Comcast Corporation (CMCSA) Management Presents at Bank of America Merrill Lynch 2019 Media, Communications & Entertainment Conference (Transcript)

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Comcast Corporation (NASDAQ:CMCSA) Bank of America Merrill Lynch 2019 Media, Communications & Entertainment Conference September 11, 2019 7:45 PM ET

Executives

Tom Williams - Chairman, Chief Executive Officer of Universal Parks & Resorts

Analysts

Jessica Jean Reif Cohen - Bank of America Merrill Lynch

Jessica Jean Reif Cohen

So if you can take a seat, please. So from Comcast, we have a very unusual guest fireside chat speaker. I haven't seen you at a conference in a long time. So we are really, really happy to see you. This is Tom Williams, Chairman and Chief Executive Officer of Universal Parks and Resorts, part of Comcast and maybe one of the fastest growing parts of Comcast, I may add. So, Tom, I have known you for a long time, over many, many, many different owners. You have been at Universal Parks since the very beginning in 1987 and in that time, as I just alluded to, Universal had many owners including, I am probably not even going to get them all, MCA, Seagram, GE. How does being part of the Comcast umbrella benefit Universal Parks? How is it different? How does it benefit you?

Tom Williams

First let me say, it's great to be with you again and great to be with all of you and hope you get something out of the comments that I will share with you this afternoon. I have been with the company since 1970, next year it would be 50 years with the company going back to the Sid and Lew days at MCA and the many, many owners that we went through, it has never been better, it never could be better than it's been working with Brian Roberts and Steve Burke and Mike Cavanagh and the whole Comcast team.

And you know, I would say that regardless, I am not trying to blow some smoke or something, they have given us the ability to invest back in our parks. We have known all along what our park guest, our park visitors wanted in terms of entertainment, the expectations that they had and we have a pretty good sense of how to under promise and over deliver on that and we would just like the capital to do it. And it was especially lean during the GE years and the timing worked out really wonderfully because we had opened in Orlando, Harry Potter.

We licensed the Harry Potter theme park rights to Warner on behalf of Jo Rowling and so forth. We built a relationship and we were able to bring to the park this attraction. And that's the timing in which we opened early summer. And that's the timing in which Comcast bought out GE and it was all done 2011. And we were just so busy and Steve, you know, he had some experience in parks and said, we are going to give you some more capital. And so we built hotels, we built parks, we built attractions and it's all worked. It's all been solid double digit returns.

And so you know, they are the real deal. They are straightforward. They make decisions. They stick with them and make business a lot easier to transact. So it's been great.

Jessica Jean Reif Cohen

But as great as it's been, it feels like, I mean definitely I shouldn't, I maybe speaking a little bit too soon, but it feels like there is still a long runway here. So let's just talk about --

Tom Williams

Long runway.

Jessica Jean Reif Cohen

Priorities for the next three to five years from your perch?

Tom Williams

The immediate priority is, it's hard, I keep reminding myself in less than two years, about a year-and-a-half from now, we will be open in Beijing, China with a fabulous resort. It will be the largest park we have ever built. You know, you just don't show up in China and build a park. You have to go through, I have been going over there for 16, 17 years building relationships and Brian's been very helpful in that regard as well. And we were invited and so we have got a fabulous parcel of land, a thousand acres.

It's at an ideal intersection of the Beijing-Harbin Expressway and the Sixth Ring Road. It's about 45 minutes out of downtown Beijing. It's got all the best IP's. We are going to have 1,200 hotel rooms, including a Universal Grand Hotel will be part of the opening. We will have a CityWalk there. We have so much land that we will be able to, in due course, if business warrants the investment, we would be able to, we have enough room to build more hotels and other park, a water Park. I mean there is a lot of upside there. So we are well on our way. It's on schedule, on budget. The ops teams are progressing nicely against the timelines. And so that's coming to us in less than two years. In about a year-and-a-half, we will be open.

And then beyond that, Brian and I just announced August 1 of this year along with the Governor of Florida, Ron DeSantis and the County Mayor Jerry Demings that we would be building a whole another gate with more hotels in Orlando called Universal's Epic Universe. We have about 738 acre. You been there, Jessica. You know it well. About 738 acres on what we call the North Campus. And then we have a Mid Campus with another 30 acres or so upon which we are putting 2,800 hotel rooms. And to the south of that, we just acquired another 750 acres.

