Building Blocks
How the UKbased Merlin Entertainments Group is constructing an American empire, piece by piece.
Move over, Mickey. There's another big cheese in the theme park kingdom, wielding an aggressive brand of business magic that threatens to dethrone Disney.
Until recently, Merlin Entertainments Group Ltd has been something of a sleeping giant, at least in the United States. Originally formed in the British coastal town of Poole in 1998, the company grew gradually over the next decade, quietly making key acquisitions along the way. It acquired the Legoland theme park chain in 2005 from KIRKBI A/S, a Danish investment and holding firm, and, in 2007, made a huge move with its purchase of The Tussauds Group (owner of the famed Madame Tussauds Wax Museums, as well as Chessington Zoo, Warwick Castle and numerous other popular European properties) for $1 billion.
Suddenly, Merlin Entertainments was the largest amusement park operator in all of Europe, and second largest globally after Walt Disney Parks & Resorts. As if a wizard had waved a magic wand, the empire instantly expanded to include Alton Towers (the UK's most popular theme park), Gardaland (the biggest theme park in Italy), the London Eye (a large Ferris wheel that is the UK's most popular paid tourist attraction) and numerous SEA LIFE Centres across Europe. Together, they attracted more than 30 million visitors in 2007. Now, the US is the company's sword in the stone, and it fully intends to assume the throne as the global king of branded, locationbased entertainment.
The Arthurian figure leading the charge is Russell Barnes, Merlin Entertainment's divisional director of midway developments. Barnes' vast corporate realm includes developing all of the company's Midway brands — including Madame Tussauds, SEA LIFE Centres, The Dungeons and Legoland — in Europe, the Far East and North America. He's also in charge of brand development for Legoland Discovery Centers, the newest jewel in the company's illustrious crown and a key element of their future plans in America. It's Barnes' team that seeks out potential future locations, plans and launches the attractions, and operates them for a year before handing operations over to a local team.
The company first dipped its toes into US waters back in 1999 with the opening of the Legoland theme park in Carlsbad, CA. Legoland California is like Honey, I Shrunk the Kids for anyone who grew up playing with Legos. Visitors are cast in the familiar Lego worlds they grew up creating, surrounded by lifesized Medieval castles, pirate ships, Egyptian ruins and dinosaurs. Like all Legoland properties, it also features a painstakingly constructed Miniland section, with miniature dioramas of seven famous locales — including Las Vegas, New York, New Orleans and Washington, DC — built from more than 40 million LEGO bricks.
Now, planning two years in advance, Barnes is coordinating Merlin Entertainments' strategy for domination, and he makes no bones about the company's mission to surpass Disney. "I think it's about looking for opportunities where we can enter markets that our competitors have overlooked," he says of Merlin's primary focus. Some of those overlooked markets include Tempe, AZ, where Merlin opened a popular SEA LIFE last year; Atlanta, where it'll open a Legoland Discovery Center in April; and Kansas City, where it's set to open another Legoland Discovery Center and SEA LIFE in May. "And we're looking for more opportunities in 2013," Barnes says. "We think, right now, that there is a more immediate win to be had with introducing our Midway brands to US markets."
Merlin recently made a very bold move in that direction, turning failed Florida tourist attraction Cypress Gardens into the second stateside location for their Legoland theme parks. Located in Winter Haven, just a stone's throw from the family vacation capital of Orlando, Legoland Florida was widely regarded as a direct challenge to Disney World and Universal Studios, the giants of the Florida tourism market.
Barnes sees the Legoland brand as a perfect fit for Merlin's mission to attract American audiences. "The heart of Legoland — be it a theme park or a Discovery Center — is what we call playful learning," he says. That means delivering a fun, immersive, handson experience, so children can think, explore and learn, and have fun doing it. "The US is a very important market to LEGO, and the opportunity to roll out the Discovery Centers into the States is one we would like to cross with both hands."
It's easy to see why: At 30,00035,000 square feet, the Legoland Discovery Centers are much smaller than a typical theme park, and are designed to provide a 2 to 3hour indoor experience that can fit into other activities in a visitor's day. Like the parks, LDCs include "Miniland" attractions featuring miniature models of local landmarks made from LEGO bricks, as well as small roller coasters, 4D movie theaters, play fortresses, gift shops and other elements designed to appeal to children ages 3 to 12.
Opening in April in the upscale Phipps Plaza shopping center, the Atlanta Legoland Discovery Center will mark the brand's third US location, and hopes to follow the same, highly targeted formula for success that worked in Chicago. Merlin found that Discovery Centers work best in heavily populated, affluent residential suburbs where there is brand awareness of LEGO and destination shopping malls. In Chicago, that meant Schaumburg. In Atlanta, it's Buckhead. "We've gone into Phipps Plaza as they look to reposition it a little bit," says Barnes. "It's a mall with highend retail, but I think they want to open it up and make it a little more mainstream, which we can undoubtedly help them do."
Thus far, Merlin Entertainment seems to be proving a great fit for America. According to a recent story in The New York Times, the company brought in $1.3 billion in revenue in 2010, reporting a pretax profit of $40.4 million. And while other elements of the entertainment industry seem to be floundering in the wake of the economic recession, Barnes is optimistic about his company's chances of weathering the storm.
"Our business has grown considerably through recessionary times," he insists. "I think there's always a demand for locationbased family entertainment, which we are the world leaders in." While he admits that Disney gets more singlesite visitors, Barnes believes that the diversity of Merlin's portfolio, along with its wide market spread, ultimately makes it a stronger brand. And soon, he hopes to connect the farflung dots of Merlin's US empire by introducing a nationwide Merlin Annual Pass that will grant admission to every theme park, discovery center and wax museum.
As for Merlin's other plans for the near future? Expansion, expansion, expansion, with a laserlike focus on the American and Asian markets. Barnes claims that the company will have eight Legoland Discovery Centers by the end of 2012; new Dungeons locations opening at a rate of seven per year; a new Legoland theme park in Malaysia (with more sites currently being scouted in Japan and Korea); and a $100 million tourist complex planned for Orlando in 2013 that will include a Madame Tussauds, an aquarium and a 425foothigh Ferris wheel similar to the London Eye.
"Ten years ago," Barnes recalls, "I was running the Madame Tussauds in Las Vegas as general manager. At the time, Las Vegas and New York were our only US attractions. By the end of 2012, I think we'll be up to 15, and the following year we'll be up to 19. In 10 years, I think we'll have more than 30 businesses across America, including a presence in the top 30 cities."
It's a boldly aggressive plan, but the company's 13year history suggests it has the right combination of planning and gumption to pull it off. So while Disney is still #1, Cinderella Castle may soon find itself in the shadows of a new breed of British Empire, built brick by LEGO brick.
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