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Strategic Management

CASES

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2 MERNOUSH BANTON

Improvement, expanded Disney’s television base. For the first time, Disney moved into publishing, forming Hyperion Books, Hyperion Books for Children, and Disney Press, which released books on Disney and non-Disney subjects. In 1991, Disney purchased Discover magazine, the leading consumer science monthly. As a totally new venture, Disney was awarded, in 1993, the franchise for a National Hockey League team, the Mighty Ducks of Anaheim. In 1992, Disneyland Paris opened in France. Disney successfully completed many projects throughout the 1990s by venturing into Broadway shows, opening up to 725 Disney Stores, acquiring the California Angels baseball team to add to its hockey team, opening Disney’s Wide World of Sports in Walt Disney World, and acquiring Capital Cities/ABC. From 2000 to 2007, Disney created new attractions in its theme parks, pro- duced many successful films, opened new hotels, and built Hong Kong Disneyland.

Internal Issues

Organizational Structure and Mission

As indicated in Exhibit 1, Disney operates using a strategic business unit (SBU) type orga- nizational structure. Note that Disney’s four SBUs consist of (1) Disney Consumer Products, (2) Studio Entertainment, (3) Parks and Resorts, and (4) Media Networks and Broadcasting. Disney’s mission statement is “To be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innov- ative and profitable entertainment experiences and related products in the world.” Disney does not have a vision statement.

Walt Disney Company

Disney Consumer Products

1. Disney Hard_Lines
2. Disney Soft_Lines
3. Disney Toys
4. Disney Publishing
5. Disney Press
6. Disney Editions

Studio Entertainment

1. Walt Disney Pictures
2. Touchstone Pictures
3. Miramax Films
4. Buena Vista Home Entertainment
5. Buena Vista Theatrical Productions
6. Walt Disney Records
7. Buena Vista Records
8. Hollywood Records
9. Lyric Street Records
10. Pixar Studio

Parks and Resorts

1. Walt Disney World
2. Disneyland
3. Tokyo Disney
4. Disneyland Paris
5. Hong Kong Disneyland
6. Disney Cruise Line
7. Disney Vacation Club

Media Networks Broadcasting

1. Disney-ABC Television
2. ESPN Inc.
3. Walt Disney Internet Group
4. ABC-Owned Television Stations
5. ABC Radio

EXHIBIT 1 Disney’s Corporate Structure

CASE 1 • WALT DISNEY COMPANY — 2009 3

EXHIBIT 2 Consolidated Income Statement (in millions, except per share data)

2008 2007 2006

Revenues $ 37,843 $ 35,510 $ 33, Costs and expenses (30,439) (28,681) (28,392) Other (expense)/income (59) 1,004 88

Net interest expense (524) (593) (592) Equity in the income of investees 581 485 473

Income from continuing operations before income taxes and minority interests 7,402 7,725 5, Income taxes (2,673) (2,874) (1,837) Minority interests (302) (177) (183)

Income from continuing operations 4,427 4,674 3, Discontinued operations, net of tax — 13 70

Net income $ 4,427 $ 4,687 $ 3,

Diluted Earnings per share: Earnings per share, continuing operations $ 2.28 $ 2.24 $ 1. Earnings per share, discontinued operations — 0.01 0. Earnings per share $ 2.28 $ 2.25 $ 1.

Basic Earnings per share: Earnings per share, continuing operations $ 2.34 $ 2.33 $ 1. Earnings per share, discontinued operations — 0.01 0. Earnings per share $ 2.34 $ 2.34 $ 1.

Weighted average number of common and common equivalent shares outstanding: Diluted 1,948 2,092 2, Basic 1,890 2,004 2,

Source: Walt Disney Company, Annual Report (2008).

Consolidated Financial Statements

Disney’s recent income statements and balance sheets are provided in Exhibits 2 and 3, respectively. Note the increase in profit from 2006 to 2007, and the decline from 2007 to 2008. The most recent Disney’s Consolidated Balance Sheet, shown in Exhibit 3, reveals over $22 billion in Goodwill and nearly $11.1 billion in Long Term Debt.