This land is quite close to one another. It's about a 10, 15 minute bus ride between the two different locations which is actually quite quick. And so we are going to build this whole new fourth gate. And we haven't announced price. We haven't announced the content in terms of the IP or even timing because it's senseless to do so. Why tell the competition what you are doing? And beyond that, why risk deferring attendance. That makes no sense. So we are hard at work. We have done our demand modeling. We have done our research. We have fully planned the park. We are beginning to work on it now with masquerading and so forth, preparing the land, installing infrastructure. So that's definitely a big priority.

And another one is Nintendo. We have a license deal with Nintendo, Kyoto, Japan. But the data on Nintendo is insane in terms of number of gamers and how deep the emotional connection runs with them. And we have a deal to substantial Nintendo Park experiences at all of our parks around the world. And so we are hard at work at doing that. The first of which will be in a park in Osaka, Japan, Universal Studios Japan. It will open up. It will be open in less than a year from now. It will be opened up next spring. And it's just going to be fantastic. The whole incremental footprint to the park, it's already our number one in Osaka. Our USJ, Universal Studios Japan, is the number one attended park, single park basis. Orlando is bigger because it's got more than one park. But single park basis, Japan. And it's going to be even better with Super Mario World.

So those are the big priorities.

Jessica Jean Reif Cohen

So let's run through each one of them. So the U.S., I am not sure what you are going to answer. I just had a question on timing, like any color that you can give on either one of those? Okay.

Tom Williams

Just for the reasons I said.

Jessica Jean Reif Cohen

And the IP, just conceptual like --?

Tom Williams

I mean it's the best. And we have tested them all and they are killers. It's a great line.

Jessica Jean Reif Cohen

So this would be different than your other parks in Florida?

Tom Williams

It takes it to the whole next level. It's going to redefine what a park experience is like. It really is special.

Jessica Jean Reif Cohen

How long do parks take, do you think, from -- you said you have already started to just --

Tom Williams

Acquire the land and then of course, you prepare the land for development. It's at least a five, six year process. Because you know, in our business, the way we do attractions, the vendor community that can support what we want to do is pretty thin. So it's not like you can go to a tradeshow and buy a ride and say, yes, I will take that ride. It just doesn't work that way. You have to design these from the ground up. You start with story, right. You start with popular IP that people have an affinity for and emotional connection to, take Harry Potter as an example. And you say, okay, what are the most favorite parts of that story? Of all that fiction? Seven books? What are the most favorite parts?

And so you select what those are and you combine that with characters, you combine that with environment and you then turn your attention to, okay, now I know what I want to do. How do I do it? And so that takes a lot of research and development. Especially on the engineering side, because a lot of times it involves technologies that have yet to be invented. That's definitely the case with our Mario, Super Mario cart ride. We had to invent and then you have to find a way to fabricate and meet all quality standards and so forth. And sometimes, like in that case, you have to do it yourself because no one, you can't find anybody that wants to do what you want to do.

And so this takes time. And so, by the time we get to design and all the R&D and eventual commissioning and soft opening, it's a good five, six year time period.

Jessica Jean Reif Cohen

Okay. Let's get to the here and now. Attendance to Universal Studios Florida was roughly 5% in 2018 according to industry sources and you have been gaining share per year. What do you view as the biggest drivers of your attendance long term?

Tom Williams

I think product. It's all about product. It's all about having the goods. It's having things that the kids are saying, mommy, daddy, we want to go see that. The adults are saying it as well. I think we really targeted demographically into the right segments. It's no secret to anybody in this room that Disney owns the very young ones. We don't try to compete for that. We have something for the younger sibling in the family group to do but we are not going to try to go head-to-head.

We would rather focus on where we have strength which is in a diverse audience, which is in, not thrill. It's not a matter of going how fast can you go or how high can you drop. It's more about telling the story in a way that just immerses the visitor in the experience and gives them a desire to do it again and again. So there is a lot of repeat. And so I think that having the right IP as we do between Universal Pictures and DreamWorks Animation and Chris Meledandri's Illumination Entertainment as well as some properties that we license. We have got the best of the best.

