Everything seems to be going right for Disney (NYSE:DIS) these days. It's the movie studio behind half of this year's six highest-grossing films, and that's before we get to the seventh installment of the Star Wars franchise that will likely shatter box office marks. It's generating record theme park attendance at its industry-leading gated attractions. The improving economy is helping smoke out higher ad rates for its iconic television properties.
However, it's probably getting hard for Disney to avoid looking over its shoulder to see that Comcast's (NASDAQ:CMCS.A) (NASDAQ: CMCSK) Universal is gaining on it.
It's not just at the local multiplex where Jurassic World has been Hollywood's biggest hit in three years, and at some point this weekend should become the highest-grossing movie domestically in six years. After all, hit movies come and go and a hot release often benefits other studios since folks getting shut out of soldout screenings wind up seeing something else.
The bigger concern for Disney has to be the amazing transformation taking place at Universal's theme parks at a time when the House of Mouse is playing it safe.
Comcast posted another quarter of impressive growth at its Universal Studios theme parks on Thursday. Revenue climbed 26%, the kind of growth that you never see at Disney's larger empire. Universal's rolling since last summer's addition of Harry Potter's Diagon Alley to Universal Studios Florida, building on the successful debut of The Wizarding World of Harry Potter at its adjacent Islands of Adventure park several years ago. Universal Orlando experienced a 21% year-over-year spike in attendance this past quarter, and the current period is peak tourist season.
Things are also picking up at the original Universal Studios theme park in California. Comcast noted during Thursday's earnings call that attendance is up in the double digits since the late June addition of the Fast & the Furious -- Supercharged attraction, coupled with the recently upgraded Simpsons area of the park.
This is really just the beginning. Harry Potter will come to Universal Studios Hollywood early next year, and if that does for Comcast's West Coast park what it did for Florida it's going to be a huge transformation. With Universal Studios Hollywood and the Universal Orlando resort a reasonable drive from Disney's U.S. theme parks it has to be making Mickey Mouse more than a bit nervous.
Comcast's fast, Disney's furious
Theme parks have high fixed costs to operate, but that's why even a modest uptick in attendance can have a bigger impact on the bottom line. We saw that at Comcast in Thursday's report with a 45% year-over-year surge in operating cash flow accompanying that 26% gain on the top line. Comcast says that its theme parks are on track to deliver $1.4 billion in operating cash flow this year, up nicely from $400 million five years ago.
Comcast seems to have the right approach. It's targeting a major attraction every year at both parks. Universal Studios Hollywood is getting Potter, and Universal Orlando's Islands of Adventure will roll out a King Kong ride.
You don't see that kind of urgency at Disney at all. Most of its parks haven't had a game-changing addition in years. It's moving too slow. The widely rumored Star Wars and Pixar makeover for Disney's Hollywood Studios in Florida has yet to be announced, and it may take a couple of years for it open. The Avatar addition at Animal Kingdom that was announced a couple of years ago isn't slated to debut until 2017. A Frozen-themed boat ride should open at EPCOT next year.
For now, Comcast is doing a good job of closing the gap. Industry tracker Themed Entertainment Association recently put out its theme park metrics estimates for 2014, showing that Disney's theme parks worldwide experienced a modest 1.3% gain in attendance last year, a far cry from the 10.4% jump at Universal. This year should also see another big leap at Universal.
Comcast knows what it's doing. It's adding hotel rooms in Florida, and a highly themed water park will open in 2017. Disney's phoning it in at the worst possible time. There will certainly be room for excitement when Avatar opens and Disney's Hollywood Studios becomes Disney's Hollywood Adventure, but that better not be the end of game-changing investments for Disney. It needs more, and it needs to pick up the pace. Turnstile clicks don't lie.