Six Flags' ambitious plans to license dozens of theme parks outside the United States appear close to collapse.
Last year the amusement park chain lost its partner in Dubai, when Dubai Parks and Resorts cancelled its plans to build a Six Flags Dubai to accompany its Motiongate, Bollywood, and Legoland theme parks. And late last month we told you about problems that Six Flags' development partner in China was having, threatening the future of those parks, too.
And yesterday Six Flags filed a report with the US Securities and Exchange Commission declaring that the company has filed a formal notice of default with that development partner, Riverside, which has stopped making required licensing payments to Six Flags.
"While the Company continues to work with Riverside and each of Riverside’s governmental partners, the eventual outcome is unknown and could range from the continuation of one or more projects to the termination of all the Six Flags-branded projects in China," the report said.
Six Flags took a negative $1 million adjustment to its revenue due to the loss of international licensing money in the final quarter of its 2019 fiscal year. Unrelated to the issues with Riverside, Six Flags also warned that its season pass and membership sales in the final quarter were lower than expected, leading to expected $8-10 million decline in revenue for the quarter relative to the same period a year earlier.
Six Flags had planned more than a dozen theme parks in China, including new park concepts aimed at various market demographics. Do keep in mind that Six Flags was not paying to build any of those parks. It simply was licensing its brand name, concepts, and site plans to Riverside, which was assuming all the development risk in building and eventually managing the parks.
But Six Flags was expecting several millions dollars in licensing fees from Riverside, so analysts and traders have been battering Six Flags' stock after learning that money wasn't likely to be paid. With the Chinese real estate bubble deflating around the world, it's hard to see how Riverside turns things around, and Six Flags' stock drop reflects that.
All this leaves Six Flags only with the planned Six Flags Qiddiya project in Saudi Arabia as its most viable expansion project outside North America right now. Again, that's another licensing deal, but it's still money to the company that it very much would prefer not to lose.
But at this point, Six Flags is batting .000 on its international expansion plans, so you can't blame anyone for skepticism.Tweet
It's well known in the industry that Six Flags will do anything to make a dollar, including going into business with any schmuck willing to offer them a dollar regardless if they have any means to pay or not. This outcome was extremely predictable, it would've been more surprising to see any of these parks actually get built and operating. This is just another thing on the [long] list of Six Flags get rich quick scheme failures.
Also the fact that pass sales are way down is extremely good news. If you are practically giving away annual passes and people still don't want to go that indicates you are doing something wrong. Maybe this will be the b*tchslap in the face they needed to actually start trying to run their parks in an acceptable way.
(Though that's not what i'm expecting to happen, what will probably happen is in order to make up for the decrease in revenue they will do more 1 train ops, less staff, cut maintenance, and in 3-5 years be looking at bankruptcy again or being bought out by Cedar Fair. Hope i'm wrong and turn it around, but knowing Six Flags i'm not confident about that)
The Six Flags of today is a far different company than that started by Angus Wynne. When the company consisted of the only the parks developed by the Great Southwest Corp. and Penn Central, (Texas, Georgia and Missouri) and even into the early expansion by acquisition (Astroworld, Great Adventure and Magic Mountain), it was a company that cared about the quality of its products, its guests and its employees. After ownership began to change hands, thing became a bit unstable. Bally, didn't do great harm but then Wesray, Time Warner, Blackstone. All of these companies did some good with the parks, in my opinion though is was Tierco/Premier Parks that took a wrong turn. Now Six Flags in name only, as Premier bought the chain and changed its name to Six Flags, the culture changed and it became all about expansion and acquisition and quality of experience was far down on the list. This began to show in the parks almost immediately. I hope these once wonderful regional parks can find ownership that cares about the facilities, the guests and the employees.
I can't say I'm surprised about any of this. From the start, I've always been skeptical the international parks would work out the way they were proposed, and figured Six Flags would come out taking a loss on that deal. This is also coming out at a time when the chain is underperforming in the US, which isn't too unexpected given their marketing strategy. By now, I've got a hunch that most people who are likely to become members have switched over, and when your parks offer inconsistent experiences and open new rides more than halfway through peak season (despite advertising them for months beforehand), it's very difficult to attract new guests to sign up.
I think the thing Six Flags needs to do is stop focusing on things that they aren't and instead focus on doing what they're good at even better. The chain is great for thrill rides, but they need to improve the quality of their guest experience and not just keep dropping small thrill rides into every park every year. I'd also like to see them try more promotions for day visitors rather than making everything about memberships, as I've heard from a few people they don't feel the parks are worth the one-day price. Lastly, stop buying parks or trying to expand, and instead focus on investing in all the parks in the chain. If it's not turning a profit or is underperforming and isn't serving as a feeder to other parks in the chain, cut it loose.
I almost don't know what to say. Anyone who's got even one eye on the theme park industry could have seen this coming.
I agree with the above sentiments. Six Flags should refocus their efforts on domestic parks. They probably could stand to shed a few parks, as well, and funnel their resources into making a handful of really amazing park experiences, spread throughout the continental U.S.
You don't see Disney or Universal buying up smaller parks and trying to open new gates all over the planet. Sure, there's Universal Studios Beijing, but there is no Disney Canary Islands or Kiev, or Universal Madagascar or Lima.
When the big two have a relatively small portfolio of locations, and keep making their existing parks better and better, you may just think they know what they're doing. No?
Theme park darwinism at work, I say.
This is what happens when you try to take the easy way. Six Flags wanted to have their cake and eat it too by licensing their concepts to shady off-shore companies so they wouldn't have to do the hard work of developing theme parks themselves. They thought they would simply sit back and let these amateurs do the work for them and rake in the cash through royalty payments. Little did they know that their reputation would decline even further as these fly-by-night developers didn't understand how hard and expensive it is to build a theme park until they were buried under mountains of debt and started defaulting on royalty payments. While Six Flags is protected in a legal (and somewhat financial) sense, their reputation as being cheap and lazy perpetuates.
Everyone in the theme park industry should have seen what Disney did when they expanded overseas. Their most successful parks have been where they have been equal collaborators, while the least successful ones are either where they took full control in a foreign environment or allowed local developers take the lead.
I applaud Six Flags trying to take a risk without putting much at stake here, but ultimately they continue to exhibit complete ignorance for the industry where they supposedly consider themselves a top competitor.
Seems like a good time to buy stock - when it is low. It most likely will go up again, based on what they've got going still.
Also, Disney seemed to be partnering much more closely with the government itself, rather than a company one (or more) steps removed from the local party authority. That helps ensure that the project remains a priority, regardless of shifts in the economy or market. However, I suspect that Six Flags did not bring enough of an international reputation to the table to be able to get the kind of access that Disney and Universal have gotten there.
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Six Flag should give up on international expansion at this time. The best thing that could happen in the regional themepark marketplace is for consolidation.