The Walt Disney Company (NYSE:DIS) has ramped up its investments in its foreign theme parks, in lieu of increasing capital expenditures at its other businesses. It is also building its cable television network presence overseas. The expansion measures have so far helped to fuel increasing income from Europe, Asia, and Latin America. Will Disney continue its focus abroad while domestic businesses receive less attention?
Shanghai progressing well
In early 2011, The Walt Disney Company (NYSE:DIS) announced plans for a Shanghai, China-based theme park and resort, now projected to open in late 2015. Earlier this year, it released a sneak preview of what the roughly-1,000 acre park might look like (see photo). Current estimates suggest total outlays of about $29 billion yuan ($4.7 billion) for startup costs.
If the performance of Hong Kong Disneyland is any indication, the China property should fare well from a profitability standpoint. The Walt Disney Company (NYSE:DIS) continues to add attractions at the Hong Kong property, where attendance is climbing. Indeed, factoring in both the Paris and Tokyo parks, international attendance jumped 6% in fiscal 2012 (ended in September).
The company has a 51% majority interest in Disneyland Paris, a 48% stake in Hong Kong Disneyland Resort, and a 43% interest in Shanghai Disney Resort. All are organized as variable interest entities and are consolidated in its financial statements.
Where Disney is allocating investments
The Dow 30 component and entertainment giant has historically spent heavily to expand and update its Parks and Resorts division. In 2012, it shelled out $2.9 billion for that purpose, including $641 million internationally. The international amount was nearly a 50% boost year over year. Its budgeting has remained similar in 2013, with domestic park investments taking a backseat to spending overseas.
On that note, The Walt Disney Company (NYSE:DIS) is currently seeing the benefits of recent year investments in its California Adventure theme park, as well as its cruise lines. North American Park and Resorts revenue advanced a solid 12% in the March quarter.
Absent theme parks, Disney’s entertainment industry peers focus their overseas investments primarily on the television networks. While Disney has expanded its ESPN and The Walt Disney Company (NYSE:DIS) Channel formats to reach audiences abroad, others are following suit.
Viacom, Inc. (NASDAQ:VIAB) owns an international unit consisting of locally programmed editions of its core MTV, VH1, Nickelodeon, Comedy Central, and BET networks. It also airs the Paramount Channel, a movie network in Spain, along with numerous other regionally-tailored networks.
Viacom, Inc. (NASDAQ:VIAB)’s overseas channels have been received well. However, revenues from Europe are on a decline of late. Nevertheless, I believe that as Viacom, Inc. (NASDAQ:VIAB) expands its international asset base, it will contribute to the bottom line and add to its investment value as a buy and hold selection.