In fact, coincidently unrelated to being here today, I was looking at a bubble chart that we had done yesterday that measured likeability with a trip driving capability. So two different axis and then showed various bubbles of VIPs and we put it up against the competition's and we are right there. We are taking a backseat in any respect in terms of trip driving capability, overall appeal. So we have got the right goods and we have got a terrific creative team, Mark Woodberry who is -- he and I have been working together since 1987, so a long time. And we have got a creative studio that dreams this stuff up.

And we just did this Hagrid's Magical Creature Motorbike Adventure attraction, long name. We are good at long names. But it's about Hagrid. Hagrid is one of the characters in Harry Potter fiction. He is the guy that showed Perry where to get his, go buy his wand and he is the groundskeeper of the forbidden forest and so forth. He is kind of a giant guy. So we did this attraction. Of all the things that we have ever done and we have gotten great reviews, critical reviews, positive, always great, never been better. I mean every review we got on Hagrid is just over the moon fantastic.

So Mark and his team, they can come up with a way to make it a super special, surprise people, delight people and get positive word-of-mouth. And that's how we are going to continue to grow.

Jessica Jean Reif Cohen

But as great as you have done, you are still relatively small compared to Disney. So in 2018, do these total attendance including water parks was estimated at roughly 51 million versus the 22 million at the Universal. How do you think about the opportunity to continue to gain share versus Disney which is also opening new attractions. I mean Star Wars just opened. So how do you think about your opportunity go gain share? And do you think that you could ultimately wind up with anything close to an even split or a closer split than you have now?

Tom Williams

I think, step one, Jessica, for me is, look, we don't have to tie them, we don't have to beat them to make a lot of money and to satisfy people from around the world. We have a great business. It's a business where I can walk out of lunch, as I often do and I can intercept guests and I know right now what kind of a job I am doing. And that's very gratifying. And it encourages us to do better and better. And so they have got a big head start.

They opened up Disneyland in Anaheim back in 1956. They have heavily capitalized terrific IP that they can apply. Good for them. Hip, hip hurray. That creates an audience of worldwide visitors that enjoys that kind of experience, appreciates a theme park, family-shared experience. And it's great for us. So in the meantime, how do I make sure that as we invest, we get a right, a reasonable and just return, a fair return on investment. Well, the key way that we are going to go about doing that is by having these great attractions, doing a super job with the guest experience and by marketing them in a manner that allows us to grow.

Take Epic Universe as an example, we are bound to get an extra day out of the visitation base. We already have. We have certainly did with IoA. And we have to a large extent with Volcano Bay, which is our theme water park, which doesn't have nearly the capacity of a dry park. So we have got the two parks plus the water park and we have got an average of length of stay of over, visitation wise, of over two parks. So when we do another one, it will edge up toward three parks. So a big chunk will be people we have already got.

And then another part will be, I think we can drive more rapid repeat visitation because hey, there is something new to see, a whole new park, let's go do it. And on top of that, I think we can drive unique visitation solely on our own behalf. We certainly did with Harry Potter. We brought people into the world of theme park experiences that otherwise wouldn't have been part of it and we can do it again. So as from those three segments that, I think, surely will continue to grow.

Jessica Jean Reif Cohen

Right. And then here in LA, attendance for Universal Hollywood more than doubled in the last 10 years from 4.3 million in 2009 to over nine million in 2019 according to industry sources. Is that park space constrained? Or do you have the potential to double attendance again?

Tom Williams

Well, you know, interesting, look, it's Los Angeles and we have 430 acres or so inclusive of the studio and all the offices and the park experience inclusive of the tour. There is land there that hasn't been developed. It's all subject to development rights. It's all defined by a plan that's called the evolution plan approved by the County and the city. It was approved a couple years ago. And it allows for a certain level of trade-off. You can take something that's you don't mind, a footprint that it's okay with you to take it out and replace it with something.

That's how we did Transformers. That's how we are doing another new attraction, Pets. It was not part of the theme park before but now it's going to be. So you can kind of, not one for one, but in a reasonable ratio replace old with new. So that's part of it. Another part of it is to increase operating hours to allow more time for visitation. Do things to incent off-season visitation to more evenly balanced flow through the course of the year. I mean, for crying out loud, we could do 30,000 every single day for a whole year, we would already see an improvement. So all those different techniques allow you to grow.

Jessica Jean Reif Cohen

Right.

