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Newsbytes

By Annys Shin, Washington Post Staff Writer

Somewhere in the Congo section of Paramount's Kings Dominion, across from a Tomb Raider ride that sends people 60 feet into the air, workers have been pouring the foundation for the newest monument to corporate media synergy: the Italian Job Turbo Coaster, a thrill ride based on the modestly successful 2003 Paramount Pictures release starring Mark Wahlberg and Charlize Theron.

Come April 1, when the park opens its gates, people will no doubt line up for the chance to re-create the film's climactic chase scene. But while hundreds take turns racing down a subway staircase and crashing through a billboard in a replica Mini Cooper S, the park's owner, CBS Corp., will be heading the other way, out of the theme park business.

CBS's decision last month to sell Paramount Parks is the latest example of how media-entertainment conglomerates are recognizing the limits of what synergy can deliver.

The concept is not dead. Just go to Orlando or Anaheim, Calif., where Walt Disney Co. parks still stand as the model for how to use cartoon characters, movie plots and theme-park rides to reinforce one another: Disney announced yesterday that first-quarter profit at its parks rose 51 percent vs. the comparable period a year earlier.

But outside the Magic Kingdom, regional theme parks such as Kings Dominion are not considered the essential media-empire building block they were during the '90s.

Creating a SpongeBob undersea simulator or turning Superman into a ride "worked in some circumstances, but the view of the [media-entertainment] industry is the synergies weren't quite as strong as expected," said John Robinett, senior vice president with Economics Research Associates, a consultancy that specializes in the entertainment and leisure business.

The change at companies such as CBS serves as a counterexample to the path pursued by Redskins owner Daniel Snyder, who recently gained control of the Six Flags amusement-park chain; announced plans for a series of radio, television and Internet acquisitions; and has said he wants to create a family entertainment company. He recruited former ESPN programming head Mark Shapiro to run the company and drew movie producer Harvey Weinstein onto the board. Microsoft Chairman Bill Gates is a major investor, and Shapiro has talked of developing an "Xbox Village" for the parks.

The strategy is something of a throwback to the days when entertainment companies saw value in breadth. Viacom Inc., which last month spun off CBS, bought Paramount Parks in 1994 during the heyday of media-empire building. Time Warner Inc. had bought Six Flags two years earlier.

Though they never anticipated out-Disneying Disney, whose resort-style destination parks traditionally draw visitors from across the globe, media giants looked at regional theme parks as new outlets for marketing and merchandise.

But some eventually found it more difficult than they anticipated to create "that spillover effect" from the theater to the theme park, said Harold Vogel, a longtime media analyst and president of Vogel Capital Management, a New York hedge and venture capital fund.

The marriage of "hard-ride," adrenaline-rush parks with movie storylines and characters was often what Robinett calls "veneer theming."

"It helps some, certainly, in advertising and promotions, but doesn't add to the core visitor experience in the same way as in other, more show-based parks such as Disney," he said.

The media giants also learned that though regional theme parks can generate large amounts of cash and boast profit margins that Robinett estimated at up to 40 percent, their high-growth, high-return days may be behind them.

The cost of building new parks has become prohibitive, and existing ones require steady infusions of capital to create new attractions to maintain attendance levels. Attendance at regional theme parks grew just 0.4 percent in 2004, according to PricewaterhouseCoopers LLP.

"We stopped seeing double-digit increases in revenue 15 years ago when the industry matured. For the past 10 years, the industry has been flat, growing about 2 or 3 percent a year," said Dennis L. Speigel, president of International Theme Park Services Inc. and a former general manager of Kings Dominion.

Even that can nose dive if the weather doesn't cooperate or if there is a downturn in travel, as there was following the terrorist attacks of Sept. 11, 2001.

A growing number of tomorrow's thrill seekers, apparently, are to be found overseas, in Europe, the Middle East and Asia. Since the late 1990s, established operators have opened or acquired parks in those areas, often with financing from private equity firms.

With their slow growth and high capital costs, regional theme-park chains did little to boost the stock prices of parent media companies such as Time Warner and Viacom.

Wall Street analysts "don't give credit to assets buried in the balance sheet. If you don't get credit, you look at assets as sources of cash that can be deployed to other core businesses," said Robert Routh, an analyst for Jefferies & Co. Routh owns shares of regional theme-park operator Cedar Fair LP.

Viacom executive chairman Sumner Redstone signaled his desire to sell Paramount Parks several years ago, as he grappled with the larger issue of separating Viacom's slower-performing CBS television and radio businesses from its faster-growing MTV and Nickelodeon cable networks.

After the split, Paramount Parks had even less synergy with CBS's other holdings, so selling Paramount Parks "makes sense," Routh said. "It's not a matter of them being . . . bad assets."

Universal Parks and Resorts, considered by industry observers as the most successful experiment in synergy next to Disney, may also end up on the auction block. When General Electric Co. merged NBC with Vivendi Universal Entertainment in 2004, several analysts contended that it was more interested in Universal's movie library than its theme parks, despite their success.

Time Warner, whose ill-fated merger with America Online Inc. was the pinnacle of media gigantism, exited the theme-park business in 1998, selling Six Flags to Premier Parks, which later took the Six Flags name. After several years of disappointing results, shareholders last year ousted management and installed Snyder and his team.

The experiences of Viacom and Time Warner haven't deterred Snyder, who has faith he can reverse the slow growth that made the theme-park business unattractive to the media conglomerates.

In that regard, he may benefit from Six Flags' lagging performance in recent years. Just putting the company on a par with Paramount and Cedar Fair may be enough to produce the sort of returns that will keep investors happy.

Turning around Six Flags will be difficult, Speigel said, but the parks "have nowhere to go but up."

Reported By TechNews.com, http://www.TechNews.com

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