SeaWorld's "Blackfish" Controversy Performed Another Trick

SeaWorld earns more bad press as attendance rates dwindle compared to Walt Disney and Cedar Fair.

Jan 10, 2014 at 6:40PM

Aquatic amusement park company SeaWorld (NYSE:SEAS) was back in hot water last week after a business journal caught the company inflating the results of an online poll. The poll question dealt with whether the recent documentary Blackfish had changed reader opinions about SeaWorld. 

In the failed attempt to alter poll results, SeaWorld pushed itself back into a difficult public-relations battle that's taken the wind out of share prices. Can SeaWorld improve its performance? Or should investors instead turn to the amusement park companies Walt Disney (NYSE:DIS) or Cedar Fair (NYSE:FUN)

SeaWorld's woes stem from the documentary Blackfish, which tells the story of a SeaWorld orca responsible for the deaths of three employees. Blackfish debuted at Sundance early last year, but it gained a much larger audience when it was broadcast on CNN in October. The film became available on Netflix last month.

Backlash intensified as Blackfish found more viewers. And that backlash started to hit SeaWorld where it hurt when a number of musicians began canceling shows at the parks. In the midst of all the negative press attention, SeaWorld reported a dwindling summer attendance.

That raised an important question: Do SeaWorld's problems run deeper than this controversy? 

Fanning the fire
SeaWorld naturally went on the defensive, but one attempt backfired last week. The Orlando Business Journal had posted an online poll asking readers: "Has CNN's 'Blackfish' documentary changed your perception of SeaWorld?" Results poured in that indicated 99% of respondents had voted "No," which seemed an oddly high number to vote in either direction. So the Journal conducted an investigation and tracked more than 54% of the votes back to a single IP address. And that IP address belongs to SeaWorld. 

The Journal points out that the tampering wasn't even necessary, since 95% of the non-SeaWorld respondents had actually voted in favor of the company. But the true results don't necessarily mean customers don't care about Blackfish. The total number of votes was 328 at the time the Journal began investigating -- and that counts SeaWorld's votes. So it's a small sample size. 

Online polls aren't the best evidence that customers have turned away from SeaWorld. But attendance numbers do paint a concerning picture. 

Falling attendance
Most of SeaWorld's revenue comes from admissions, or ticket sales. In the third quarter, admissions accounted for more than 63% of total sales. Admissions were up 5% year over year, which looks encouraging at a glance. But the growth was due to a ticket price increase. Actual attendance was on the decline during the all-important summer season. 

Attendance in the second quarter, which included June, was down 9.5%. The number improved in the third quarter, but only to a drop of 3.5%. The company blamed adverse weather conditions for the poor summer performance.  

But neighboring Walt Disney World parks didn't suffer a weather-related attendance drop. Disney didn't break down specific attendance numbers, but disclosed in its fourth-quarter earnings call that the park in Florida had record attendance. 

Cedar Fair's parks also had a better summer than SeaWorld. The Cedar Point owner reported third-quarter attendance as flat compared to the prior year -- a number that jumps to 2% growth when excluding two water parks the company had sold between the two periods. 

So the drop in SeaWorld attendance had more factors at play than weather. Was Blackfish backlash one of those reasons? Possibly. But at the end of the day, it really doesn't matter why. It only matters that it happened. And the drop marks another problem that's dogged the company since its IPO in the spring, which also raises the question of whether the IPO was a great idea in the first place. 

The Blackstone Group paid $2.3 billion in 2009 to purchase SeaWorld from Anheuser-Busch and took the company public in April of this year. Blackstone received about $500 million in proceeds. Blackstone had a 63% stake initially, but recently sold more SeaWorld shares, dropping to a 40% stake.  

Foolish final thoughts
SeaWorld's in a bind. The Blackfish controversies continue, and the summer attendance drop proved disappointing from a business standpoint. Investors considering a theme-park investment might consider Cedar Fair or Disney, which has multiple entertainment industries in the bundle that would help offset any potential future drops in guests at its parks.

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