New Disney theme park expected to exceed modest expectations

ANAHEIM, Calif. (AP) _ When The Walt Disney Co. opened theme parks in years past, executives and investors held their breath and hoped for a hit.

Disneyland Paris, for example, opened in 1992 amid a recession. It also faced the scorn of Parisians who called it a "cultural Chernobyl." The park initially bled money and was on the verge of being one of Disney's greatest catastrophes.

Since then, however, it has become one of the company's greatest triumphs _ so successful that a second park is under construction nearby.

No such risks are being taken with the latest park. Analysts say California Adventure makes good use of already proven Disney concepts, incorporates the company's vast television and movie-making resources and fulfills a longtime desire to make the flagship Disneyland park more than a one-day visit.

That formula has Disney watchers breathing a bit easier in advance of Thursday's opening.

"Disney has this down to a science and it's magical," said Jessica Reif-Cohen, an analyst with Merrill Lynch. "I think they are going to do very well with this park."

The economy is the wild card, with consumer confidence hitting a four-year low in January.

Lagging confidence, however, typically isn't felt by theme parks for about six months, giving the company a chance to showcase the new park in its first year.

Other factors also could hurt attendance, including rising gasoline prices, uncertainty related to California's power crisis and a theme park with an unusually narrow theme.

But economic uncertainty actually could help, analysts say, because people might cancel expensive vacations abroad in favor of trips closer to home.

"Theme parks are pretty recession-proof," said Tim O'Brien, an editor at the trade publication Amusement Business. "There's nothing that's going to stop people, at least for the first year, from going out and seeing that park."

Analysts said one factor in Disney's favor is that the new park, while unique in its focus on California's history and natural wonders, recycles attractions found in its other parks.

"It's more of an extension of certain rides and concepts than huge, new, risky, untested themes," said Christopher Dixon, an analyst at UBS Warburg.

The Muppets 3D attraction in California Adventure's Hollywood Backlot section, for instance, is the same ride found at Walt Disney World in Orlando, Fla. A Bug's Life, in the section on California's agriculture history, also comes from Orlando.

Downtown Disney, a retail strip of restaurants and shops, is a successful part of the Florida park and features an ESPN Zone, a restaurant inspired by Disney's ESPN cable sports channel.

Inside the park, the ABC Soap Opera Bistro allows diners to eat in the emergency room of General Hospital or in the living room of the Chandler's mansion from "All My Children." If the concept proves successful, Disney executives said it could serve as a model for a chain of such restaurants. Disney owns the ABC Television network.

"What is most telling about California Adventure is that it is not a $5 billion park designed for 12 million people a year," Dixon said. "In the face of concerns about the economy, this strategy is expected to be much more successful."

The park, hotel and Downtown Disney cost the company $1.4 billion, with the park designed to handle about 7 million annually.

Its opening comes at a challenging financial time for the company.

Disney warned investors last year that its first-quarter growth would be flat, in large part because of a slowdown in advertising revenue at ABC.

Disney also is trying to breathe new life into its consumer products and licensing division. Spiraling costs for production have hurt profits from motion pictures, even though Disney movies made the most money at the box office last year.

Disney recently said it will close its Go.com Internet portal site and end what has been a failed attempt to become a major player on the Web.

In the midst of financial uncertainty, Disney's theme parks and resort properties, including its cruise line, have become a reliable financial engine.

Last year, the top five amusement parks in North America were Disney's, including Disneyland and four at Florida's Walt Disney World _ The Magic Kingdom, Epcot, Disney-MGM Studios and Disney's Animal Kingdom. The company also operated seven of the top 10 parks in the world.

Analysts predict Disney's latest park will add about $150 million to the company's bottom line in the first year, a figure Disney says is about right. And starting in the 2002 fiscal year, the theme parks are expected to generate about $1 billion a year in profit.

Traditionally, Disney's stock price has risen after the opening of a new park.

Analysts wonder whether Disney will use that extra cash to expand the company through a merger or acquisition, or become a niche company in an rapidly changing entertainment universe.

One strategy Disney used to reduce risks with the new park was to build for smaller crowds.

"As Walt did with his park, we will build and add to it over time, as we are sure the demand is there," said Paul Pressler, chairman of Walt Disney Parks and Resorts. "We do believe the demand is greater than what we built the park for."

Disney plans a 30-acre expansion into a nearby parking lot, which could begin after two years if attendance meets expectations.

Pressler would not say what kind of attractions might be added, but said park capacity could grow to nearly 9 million.

Disney is expecting the new park will be such a hit that it will have to shut its gates the way Disneyland did several days last December.

"I'm anticipating peak capacity crowds," said David Miller, an analyst with Sutro & Co. "For at least the first four months, Disney will be roping the park off at peak times after 33,000 people enter."

Pressler said out-of-town visitors with three- or four-day passes will be guaranteed at least one day in the new park.

"It's a nice problem to have," Pressler said. "We will do that to ensure that the guest experience is a Disney-quality experience."