Tom Williams

And the city and the county were wonderful to work with. And there is nothing that says that it can't be revisited if there is a business case to be made. We have to be considerate of our neighbors. We have to take into consideration traffic flow and the environment, so all of that has to go to into the mix to do the right thing. But it doesn't mean we can't grow, because we will.

Jessica Jean Reif Cohen

Right. And Disney invested at least $1 billion to create each of the Star Wars: Galaxy's Edge at Disneyland and then again at, well, Disney World. Interestingly, at Disneyland, attendance declined post the opening which Disney attributed to crowd management. And it appears that, like just as you alluded to, about not giving specifics to that effect, it appears that people and all the visitors delayed their time in Orlando because they were waiting for Star Wars to open. What impact have you felt in your parks, both in California and Florida as a result of the Galaxy's Edge opening?

Tom Williams

Yes. Because we opened both Hagrid in Orlando, we open that on June 13. So they didn't open Star Wars in Orlando till, I think it was August 27. So we had a head start. So Orlando did fine. We just went through a hurricane, Hurricane Dorian. So that slowed things down for about a week. But we really came out of it pretty, well, physically unscathed, just a matter of attendance drop off because of obvious and logical people have concern about visiting during that timeframe.

In Hollywood, we had the brand new recently refurbished Jurassic World ride which has really been a hit with locals since we opened. So we have been fine on both coasts. I think both markets have seen some level of the decreased visitation and perhaps part of that is holding off in anticipation of the Star Wars opening. I think that's behind us now. For certain, the chapters, the final chapter of the book does not close on Star Wars. There is going to be plenty of opportunity for success going forward for them. And one of the things we have learned through research is that Star Wars fans are also Harry Potter fans. And we have got Harry Potter in heavy doses on both coasts. So I think we will get our fair share in both cases.

Jessica Jean Reif Cohen

And then just on the delayed visitation, would you open your new attractions in all of the world and here? How do you make sure? Is there anything you can do to make sure that visitors don't delay their visits?

Tom Williams

Yes. I mean we have been doing the same thing for years, which is there is an annual travel mart for worldwide travel agents, wholesalers, packages and so forth, takes place every year in May. And in May of every year, we tell them what we are going to be doing the next year. Well, because they need to put it into their packages and their brochures and so forth. And so by the time you get to May, people have already made summer vacation travel plans. So you are not dissuading any attendants. You haven't hurt yourself at all.

And then when we get to the summer, you are back to school, but then we have our Halloween event which, as Steve Burke funnily calls our 13th month because it is our 13th month, we have Halloween in all of our parks around the world and it's a huge after-hours separately ticketed event that drives enormous lines of business. So you are into Halloween and then you are into Thanksgiving and then you are into holiday programs. We have big holiday programs at all the parks. And then by the following year, we do have new attraction open. So have been quite successful at avoiding deferring attendance.

Jessica Jean Reif Cohen

Okay. Steve Burke discussed expanding hotel capacity at Universal Orlando Resort for years, I mean pretty much since the day Comcast came in. You currently have 7,000 hotel rooms. I think it's planned for 9,000 by next year in Orlando and there were probably 2,400 when Comcast first bought you. What's the plan or the vision towards continued room expansion? And how important is that?

Tom Williams

It's really important and we are all in on it. We have got a great hotel partner in Loews. Jon Tisch, great, great partner. The way we do it is, we design and we build and we market and then Jon and his team at Leows manage. And we are 50-50 partners and it works great. We wanted to do the marketing because we want to sync the hotel offerings up with the park offerings. We have the ability to control price, package and so forth to make a compelling offer to consumers.

As a matter of fact, close to 95% of the people that stay in hotels logically go to the theme parks, buy tickets and they by multi-day tickets. So it's a very solid hotel businesses in it's own right and it's great for the parks as well because it takes away the uncertainty. You can say, we are going to Orlando for a theme park vacation, I am going to stay in hotel XYZ. Then when you get there, you can change your mind. You might have it in your head you are going to go to us and then you are going go to Disney or whatever you are going to do.

And then, the dynamics of the vacation, kids say, I would rather do this, rather do that. They see a billboard or whatever. Maybe they may change their mind. Well, when they are staying in your hotel and they buy your package, they are not changing their mind. So it's a way for us to secure visitation in advance, assure people what they are going to pay. Here is the all-in price for the whole experience and we have hotel product that goes from value to premium, four, five different levels in there, all different price points.

