Theme Park Rivals Meet Again in Japan
Like many Japanese, Noriko Shimizu knows her theme parks. And she finds a lot to like about the new $1.4-billion Universal Studios Japan, including its glitzy Hollywood imagery and Jurassic Park ride. One thing she’s not quite sure about, however, is her run-in near the front gate with a giant blue and red bird with baggy skin and green eyes.
“With Woody, I don’t know . . . somehow it’s not the same,” the 33-year-old assistant nurse said. “Mickey Mouse makes even adults melt. You just want to hug him.”
“Huggability” and inevitable comparisons with the world-famous rodent are just two of the challenges Universal faces with its just-opened park here. The perennial industry No. 2 enters a market Walt Disney Co. and Disney’s Japanese partner, Oriental Land, have created, developed and dominated since the mid-1980s.
It does so as many Japanese theme parks are going bust, the economy is tanking and attendance is down. Nor can Universal claim belle-of-the-ball status for long. Disney plans to open DisneySea, its second theme park in Japan, in September.
The way Universal sees it, however, there’s more than one way to skin a rat. “We’re not mired in the past with just one character,” said Glen Gumpel, international president of Universal Recreation. “I can tell you, this is going to be a successful project.”
He’s probably right, less so because Universal has figured out how to trounce Disney than because it probably doesn’t need to. Experience has shown the two rivals to be complementary in most markets. And Japan’s appetite for theme parks remains huge, largely because of the lousy job local competitors have done.
Universal, a unit of the French conglomerate Universal Vivendi, has years of experience operating theme parks in Florida and Los Angeles. What it doesn’t have is much of a track record overseas. This makes the Osaka project especially important to the company, given the enormous potential most industry players see in markets outside the U.S.
Universal spent years studying the habits of Japanese visitors at its U.S. parks, creating special test kitchens, mounting focus groups and poring over Japanese demographic data. Some of its early mistakes involved trying to be too Japanese--a giant squid character was dropped, as were many Japanese-language signs. The company found most Japanese wanted an American experience.
It carefully studied Tokyo Disneyland, the most successful theme park in the world with 16.5 million visitors last year, equal to nearly 15% of the Japanese population.
In a market where cutesy is king, success in Japan often involves designing rides around characters that resonate with the Japanese, including Universal’s Snoopy and E.T. and Disney’s Winnie the Pooh.
“I love Pooh,” gushed Megumi Kawabe, a 20-year-old part-time office worker, as she emerged from a Tokyo Disneyland shop with a shopping bag. “I usually spend $500 to $600 on Pooh items, but today it was only $200. I couldn’t find any Pooh stuff left to buy.”
Universal also has brought to Osaka many of its proven crowd-pleasers, including attractions based on “Jaws,” “Back to the Future,” “Waterworld,” and “Backdraft,” as well as a Terminator 2: 3-D attraction that is one of the most expensive in the world at $70 million.
Most Japanese theme parks do fine the first year. Universal’s challenge will be to keep people coming back--and that generally means adding expensive new rides every few years and new parades, themes and shows every few months. Disney sets the standard, having spent nearly as much since 1983 renewing Tokyo Disneyland as it spent building it. More than 95% of its visitors have been there before, and many are fanatics.
“I’ve been coming to Tokyo Disneyland several times a year since it opened 18 years ago,” said Kaoru Hatayama, a 39-year-old office worker, standing outside the park gates. “It makes me feel so happy.”
In a business dependent on location, Universal Studios Japan, which opened March 31, is well-situated on former industrial land a few minutes from central Osaka. About 22 million people live within a 60-mile radius. Still, it can’t match Disney’s 33 million local base in Tokyo, the capital city, so Universal also is banking on tourists, including those visiting nearby Kyoto.
Both companies say, at least officially, that they welcome the rivalry and expect it will expand the overall market. “It keeps us both on our toes to stay sharp,” said Jim Cora, president of Disney International. “And the more advertising they do, the more it raises awareness of theme parks in general.”
Disney’s Japanese partner, Oriental Land, says it could lose a modest number of visitors to Universal in the first year but expects to see them again when DisneySea opens. “They’ll return,” said Yoshiro Fukushima, the company’s executive managing director.
Oriental’s decision to build the two Disney parks side by side reflects in part the difficulty of acquiring land in Japan. But in a nation still stingy about vacations, it’s also designed to entice people into staying two or three days--boosting hotel, souvenir and admission revenue. The same logic saw California Adventure open in Anaheim a stone’s throw from Disneyland.