Financials by Segment

Exhibit 4 demonstrates the company’s revenue and operating income by each business seg- ment. Note that Disney’s Media Networks brings in the most revenues and operating income for the company. This division, as well as the Parks and Resorts segment, is grow- ing. However, the company’s Studio Entertainment business segment and their Consumer Products businesses have experienced declining revenues in the last three years. As shown in Exhibit 5, Disney derives 76 percent of its revenue and 77 percent of its operating income from businesses in the United States and Canada. The company’s rev- enues and income are growing in all regions of the world, with Europe being second behind the United States/Canada in both revenues and income.

Disney Business Segments In percentage terms, Disney revenues in 2008 were derived from Media Networks (43 percent), Parks and Resorts (31 percent), Studio Entertainment (20 percent), and

CASE 1 • WALT DISNEY COMPANY — 2009 5

EXHIBIT 5 Revenue and Operating Income by Region

(in millions) 2008 2007 2006

Revenue

United States and Canada $ 28,506 $ 27,286 $ 26,

Europe 6,805 5,898 5, Asia Pacific 1,811 1,732 1, Latin America and Other 721 594 537

$ 37,843 $ 35,510 $ 33,

Segment operating income

United States and Canada $ 6,472 $ 6,026 $ 4,

Europe 1,423 1,192 918 Asia Pacific 386 437 542 Latin America and Other 175 156 93 $ 8,456 $ 7,811 $ 6,

Source: Walt Disney Company, Annual Report (2008).

EXHIBIT 4 Revenue and Operating Income by Segment (2008 vs. 2007)

Percentage of change 2008 2007 vs. vs. (in millions) 2008 2007 2006 2007 2006

Revenues:

Media Networks $ 16,116 $ 15,104 $ 14,186 7 6

Parks and Resorts 11,504 10,626 9,925 8 7 Studio Entertainment 7,348 7,491 7,529 (2) (1) Consumer Products 2,875 2,289 2,107 26 9

Total Consolidated Revenues $ 37,843 $ 35,510 $ 33,747 7 5

Segment operating income

Media Networks $ 4,755 $ 4,275 $ 3,481 11 23

Parks and Resorts 1,897 1,710 1,534 11 11 Studio Entertainment 1,086 1,195 728 (9) 64 Consumer Products 718 631 607 14 4

Total segment operating income $ 8,456 7,811 $ 6,350 8 23

Source: Walt Disney Company, Annual Report (2008).

Consumer Products (8 percent). Operating income was derived from Media Networks (57 per- cent), Parks and Resorts (23 percent), Studio Entertainment (13 percent), and Consumer Products (9 percent). These percentages reveal a bit of a weakness in Studio Entertainment because this segment creates 20 percent of revenues but only 13 percent of operating income.

Media Networks/Broadcasting

Disney owns ABC Television Network, which includes ABC Entertainment, ABC Daytime, ABC News, ABC Sports, ABC Kids, Touchstone Television, and ABC Radio. Also included in this segment, Disney owns ESPN, Disney Channel, ABC Family, Toon Disney, SOAPnet, and Buena Vista Television. Disney has equity interest in Lifetime

6 MERNOUSH BANTON

Entertainment Services, A&E Television Networks, E! Entertainment, ESPN, History Channel, The Biography Channel, Hyperion Books, and Disney Mobile. The increase in revenue in this segment was primarily due to growth from cable and satellite operators, which are generally derived from fees charged on a per subscriber basis, contractual rate increases, and higher adverting rates at ESPN. The increase in broadcasting revenue was due to growth at the ABC Television Network and increased sales of Touchstone Television series as well as an increase in prime-time advertising revenues. Increase in sales from Touchstone Television series was as a result of higher international syndication and DVD sales of hit dramas such as Lost, Grey’s Anatomy, and Desperate Housewives, as well as higher third-party license fees led by Scrubs, which completed its fifth season of network television. Two major TV networks of Disney (ABC and ESPN) recently struck a deal with cable operator Cox Communication whereby these companies now offer hit shows and football games on demand. Although advertising in the network is a source of additional revenue for the broadcasters, it requires selectivity for charging for each episode. Video- on-demand is a major industry and is expected to grow to $3.9 billion by 2010. Disney recently unveiled Disney Xtreme Digital, a networking site aimed at children younger than 14 years of age. This service will be competing against MySpace (owned by News Corporation). Disney has reported an increase in fiscal 2009 second-quarter net income mostly as a result of strong gains at cable network ESPN. Higher advertising rev- enues are reflected due to NASCAR programming at ESPN, an increase at ABC Family primarily due to higher rates, higher other revenues by DVD sales primarily from High School Musical , and a favorable settlement of a claim with an international distributor. Exhibit 6 provides specific segment information for the Media Networks division. Disney’s domestic broadcast television stations are listed in Exhibit 7. Disney’s international media network operations are described in Exhibit 8. In prime time, higher advertising rates and sold inventory were partially offset by lower rating from some of the problems. Increased sales of ABC Studios productions reflected higher international and DVD sales of hit drams such as Desperate Housewives, Grey’s Anatomy, and Ugly Betty.

