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Universal to Bring Theme Park to the Motherland

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After California, Florida, Japan, and Singapore, Russia is set to become the newest site of a Universal Studios amusement park.
 
Russian real estate mogul Sait-Salam Gutsiriev is in talks with the Comcast (CMCSA)- and General Electric (GE)-owned Universal to open the first European Universal Studios resort in Moscow, WorldCrunch notes.
 
To be named Galactica Park, the proposed entertainment center would include two hotels, a shopping mall, two office towers, and a 20,000-capacity arena, in addition to Universal’s iconic theme park, famous for its Harry Potter and Spiderman rides.
 
"Russia is an important and attractive market and we see significant potential for the kind of themed entertainment experience we offer," said Michael Silver, president of global business development for Universal Parks & Resorts, in a written statement. "Entertainment is a global language and we will be delivering the same thrills, excitement and unique family experiences that Universal's worldwide theme parks are known for creating."
 
The venture’s estimated cost is $2.8 billion, with the theme park alone costing $500 million. Experts, however, say that the real cost of construction will actually be $11 billion, as the transport infrastructure around the proposed 22 hectare site in south Moscow requires a massive upgrade. Universal doesn’t have to worry though; the company is reportedly not putting any of its money into the project.
 
Gutsiriev is clearly a big fan of theme parks, for this was not his first attempt at bringing one to Russia. In 2010, at the same time he launched discussions with Universal, Gutsiriev also entered talks with Disney (DIS) to set up a Russian Disneyland, which ultimately did not materialize.
 
It’s not surprising that Disney declined Gutsiriev’s offer. Moscow is a tricky market. Though it is the most populous city in Europe with 10 million people, it is also 1,500 miles away from Western Europe. Paris has a smaller population, but the Disneyland there can draw on the tens of millions more Europeans from nearby cities and countries.
 
And among the 10 million people, it’s likely that a majority will be unable to afford the entrance fees. After all, Russia is ranked 70th in terms of GDP per capita, according to the CIA World Factbook.
 
Accounting for the low median spending power of Russians, Galactic Park plans to charge an admission fee of about $34, which would be the lowest in the world. Universal’s parks in Orlando and Singapore charge $85 and $54 respectively.
 
Universal’s entry into Moscow reflects the growing significance of Russia and other emerging markets to Hollywood’s balance sheet. In 2011, the burgeoning Russian box office grew by 20% from 2010 and topped $1 billion for the time ever.
 
Foreign movies, chiefly Hollywood blockbusters, accounted for some 85% of ticket sales, with the highest grossers of the year being Disney’s Pirates of the Caribbean: On Stranger Tides ($63.6 million), Dreamworks’ (DWA) Puss in Boots ($50.3 million), and Paramount’s (VIA) Transformers 3: Dark of the Moon ($45 million).
 
Universal has not released details of the theme park, but we’re thinking that, given Russians’ love for the Pirates and Transformers franchises, Captain Jack Sparrow- and Optimus Prime-inspired rides seem all but inevitable.
 
The construction of Galactic Park is awaiting final approval for Moscow authorities, and work is expected to start in 2014, with a target opening date of 2018 to coincide Russia hosting the FIFA World Cup.
POSITION:  No positions in stocks mentioned.

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