Disney to build a new theme park in Abu Dhabi

Walt Disney Co. plans to expand its empire to the Middle East with a new theme park in Abu Dhabi, United Arab Emirates, the company said Wednesday.

The park will be on Yas Island, which is already home to several theme parks including Ferrari World, Warner Bros. World and SeaWorld.

It will be Disney’s 13th theme park and the most significant international expansion since the company unveiled its $5.5-billion Shanghai Disney Resort in 2016.

To build the park, Disney is entering a strategic partnership with Miral, an Abu Dhabi firm specializing in leisure and entertainment locations. Financial details were not disclosed.

Disney will oversee the park’s design, license its intellectual property and provide “operational expertise” while Miral provides the capital, construction resources and operational oversight, company Chief Executive Bob Iger said on a Wednesday earnings call with analysts. Disney will collect a royalty from the agreement, he said.

“Disneyland Abu Dhabi will be authentically Disney and distinctly Emirati,” Iger said from Abu Dhabi. “It will serve as an oasis of extraordinary Disney entertainment for millions and millions of people in this crossroads of the world.”

The decision to expand into the Middle East comes as Disney looks to reach new audiences, particularly those who are interested in attending its theme parks but are too far from its hubs in the U.S., Europe and Asia. Recently, rival Universal announced its own international growth with a planned park in the U.K.

“We felt the best way, obviously, to reach those people is to basically bring our product to them,” Iger said.

Abu Dhabi, in particular, has emerged as a hub for leisure and entertainment within the United Arab Emirates, which probably made it an attractive location for Disney.

“It’s a geographic region that Disney needs to be in because they’ve been generating a lot of revenue and expanding in that area from a merchandise and entertainment standpoint for quite a few years,” said Dennis Speigel, founder and chief executive of consulting firm International Theme Park Services. “They’re planting the flag.”

Beyond theme parks, the NBA has also established its Middle East hub in Abu Dhabi, though the league received blowback for so-called sportswashing, or allowing a country accused of human rights violations to rebrand itself. Human rights groups have criticized the United Arab Emirates for its constraints on free expression and assembly, as well as its extensive surveillance of its people and treatment of migrant workers. Analysts said it was unclear whether Disney would face similar criticism.

Also Wednesday, the company reported that streaming and domestic theme park spending helped propel its earnings during its fiscal second quarter, as analysts wait to see whether broader economic uncertainty will dampen the entertainment giant’s prospects.

The Burbank firm reported $23.6 billion in revenue for the three months that ended March 29, a 7% increase compared with the same quarter a year earlier. Earnings before taxes totaled $3.1 billion, up $2.4 billion from last year. Earnings per share were $1.81, up from a loss of 1 cent per share.

The company’s entertainment unit, which includes its studios and Disney+ and Hulu streaming services, reported revenue of $10.7 billion, up 9% compared with the previous year. Operating income for the division rose 61% to $1.3 billion.

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The segment saw a boost from its streaming services, which reported revenue of $6.1 billion, 8% higher than a year earlier, and operating income of $336 million for the quarter, compared with $47 million last year.

In total, the two services now have 180.7 million subscribers, with an increase of 2.5 million subscribers from the fiscal first quarter.

Those gains were attributed to the strength of new titles that made their way to streaming platforms that quarter, including blockbuster films “Moana 2” and “Mufasa: The Lion King.”

Iger said the company’s efforts to bundle its services, such as its integration of Hulu content on Disney+, have yielded more engagement and less churn. The company is also starting to invest more in foreign content to appeal to viewers outside the U.S.

The company’s linear networks, however, continued to struggle, reporting revenue of $2.4 billion, a 13% decrease from the previous year. Operating income totaled $769 million, up 2% compared with last year.

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Disney’s experiences division, which includes parks and cruise lines, reported revenue of $8.9 billion, up 6% compared with the previous year. Operating income was up 9% to $2.5 billion.

The company said the results were driven by growth in domestic theme park attendance and increased guest spending, as well as bookings on its newest cruise ship, the Disney Treasure.

Iger expressed confidence in the experiences segment as “an important growth platform” despite questions about broader economic uncertainty or the potential impact of new competition, such as Universal’s Epic Universe theme park, which will open in Orlando, Fla., this month.

“I’m encouraged by the strength and resilience of our business, as evidenced in these earnings and in the second-half bookings at Walt Disney World,” he said.

In spite of concerns that the trade-tension-fueled drop-off in international tourism would have an effect on the parks, Disney has seen only a 1% to 1.5% effect so far on international attendance, with domestic visitors “more than making up for it,” Chief Financial Officer Hugh Johnston said.

Disney’s sports segment, which includes ESPN, reported revenue of $4.5 billion, up 5% from last year. Operating income, however, was $687 million, down 12%, which reflected the higher programming and production costs of airing three additional College Football Playoff games and an extra NFL game.