Parks and Resorts

Disney owns and operates Walt Disney World Resort & Cruise Lines in Florida, Disneyland Resort in California, ESPN Zone facilities in many states, 17 hotels at the Walt Disney World Resort, Disney’s Fort Wilderness Camping and Recreation, Downtown Disney, Disney’s Wide World of Sports, Disney Cruise Line, 7 Disney Vacation Club Resorts, Adventures by Disney, and 5 resort locations with 11 theme parks on three conti- nents. With theme parks, Disney has 51 percent ownership in Disneyland Resort Paris,

EXHIBIT 6 Media Network Segment: Revenue and Operating Income

Change 2008 2007 vs. vs. (in millions) 2008 2007 2006 2007 2006 Revenues: Cable Networks $ 10,041 $ 9,167 $ 8,159 10% 12% Broadcasting 6,075 5,937 6,027 2% (1)%

$ 16,116 $ 15,104 $ 14,186 7% 6%

Segment operating income: Cable Networks $ 4,100 $ 3,577 $ 3,001 15% 19% Broadcasting 655 698 480 (6)% 45%

$ 4,755 $ 4,275 $ 3,481 11% 23%

Source: Walt Disney Company, Annual Report (2008).

8 MERNOUSH BANTON

EXHIBIT 9 Disney’s Offerings Under Parks and Resorts

Hong Disneyland Kong Tokyo Disney Walt Disney Disneyland Resort Disneyland Disney Cruise ESPN Walt Disney World Resorts Resort Paris Resort Resort Line Zone Imagineering

Epcot Disneyland Disneyland Hong Tokyo Park Kong Disneyland Disneyland

Disney-MGM Disneyland’s Walt Resort Tokyo Studios California Disney Facilities DisneySea Adventure Studios Park

Magic Kingdom Resort Facilities

Disney’s Animal Kingdom

Resort Facilities

Source : Walt Disney Company, Form 10K (2008).

43 percent ownership in Hong Kong Disneyland, 100 percent ownership in Tokyo Disney Resort as well as Disneyland in both California and Florida. Exhibit 9 summarizes Disney’s key parks and resort holdings. Disney revenues at its Parks and Resorts division increased 7 percent in 2008, or $701 million, to $10.6 billion due to increases of $483 million and $218 million at its domestic and international resorts, respectively. Domestic Parks and Resorts revenues increased due to increased guest spending, theme park attendance, and hotel occupancy, as well as higher sales at Disney Vacation Club. Higher guest spending was due to a higher average daily hotel room rate, higher average ticket prices, and greater merchandise spend- ing at both resorts. Disneyland Resort Paris experienced increased revenues, offset by a decrease at Hong Kong Disneyland Resort due to lower theme park attendance. Some of the increase in revenue was due to favorable impact of foreign currency translation (weakening of the U.S. dollar against the euro). Operating income from the Parks and Resorts segment increased 11 percent, or by $524 million, to $1.897 billion. Exhibit 10 presents Disney’s attendance, per capita theme park guest spending, and hotel statistics for its domestic properties:

EXHIBIT 10 Disney Parks and Resorts Data (2008 vs. 2007)

East Coast West Coast Total Domestic Resorts Resorts Resorts FY FY FY FY FY FY 2008 2007 2008 2007 2008 2007 Increase in Attendance 6% 5% (1)% 6% 3% 5% Increase in Per Capita 3% 1% 2% 8% 3% 3% Guest Spending Occupancy 89% 86% 92% 93% 89% 87% Available Room Nights 8,614 8,834 810 810 9,424 9, (in thousands) Per Room Guest Spending $217 $211 $309 $287 $225 $

Source : Walt Disney Company, Annual Report (2008).