Disney also is trying to hedge its bets demographically. Japan’s population will peak in 2007 and then decline and age rapidly. Finding a formula that doesn’t depend on youth is essential. DisneySea is a little less cutesy than Tokyo Disneyland and targets an older audience by serving liquor and focusing on maritime themes.
“Mickey Mouse lives in Disneyland, but he may come for a visit to DisneySea,” Oriental manager Ryoji Yasuoka said.
One key difference between Universal and Disney in Japan is their respective stakes in their parks. Disney collects only franchise fees from Oriental Land. Universal has taken a direct 24% stake in its Osaka venture. “I suspect if [Disney] had to do it again, they would do it differently,” Universal’s Gumpel said.
Universal’s main partner is the Osaka local government, which owns 25%. Other investors include Sumitomo Group and Hitachi Zosen. Universal says it retains marketing, creative and financial control. The arrangement is not a drawback and it is different from the many failed public-private theme park projects littering Japan, the company says.
Universal won’t disclose its projected break-even point, although Osaka says it expects to make a profit by the fourth year and pay off all debt by the sixth. With the weakening yen, the project has become dramatically less expensive for Universal, which once estimated the park’s cost at more than $1.6 billion.
Disney and Universal both benefit enormously, meanwhile, from the poor showing by most Japanese theme parks. Disney arrived in 1983 and was an immediate hit. Japan soon changed its laws to funnel tax and other benefits to local leisure projects, giving rise to thousands of so-called third-sector projects jointly owned by private companies and local governments.
Bureaucrats with no vision, marketing skills or profit motive all too often headed the projects, many of which were a few miles apart simply because they were in different prefectures.
Like a giant wave, hundreds of these parks were simultaneously planned in the late 1980s, opened in the early 1990s and are failing in the early 2000s.
“Left alone, the Japanese went a little nuts” with theme parks, said Ira West, president of Duell Corp., an U.S. and international theme park designer. “Virtually none made money.”
Many projects were conceived by older men, based on their memories of the high-yen days when foreign travel was expensive and difficult, said Hirotake Araya, senior analyst with Tokyo Shoko Research.
This resulted in scores of projects with names such as Spain Village, Dutch Village and Hawaiian Spa featuring miniature versions of landmarks from the country in question. “Nowadays, young people just go to Switzerland instead of some silly, artificial Swiss Village,” Araya said. “It’s pathetic.”
The arrival of more high-level competition is expected to hasten a trend already underway. In a spectacular flop, the Seagaia park, featuring a domed beach and wave-making machine, failed in February with a debt of $2.35 billion. “The Japanese parks will be weeded out eventually,” said Kenji Kobuse, analyst with Nomura Financial Research Center. “Disney and Universal will be the ones left standing.”
Among the Japanese park offerings are Bow Wow Kingdom, featuring puppy sunbathing; Tom Sawyer Pasture, touting its Vietnamese miniature pigs; Canadian World, which invites you to “take a photo with Anne of Green Gables”; and Mongolian Village, where you can stay in a tent, yak optional.
Most report a decent first year but see little repeat business. “People get bored after they visit these parks once, unless they’re idiots,” said Toshihiko Okino, an analyst with UBS Warburg.
Disney and Universal, however, tap a different vein, analysts say. They are successful because their wide-open spaces, glitter and echoes of American fantasy contrast with the often-cramped life and long commutes of average Japanese. Many say they are a particularly welcome break these days, given the gloomy state of Japan’s economy and political wrangling.
“Coming to the park separates me from everyday life,” said Sachi Inoe, a 21-year-old sales executive. “It makes me feel safe, happy and uncomplicated, sort of like I’m back in my childhood.”
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By the Numbers: Disney and Universal in Japan
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Category Tokyo Disneyland Universal Studios Japan Tokyo DisneySea Annual visits Over 17 million in 2000 8 million projected 10 millioprojected Cost $1.5 billion $1.4 billion $2.billion Size 32.4 acres 21.9 acres 28.9 acres Visitor capacity per day 90,000 52,000 60,000 to 70,000 Opening April 15, 1983 March 31, 2001 Sept. 4, 2001 No. of attractions 47 18 23 No. of restaurants/
retail shops 114 45 50 Admission fee $45.80 $45.80 $45.80
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Sources: Oriental Land, Universal Studios Japan, Nikkei newspaper, industry sources
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Hisako Ueno in the Tokyo bureau contributed to this report.
