Although Walt Disney Co. (NYSE:DIS) and Universal Studios' iconic U.S.-based theme parks have done quite well in recent years, both companies are focusing on international expansion as a key component for long-term growth.
Of course, the companies have been competing internationally for years. In 1986, Disney took its House of Mouse to Tokyo, Japan, and Universal Studios, which is owned by Comcast (NASDAQ:CMCSA), arrived in Osaka 15 years later. Then in 2005, Disney opened Hong Kong Disneyland, and Universal opened its resort in Singapore five years later.
Now, both rivals are vying for a greater share of the Chinese market. Disney plans to open its next park in mainland China, near the southern main city of Shanghai, in 2016. To counter Disney's coming resort, Comcast is placing its new Universal Studios theme park near the capital city of Beijing, which is further north in China and set to open three years after Disney Shanghai.
Here's why China matters so much to these companies and what investors can expect with Universal Studios Beijing.
Why China is so important for Universal Studios
According to McKinsey research, more than 75% of urban Chinese will be in the "middle class" by 2022, up from just 4% in 2000. Domestic travel and the film industry are both exploding as these consumers spend their newly available discretionary income. In fact, domestic travel is rising by 10% year over year, while China's film industry, as tallied by box office revenue, is projected to surpass the U.S. box office revenue by 2017 and double it by 2025.
Naturally, Disney and Universal Studios stand to profit immensely from this trend. Hollywood movies often do well in China, especially action genre movies such as the Transformers series, which is a Universal Studios highlight at its other parks in Asia. The most recent Transformers movie, Transformers: Age of Extinction, made over $300 million in China, which eclipsed the $245 million it earned in the U.S.
While Comcast's own theme parks do not provide nearly as much total revenue and income as Disney's, they have been successful and are growing quickly. In fact, Comcast's theme park revenue jumped nearly 20% year over year in the most recent reported quarter. With growing success in theme parks and a ripe consumer market, another Universal Studios is well-positioned to profit from a Hollywood-themed resort in China.
Universal Studios Beijing, a classic Hollywood attraction
Comcast is teaming up with Beijing Shouhuan Cultural Tourism Investment Co. (a conglomerate of four state-owned companies) to build a new theme park in a Beijing suburb. While Comcast plans to invest $3.3 billion in the project, the Xinhua News Agency reported the total investment from all partners could reach nearly $8 billion.
Plans for the Beijing resort include 1,000 square acres of space (which roughly mirrors the size of Disney Shangai), along with resorts, hotels, and other entertainment facilities similar to its U.S. parks, such as City Walk and Hollywood-themed hotels. While the park will have Chinese-specific attractions and themes, it is still expected to maintain its classic Hollywood feel. In fact, iconic Hollywood director Steven Spielberg will assist with the park's design.