CASE 1 • WALT DISNEY COMPANY — 2009 9

The company also has been hosting VIP tours (additional fees applies), offering added-value services such as number of attractions being covered along with personal guide tours, preferred seating, and front-of-line access to rides. The company also offers package deals for major corporations and schools. Disney has plans to change its concept of the theme parks from the masses to a more concentrated perspective. This move allows Disney to offer more stand-alone theme parks and resorts in cities and beach resorts, as well as Disney-branded retail and dining districts, and smaller and more sophisticated parks. This permits the company in using the Disney brand name to expand in other areas of the travel business. The company has built time- share vacation homes in popular places in the United States. Some of the challenges in this marketing strategy have been tailoring the niche attractions to the local markets while keeping the Disney brand reputation. However, there is a challenge of avoiding cannibalization of existing parks and attractions. The goal would be entering into new mar- kets without harming or cannibalizing Disney’s brand.

Studio Entertainment

Disney produces live-action and animated motion pictures, direct-to-video programming, musical recordings, and live-stage plays. Disney motion pictures are distributed under the names Walt Disney Pictures and Television, Touchstone Pictures, Hollywood Pictures, Miramax Films, and Buena Vista Home Entertainment International, which includes Walt Disney Records, Buena Vista Records, Hollywood Records, Lyric Street Records, and Disney Music Publishing. Disney owns Pixar, a computer animation leader, and produces feature animation films under both the Disney and Pixar banners. The company also pro- duces stage plays, musical recordings, and live entertainment events. As of September 2008, Disney had released 928 full-length movies, 80 full-length animated features, and 546 cartoon shorts. Product offerings include Pay-Per-View, Pay Television, Free Television, Pay Television 2, and International Television.

Consumer Products

The Consumer Products segment includes partners with licenses, manufacturers, publish- ers, and retailers worldwide who design, promote, and sell a wide variety of products based on new and existing Disney characters. The product offerings are Character Merchandise and Publications Licensing, Books and Magazines, Buena Vista Games, DisneyShopping.com, and The Disney Store. Products include books, interactive games, food and beverages, fine art, apparel, toys, and even home decor. In 2008, the revenues from this segment increased 26 percent to $2.9 billion. Sales growth at the Disney Stores was due to the acquisition of the Disney Stores North America. Sales growth at Merchandise Licensing was driven by higher earned royalties across multiple product categories. Operating income of this segment increased 14 percent to $718 million, mostly due to growth at Merchandise Licensing partially offset by a decrease at the Disney Stores due to the acquisition of the Disney Stores North America. In April 2008, Disney acquired inventory, leasehold improvements, and certain fixed assets of the Disney Stores North America for approximately $64 million. The acquisition included the assumption of the leases of 229 stores.

Competition Disney’s competitors differ in each segment of business. Time Warner is a major competi- tor to Disney and is composed of five divisions: AOL, Cable, Filmed Entertainment, Networks, and Publishing. Time Warner owns Time Inc., AOL, Warner Brothers, and TBS Networks. Walt Disney generally is classified as Entertainment-Diversified, which directly competes with Time Warner, Inc. (as shown in Exhibit 11). CBS Corporation and News Corporation directly compete with the Walt Disney Company in the Media Network segment, but they are not rivals in the Consumer Products and Parks and Resorts segments. CBS Corporation was a part of Viacom, Inc., but now operates independently under CBS Corp. News Corporation is a diversified international media and entertainment company that operates in eight segments: Filmed Entertainment,