This latest 2,800 that we are building, the 750 that we already opened and the 2,050 to complement it that will open next year, they are all value properties. The standard room is $85. Now there are a lot of hotels, motels or hotels up and down International Drive, which is the tourism drive right there in Orlando that they are $200, $300 room properties and people aren't going to stay there when they can stay at Universal and get early park admission and get transportation to the park and have character breakfasts and all the themeing and everything. So it really is, I mean we just opened it in summer, we are on a 94% occupancy. It's crazy.

Jessica Jean Reif Cohen

How many rooms do you think you will ultimately have in Orlando? I mean not forever but in the next, let's say, five years.

Tom Williams

At least 11,000. A couple thousand more than the 9,000 we have already announced.

Jessica Jean Reif Cohen

Okay. And then you just mentioned briefly the Halloween events that you have. So you do, I mean you promote them. I have seen major promotions of this. But the parks are transformed at night. Can you discuss the worldwide impact from the Halloween events? Halloween Horror Nights, Surprise Halloween?

Tom Williams

It's the 13th month. We do it in Singapore and Osaka. We are going to do it in Beijing in its own form. We customize it to the market. We license the park. We have licensed the park in Singapore. And I was shocked to find out that there is some Malaysian ghost. Singapore is not a part of Malaysia but it used to be. It's right next door. It's an island state. And some super feared Malaysian ghost that they did a haunted maze around, but none of the employees wanted to work there because they were too afraid. When you stop laughing, you realize they were serious. It's a huge success.

We drive millions of people, as Jessica said, we sweep the park at 6:00 at night and we reopen it an hour later and we stay open till 2:00 in the morning. And there is food sales, merchandise sales. We have, like in Orlando, 11 different haunted houses as well as a huge show on the main lagoon. We have a great number of different shows, contortionists and magicians and different things of the like that rally entertain people and it's just been a huge success. We have been doing it in Orlando for 30 years. It's terrific.

Jessica Jean Reif Cohen

So let's move on to Beijing. So you have a 30% ownership stake there. So I mean, there has been so much tension recently between U.S. and China. Has that had any impact at all on the development?

Tom Williams

It just hasn't. You would logically think it has but it's almost like if you ask anybody in this room, what have you seen as a result of China imposing these tariffs on us that you are really are all that shook up about. I mean your everyday work, you are not talking about it. I mean because of what you do, maybe you are talking about it, but you are not actually making the big consumer decisions on it. The people we work with, they are all in on building this park and getting it ready to open. That's all they are focused on.

And believe me, when you go to China, you don't start talking about politics. You don't start talking about the leadership in China. You would be crazy to bring up Hong Kong, Taiwan. You would never start talking that way. You just focus on what you are trying to do. These are is a happy people. I remember when I went there 16 years ago, shock out of staying at the hotel right across from Tiananmen Square, look out the window and there is a Porsche dealership across the street. I thought, wow, the last thing I would expect.

I go to the Forbidden City and right inside the front doors is a Starbucks. This is 16 years ago. So you know Beijing is a cosmopolitan city. You go down to their heavy shopping districts and all the major brands are there. The fashion houses are all there. I mean, you know not everybody, but they have got money to spend and they are happy, content people and they are thrilled to have the theme park, Universal Studios come. I am very proud of the fact that we are in the People's Republic of China. We are going to open up. You can't get a more American kind of brand than Universal Studios. And it's all with welcome arms, open arms.

Jessica Jean Reif Cohen

So the press has speculated that the investment in the park is now set at total of $6.5 billion. And again, you have 30% stake. But that's even larger than the $5.5 billion of Disney Shanghai or Shanghai Disney.

Tom Williams

Reported.

Jessica Jean Reif Cohen

Reported. Can you talk about the plans there? The opportunity? Key attractions?

Tom Williams

Yes. I mean like I said, it's our largest park. It will have the 1,200 rooms to begin with, located in two different locations. It's got a great location going for it. It's got Harry Potter. It's got Transformers. It's got Minions. It's got Hollywood. It's got Jurassic Park with new rides that we have never done before. I mean it's a terrific line-up giving weight to the winter weather in Beijing for about a month. It's got colder temperatures in Osaka. Our park in Osaka open 12 months of the year. So we know we are going to get wintertime visitation.

