuted. Universal, a smaller draw than its close rival Walt Disney World, quickly became a must-see for millions of Orlando tourists (a record 59 million people traveled to the city in 2013).

Insiders say Universal, with the full support of parent company Comcast (CMCSA), committed at least $500 million to the Diagon Alley addition. The shops, eateries and cobblestone streets envisioned by Harry Potter author J.K. Rowling were designed and constructed by the same production crew that built the elaborate sets for the Warner Bros. films. Universal shut down its long-running Jaws attraction in 2012 to make room for Diagon Alley, which doubles the size of the Harry Potter footprint in Orlando, according to Universal. (Wizarding World  – Hogsmeade takes up 20 acres of Islands of Adventure). 

A boost to Florida

The Harry Potter franchise, needless to say, has been extremely lucrative for J.K. Rowling, Warner Bros., Universal and even the state of Florida. The state’s economy, decimated by the housing crisis, has rebounded in part because tourist operators such as Universal invested heavily during the downturn. Since the Wizarding World opened, leisure and hospitality jobs in Florida have increased by 16%, according to The New York Times. More than 54,000 leisure and hospitality jobs were added statewide in 2013, with 14,800 in Orlando alone.

Dennis Speigel of International Theme Park Services, Inc. predicts Universal could profit from the Potter series for at least a decade, even though the last movie hit theaters in 2011 (and the final book in the series was published in 2007).

“Harry Potter has been a phenomenal addition to the Universal product line,” Speigel says. “This investment is not a one-off. Harry Potter has legs.”

Universal management never expected the Wizarding World of Harry Potter to become as successful as it has – and neither did Disney (DIS). The media giant dropped its bid for the licensing rights to Harry Potter in 2006. “That was [Disney’s] biggest mistake in the last 20 years,” says Neil Begley, senior analyst at Moody’s Investors Services. Disney passed on Potter because it was costly and J.K. Rowling and Warner Bros. controlled the intellectual property, which goes against Disney’s modus operandi. “Universal was the beneficiary of that,” Begley adds. 

Wizarding World’s popularity may have driven Disney to sign a long-term licensing agreement with "Avatar" director James Cameron, his producing partner Jon Landau and 20th Century Fox, to build an “Avatar”-themed land based on Cameron’s mythical planet of Pandora (expected to open at Disney’s Animal Kingdom in 2017).

“Disney did not want another ‘Harry Potter’ on its hands and is now playing catch up,” says Begley. The "Avatar" deal shows Disney is “willing to break the formula where essentially they had to own all the intellectual property and all the films and the rights around it, and they're doing what's necessary to remain fresh and attractive for consumers.”

When asked about Disney’s decision to withdraw from the Harry Potter negotiations, The Daily Ticker received this response from publicist Jacquee Wahler:

"We are very pleased with the investments we're making in our parks and resorts around the globe, and our parks continue to be the most popular in the world. We offer a terrific product that our guests love, which has led to record attendance.”

Disney still ranks as the No. 1 Orlando attraction without Harry Potter; its Magic Kingdom is the top theme park in the world. Disney’s Orlando theme parks were the first, third, fourth and fifth most visited parks in North America last year, according to the 2013 TEA/AECOM Theme and Museum Index report.

Universal knows it can’t depend solely on Harry Potter to hook crowds. The TRANSFORMERS: The Ride 3-D and Springfield USA, its Simpsons themed area, have also significantly helped push up attendance, according to the nonprofit Themed Entertainment Association. Last year 7 million people visited Universal Studios Florida, a gain of 14% from 2012. Universal’s Islands of Adventure park welcomed 8.1 million guests in 2013, a 2% increase.

As many villains have learned, however, nothing is more powerful than Harry Potter’s magic touch.

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