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Universal Studios Set for U.S., Overseas Expansion

Theme parks: Parent firm Vivendi is confident after business rebounds sooner than expected.


Barry Diller, in one of his first strategic moves since taking the helm of Vivendi Universal Entertainment this month, has green-lighted an unexpected expansion of the company's theme park business.

Despite a severe downturn in tourism and theme park attendance after Sept. 11, Universal Studios soon will announce plans to develop three major new attractions at its theme parks in Hollywood and Orlando, Fla. The attractions, representing an investment of more than $60 million, will be based on the hit animated movies "Shrek" and "Jimmy Neutron: Boy Genius."

Diller also has given the theme park group the go-ahead to aggressively scout for new locales for additional theme parks overseas, including possible sites in Germany and mainland China.

The developments reflect a vote of confidence in Vivendi Universal's theme parks, which have bounced back sooner than expected from a slump that accelerated after Sept. 11 and sparked layoffs and cutbacks. Universal Studios Hollywood reported record attendance in this year's first quarter, driven mostly by a popular discount on annual passes. Its two parks in Orlando--Universal Studios and Islands of Adventure--are running at last year's levels, executives said.

Rival Walt Disney Co. also has seen significant gains in attendance in recent months, though its theme parks have been more affected by a continued slump in international travel.

Vivendi also has been encouraged by the strong results from its theme park in Osaka, Japan, which in its first year of operation drew 11 million visitors--2 million more than the company projected--despite a recession in the nation.

The gains in Japan and Hollywood brought a 69% jump in the group's cash flow in the first quarter, more than any other segment of Vivendi.

"In the post 9/11 period we came out swinging," said Tom Williams, chairman of Universal Studios Recreation Group.

Williams attributes the turnaround largely to an aggressive marketing campaign after the Sept. 11 terrorist attacks to counter the steep travel falloff. Universal doubled its advertising budget, hired a new advertising agency and launched a national advertising campaign aimed at drawing out-of-state visitors to its two Orlando theme parks. The promotions included a 60-second TV commercial during the Super Bowl in January.

The performance of the parks, however, has been overshadowed by the steep declines in Vivendi's stock price amid doubts from investors about Chief Executive Jean-Marie Messier's overall strategy for building a rival to AOL Time Warner Inc.

Vivendi shares closed Friday at 30.22, up 52 cents on the New York Stock Exchange.

Theme parks also get overlooked because they account for only about 5% of Vivendi's operating income. Yet they are an important symbol of Messier's drive to create a global entertainment giant and another outlet for promoting Vivendi's diverse holdings, including movies, music, television and children's books.

The mandate to expand the theme park business marks a strategic shift from a year ago, when Universal Studios' new French parent put theme park expansion on hold until the company's two newest parks in Orlando and Japan could prove their worth.

Diller is helping to bring new momentum to the division. He is a legendary figure in Hollywood who chairs Vivendi Universal Entertainment, which was recently created after Vivendi's $11-billion acquisition of Diller's film and television businesses.

Reached in Cannes on Friday, Diller affirmed his support of expanding the theme park business and his passion for rides.

"I like roller coasters," he said. " I went to the Universal park in Orlando before it opened just because I wanted to see the rides.... I rode Spider-Man so many times it's embarrassing. I took my family at Christmas on the back-lot tour here [in Hollywood]. It's genuinely fun."

Diller also is interested in finding ways to promote ties between the film and television business of USA Networks and Universal Studios. Among the possibilities, Williams said, are staging television shows such as Home Shopping Network at the theme parks, or developing children's programs that could be spun off into theme park attractions.

The new expansions, however, will be on a more modest scale than past projects, such as the $75-million Amazing Adventures of Spider-Man ride in Orlando. The Shrek attraction will be a 10-minute show, blending 3-D film, motion simulators and other effects based on the movie. The Oscar-winning DreamWorks film was distributed through Universal Pictures.

The attraction will open simultaneously in Orlando and Hollywood in the summer of 2003--a first for Universal Studios--in an effort to create more cohesion between the properties.

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