But indifference to it, two-thirds of the attractions are indoors. About 40% of the total park facilities are completely indoors. Now there is a Kung Fu Panda Land, it's 100% indoors. The rides are indoors. The shops are indoors. It's all indoors. And so we think that ratio of the total park capacity aligns nicely with the expected visitation on those cold, cold days. You wouldn't need it any more because not that many more people are going to come. So we think we planned it correctly.

Jessica Jean Reif Cohen

And what's your assessment of the competitive environment in China? It feels like there is lot of parks going up?

Tom Williams

Well, not in Beijing. I mean 22 million people live there and 275 million people visit. And we have been able to substantiate the number. When the Mayor first told me that, I thought he was exaggerating. But now it's correct. There is a lot of cultural effects, lot of places to visit from a cultural standpoint in Beijing. Orlando, by comparison, has 80 million visitors that come, whereas Beijing has 275 million. Now they are not all going to be income qualified, but it's certainly going to be more than enough of a pool for us to be quite successful. And Disney has been successful in Shanghai.

Jessica Jean Reif Cohen

And finally on China, what's your plan for additional gate openings or parks in China?

Tom Williams

No plan except we know we have got the land and we have the product because we have developed it elsewhere. We have two gates in Orlando and so forth. And so when the timing is right and it makes sense, you have to be open for a few years to get your feet on the ground and do a great job and really confirm all the assumptions that you made were correct and those that weren't correct, fix them and plan accordingly. But the important part is the opportunity is there, when and if we choose to avail ourselves of it.

Jessica Jean Reif Cohen

Right. Moving on to Japan. In 2017, Comcast bought out the 49% stake that your former partners owned for $2.3 billion. You now have full ownership of Universal Japan, which as you just said measured by attendance is your single largest park. Attendance for the park was affected by the typhoon last year. Can you give us color on attendance trends in the park this year and what's your outlook moving forward for the next year or so?

Tom Williams

Yes. Year-over-year, it's been great because last year and of course in two months they had five typhoons, an earthquake and a heat wave. It was really rough. And this year, it's been great. Last year was a total abnormality. We have been open 16, 17 years and never had anything like that ever before. So it was a one-off deal. It was all over in a couple of months and we have fully recovered and we are up double digit, equivalent time period, we are way up.

So they are into Halloween now. They opened at the start of Halloween last week. We did a Sing attraction there based on Illumination Entertainment movie, Sing, which has gone over great, because it's a popular Western song. And it's a sing along kind of a show. So it's been done really well.

The employees there are super dedicated, super friendly I would really like to bottle them, so to speak, get all of our parks around the world because just culturally, they are very considerate, very considerate. When you see everybody walking around with a mask, because they don't want to give you their illness. And they don't want to get one either. But they are very considerate, very thoughtful and it's just a great environment.

Jessica Jean Reif Cohen

Is there anything you can talk about the economics of that park?

Tom Williams

It's very, very strong otherwise we wouldn't have bought it. We were an investment in that park when we first opened it back in 2001. I think we had a 24% stake and GE had to sell it. And when we started talking about international expansion after Comcast acquired us, so I kept telling to Steve, step one is we ought to buy back because we designed it, we staffed it. It was all our key management. We opened it. We marketed it. This is like our home week. This is our park. And I was pleased when there was agreement to do so.

Jessica Jean Reif Cohen

So in 2015, you signed a partnership with Nintendo and as you said before, this will be the first park to open a Super Nintendo World. I think the plan is to open in time for the 2020 Olympics in Tokyo. The total cost has been reported at between $350 million and $550 million. Are you on track for that opening? Are there any details you can provide on that?

Tom Williams

We are going to open up next spring. It's a whole new separate area of the park. It's got food. It's got merchandise. The first phase will have two rides, Super Mario Kart Ride and as well as Yoshi's Adventures. Yoshi is one of the other Nintendo characters. There will be two rides. The whole land is interactive. And you are going to have a wristband that's got the big red Mario symbol on it.