CASE 1 • WALT DISNEY COMPANY — 2009 11

television production, and syndication, Showtime, and CSTV Networks. In 2008, the Television segment of CBS contributed 64 percent of company’s total revenue (approximately $8.99 billion). The Radio segment derives revenue primarily from advertising sales. In 2008, the Radio segment generated 11 percent of CBS’s total revenue (approximately $1.5 billion). News Corp., with $33 billion in revenue, operates in eight industry segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Magazines and Inserts, Newspapers, Book Publishing, and Other. For the fiscal year 2008, the Filmed Entertainment, Television, Cable Network Programming, and Direct Broadcast Satellite Television contributed approximately 65 percent or $21.2 billion to the company’s total revenue. The company has been moving aggressively toward digital technologies such as broadband, mobility, storage, and wireless. News Corp. owns MySpace.com, one of the Internet’s most popular social networking site, and IGN.com (a gaming and entertainment site). Fox TV, owned by News Corp., ranks as one of the most popular networks on television with an average audience of 7.6 million every night, fol- lowed by CBS with 6.7 million viewers during each prime time, Walt Disney Company’s ABC with 5.4 million viewers per night, and finally NBC (owned by General Electric Company) with 4.8 million viewers during each prime-time period. News Corp. recently acquired Dow Jones & Company and Liberty Media Corporation, which included approxi- mately 41 percent interest in the DIRECTV Group, Inc. Time Warner’s media and entertainment segments include AOL, Cable, Filmed Entertainment, Networks, and Publishing. The Cable segment services primarily analog and digital video services, and advanced services such as VOD and HDTV with set-top boxed equipped with digital video recorders. The Filmed Entertainment segment produces and distributes theatrical motion pictures and television shows. The Network segment con- sists of HBO and Cinemax pay television programming services. The Publishing segment publishes magazines and Web sites in a variety of areas and has a strategic alliance with Google, Inc. Exhibit 13 demonstrates Time Warner’s revenue by segment.

Competition: Parks and Resorts

Disney’s theme parks and resorts compete with all other forms of entertainment, lodging, tourism, and recreational activities. Many uncontrollable factors may influence the prof- itability of the leisure-time industry such as economic conditions, including business cycle and exchange rate fluctuations; travel industry trends; amount of available leisure time; oil and transportation prices; and weather patterns. Seasonality is another concern for this seg- ment because all of the theme parks and the associated resort facilities are operated year- round. Peak attendance and resort occupancy generally occur during the summer months when school vacations take place and during early winter and spring holiday periods. According to a survey conducted by the International Association of Amusement Parks and Attractions (IAAPA), there are more than 400 amusement parks in the United States, gen- erating approximately $11.5 billion in revenues. The Magic Kingdom at Walt Disney World in Florida was the most visited amusement park in the world. The amusement parks in the United States employ approximately 500,000 year-round and seasonal employees.

EXHIBIT 13 Time Warner, Inc., Revenue (in millions) by Segment (2007)

Segment

Percentage of Operating Revenue Total Sales Income

Cable $ 17,200 35.44 $ (11,782)

AOL 4,165 8.58 (1,147)

Filmed Entertainment 11,398 23.49 823

Networks 11,154 23.00 3,

Publishing 4,608 9.49 (6,624)

Total 48,

Source: Time Warner Inc., Form 10K (2008).

12 MERNOUSH BANTON

The second largest amusement park company after Disney is Six Flags, Inc., based in Oklahoma City, Oklahoma, with 20 parks across the United States, Mexico, and Canada and soon in Dubai and Qatar with more than $1 billion in revenue (2008). Six Flags recently acquired Dick Clark Productions, which owns television hits such as the American Music Awards, The Golden Globe Awards, the Academy of Country Music Awards, Dick Clark’s New Year’s Rockin’ Eve, and So You Think You Can Dance. Ocean Park in Hong Kong has been aggressively competing with Disney. Ocean Park is a theme park that covers over 870,000 square meters and receives more than 5 million tourists each year. In March 2009, Ocean Park launched two new sightseeing locations in Shanghai to attract tourists from regions such as the Yangtze River Delta. Ocean Park has the advantage of understanding the local market because they have been in business for more than 30 years. They offer a range of transportation facilities to link Hong Kong with major cities in the Pearl River Delta. In 2008, Ocean Park established an office in Shanghai. Ocean Park plans to complete construction of four new themed travel attrac- tions between 2010 and 2013. It also seems that the residents in Hong Kong are not very impressed with the small version of Disney built there because many have visited Disneyland in Tokyo or Anaheim, California. Disney in mid-2009 reached an agreement with the Hong Kong government to enlarge Hong Kong Disneyland. That city government owns 57 percent of that Disney theme park.