By the way, the wristband is super cool. It's all magnetic. You slap it at your wrist and it just snaps on and it won't come off. And that allows you to, on an interactive basis throughout the entire land which is built on three different levels. It's got all the popular Bowser's deal and Princess Peach's Castle and all the different key elements. And you will be able to go up and keep score and play with the various games and that also translates to a score keeping capability, if you choose to do so within the rides and it actually interfaces back with your game console. So you can build on it and come back again and really got everything going for it.

Jessica Jean Reif Cohen

So what are the plans to take Nintendo to your other parks, Florida and --?

Tom Williams

We are taking it everywhere. Any place we are not going to start round one is in Beijing. There is a tension between the Japanese products in China.

Jessica Jean Reif Cohen

So what's the timeframe for bringing it to the States?

Tom Williams

I only know we are bringing it. But I don't want to defer attendance.

Jessica Jean Reif Cohen

Okay.

Tom Williams

But we are bringing it. You can count on it.

Jessica Jean Reif Cohen

And as you look across the globe, what areas would you like to have more of a presence?

Tom Williams

I think that China would be the first logical opportunity. There is additional opportunity in Japan. Right where we are in Osaka, the government has created a man-made island, more than one, but one called Yumeshima. They bid for and got the World's Fair rights for 2025. So they are going to host the World's Fair there. And we are in discussions with them about how we can perhaps support them in that. They also are likely to be one of three cities in Japan that get awarded the rights to do an integrated resort which would include gaming and the most important part is entertainment. We would not participate in any gaming but we could see how that could be something we could participate in. So I think Asia would be the logical place to look for expansion first. It would not be South America. It would not be North America. And highly unlikely any place in Europe.

Jessica Jean Reif Cohen

What are some of the biggest differences in developing a park internationally versus building or adding to an existing domestic park?

Tom Williams

Local custom. You have to be respectful. You have to learn what they are. You have to play by the rules. Everybody's got, all the different countries have their different permitting processes, bidding processes. It sometimes require public bidding on things you wouldn't otherwise consider to publicly bid. Different metrics of measurement and different construction codes and a lot of different things you have to become familiar with and hire the right people to know what to do and make sure that you do it right. Books of been written about how to get along in Japan, how to get along in China. I have never found it to be particularly difficult. I think it goes back to the golden rule, treat people the way you want to be treated and everything turns out pretty good.

Jessica Jean Reif Cohen

So let me ask one more question and then we will open it up. But on pricing, how do you think about pricing? I noticed price increases across your various parks.

Tom Williams

Pricing is an obvious, it's an important ingredient in getting a fair and reasonable profit. And you can't make investment without getting some type of reward, both in the form of attendance as well as pricing power. And we have leveraged that to, we have got a double digit CAGR over the last five, six years on pricing. While we take pricing, we at the same time say, look, look, look, we have got to offer something for everybody. So we always have resident pricing. We do various promotions for various affinity groups like first responders, teachers, military and the like. So you are not forced into buying gate price, purchasing at gate price at all times.

Plus we do packaging where we lump everything together, hotels, meals, parks and so forth and make it very appealing. And then we have seasonal pricing as well. So as an example, there is three different seasons in Orlando, value, peak and regular. And so if want to come in a high demand period, you pay more. If you want to have to take it easier on your pocketbook, you might come during a value period. Same for the hotels. So we think we offer something that's diverse and meets everybody's requirements.

Jessica Jean Reif Cohen

Are there any questions? Brian?

Question-and-Answer Session

Q - Unidentified Analyst

Thanks. I had one on competition. I know you talked about Disney, obviously, but you know you had a lot of success and growth. But who else do you compete with? What are you competing with to get people into your parks? Is it available time of sporting events? Is it smaller parks, like a SeaWorld?

Tom Williams

No. It is a big difference. I think everybody understands between a destination park and a regional park. Six Flags will be a regional park, Cedar Fair and so forth. SeaWorld is not quite the player that they used to be ever since Blackfish. It was on the air five minutes. And so it really is us and Disney, as far as parks. In the world of entertainment, cruises in Florida is more of a factor. As they introduce private islands with rides and types of entertainments, nearly on the scale of what we offer at our parks, though. And a cruise isn't for everybody.

And one of the downside of cruising is, once you are on that ship, you are on that ship, until the cruise is over. Hope you like it. But that would be one not that all that there is no concern in Southern California. You know, cruising isn't so much of a factor here. There is a lot to do in SoCal, a lot to do. Beaches and shopping and the various entertainment experiences probably undeniably people go by far and large to Orlando for the theme park experience.

That wouldn't necessarily be the case in Southern California. You are going to go to Los Angeles. And then while you are there, we hope you want to see the genuine holiday, Hollywood authentic experience and go to Universal Studios Hollywood. So people want a shared experience. All virtual reality is going to cause you trouble? No, it is not going to cause us any trouble. Sitting in, first off, you can't stand to have a headset on for very long. But even if you do, even with gaming, at a point you want to get out and do something that's not individualistic, just you.

You want to share with people. And particularly for parents, they want to go on the ride because they want to see what the youngster, they want to see the youngster enjoying themselves. They want to have a shared experience. They want to get off the ride and say, were you scared, daddy? I wasn't scared. Were you scared? You know, that's what gets, that's what makes it fun. That's what makes it a memorable experience. And so I think we have got, we are in a unique spot in the marketplace that's enjoyed a lot of success and I think we are going to continue to do so for those reasons.

Jessica Jean Reif Cohen

We have a question here.

Unidentified Analyst

Hi. How are you? My question is just around pricing. And I guess, there's two questions. One is, there seems to some discussion or debate particularly around Disney's pricing and how high is up and how far is too far. And I think the question really, not just about Disney but about the industry as a whole and some of the conversations also kind of bleed into maybe concerts and other experiences that you discussed. Can do just walk us through a little bit like where do you see the pricing ceiling? How do you benchmark it? Like, is it inflation times two? And how should we think about that as we go forward? And then maybe any thoughts just on the pricing ceiling that competitors put out there and how that allows you to operate? It will be fascinating to get you thoughts on that.

Tom Williams

Yes. That's a really legitimate question and one that we spent a lot of time thinking about. First off, we don't make pricing decisions independent of deep research. We do a lot of kind of work, force choice, what's your priority, how are you making your vacation plan, how you are making your decision. You would be surprised, pricing falls, it's not number one, it's not number two, it's not number three. It's mostly about what is the experience. What are we going to do when we get there and how appealing is that to me.

So that's not to say pricing is not important because if people feel gauged, that's not going to work. But it isn't the number one thing that comes to mind when you try to make a decision. And we tease out of all the research we do where we can be priced in order to get the returns that we feel are warranted based on the investments that we are making. To some extent, we keep an eye on what the competition is doing because we don't want to be too far out of whack. But we are not led by them.

And one of the things that really is very much on our minds now is to not make it to doggone complicated. The competition's got nine different tiers for when they are ticketing. It's complicated. And then when you start throwing in multi-day and add-ons and so forth, it can be a frustrating experience and pretty soon, you say, who needs this. And so we are focused on trying to keep it simple, trying to be straightforward, trying to not have any hidden aspect to it, there is no tricks, there is no reservation fee. No nonsense that somebody is going to say, well, what's that all about.

So I think between simplicity, offering various types of rates based on whatever level of experience you want, we have been able to walk a fine line to get the double digit pricing CAGRs but at the same time not drive off business because people are saying now you are too expensive. And so when you look at it on a hourly basis, which nobody does, but if you did and you would say, well, your tickets are $115 and the average length of stay is eight hours, geez, that's pretty cheap entertainment compared to going to a concert or going to a ballgame or in some ways going to a movie if you buy enough popcorn and Coke.

So I think there is real value and with all the social media when you get positive reviews on Yelp and TripAdvisor, our Islands of Adventure has been rated number one theme park in the world by TripAdvisor five years in the world in a year, five years in a year, we are up five years in a row. We have got two of the top five, three of the top five, excuse me, three of the top five. Islands of Adventure in Florida, USF in Florida and Hollywood, three of the top five. TripAdvisor, we are number one.

You get that positive word-of-mouth on your side and people say, they had a good time, let's go give it a try. And then the positive word-of-mouth builds on it when you do a good job. And we have put a lot of effort into that. The three drivers of success in the theme park business, the product probably applicable to a number of businesses too, the product, the guest experience itself once they get there and of course the marketing that drives people to give it a trial.

Jessica Jean Reif Cohen

Great. We have like ran out of time. But thank you so much. It's been great to see you. Thank you.

Tom Williams

Good to be here. Thank you.

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