Competition: Studio Entertainment

The success of Studio Entertainment operations depends heavily on public taste and pref- erences. Operating results fluctuate due to the timing and performance of releases in the theatrical, home entertainment, and television markets. Release dates are determined by competition and the timing of vacation and holiday periods. Many companies produce and/or distribute theatrical and television films, exploit products in the home entertainment market, provide pay television programming services, and sponsor live theater. Disney also competes to obtain creative and performing talents, story properties, advertiser support, broadcast rights, and market share. Movies have historically been a reasonable priced entertainment for families, and comprise more than $150 billion in revenues annually. The most important regions con- tributing to this industry are the United States (49.8 percent), Europe (33 percent), and Asia and developing countries (14 percent). Consolidation has been very common in the movie and entertainment industry. As such, a few companies dominate the industry and control the production and distribution of most movies, including: Warner Brothers (17.10 percent), Walt Disney (11.70 percent), Twentieth Century Fox (10.3 percent), Viacom (6.3 percent), and other (54.6 percent).

Competition: Consumer Products

Leading competitors to Disney in this segment are Warner Brothers, Fox, Sony, Marvel, and Nickelodeon. Disney competes in its character merchandising and other licensing, publishing, interactive, and retail activities with other licensors, publishers, and retailers of character, brand, and celebrity names. Disney is perhaps the largest worldwide licensor of character-based merchandise and producer/distributor of children’s film-related products based on retail sales. Operating results for the licensing and retail distribution business are influenced by seasonal consumer purchasing behavior and by the timing and performance of animated theatrical releases.

Risk A wide range of factors could materially affect the future and the performance of the Disney, such as:

1. A prolonged recession in the United States and other regions of the world could have an adverse affect on the company’s business.
2. The success of the business depends on the ability to consistently create and distribute programs/products (movies, films, programs, theme park attractions, resort services, and consumer products) that consumers want. As such, heavy

Merryland Amusement

Park — 2009

Gregory Stone Regent University

In September 2009, the “Support Merryland” advocacy group was started to draw public interest in the historic Merryland Amusement Park. Anthony (Tony) Kenworthy is cur- rently aligned with this Kansas historical preservation group for the purpose of gaining federal government influence toward a “historical site” designation, which would help to secure the property and its assets for potential investors for the purpose of site restoration. There is also a growing grassroots level interest throughout Kansas in seeing Merryland restored to its previous days of carnival-like splendor. Tony is fully aware of this state sen- timent and intends to use it to move a state-based initiative forward for just that purpose. Tony has to make a decision! The owners of Merryland Amusement Park, a derelict “50 acres of fun!” amusement park located in Kansas City, have again put the attraction up for sale after several failed attempts to reopen the park. Merryland officially closed its entrance gates to the public in 2009. If Tony waits too long, his colossal theme park dream will vaporize. If he acts too quickly, he might get the keys to the Titanic. Poor financial management and other factors contributed to the owners’ decision to close and sell the park. Tony has three investment options, and investors associated with each are ready to move, even in the face of poor park performance—or, in this case, nonex- istent performance. Tony’s entrepreneurial magic is just what the amusement park needs, if not more of an entrepreneurial miracle. The park is the perfect fit for providing fun activi- ties for disabled children—Tony’s personal passion. Tony’s first option is to buy the park, make the renovations, and reopen it under his management. Altria, a major corporation, has offered all the cash he needs to make the pur- chase representing Tony’s second option. Finally a local consortium of entrepreneurs gives him more control, but far less cash. Choosing the right option could make or break Tony’s career, his finances, his life, his reputation, and even his personal relationships.

Background Merryland is a local theme/fun park that originally opened in 1955. The park was started and managed for 33 years by Stanley Merry, a nephew of the man the park was named after. In 1988, Stanley Merry died and left the park to his only heir, his widowed daughter- in-law, Samantha Steinberg. Samantha had little interest in owning, and much less in operating, an amusement park. Her second husband, Alan, took up the responsibility for most of the day-to-day operations. Although the couple operated the park from 1988 to 2008, Samantha’s heart was never in the business. Maintenance budgets and the total number of employees were annually reduced to the detriment of the park’s operations. They simultaneously, however, kept annually increasing park entrance fees, “to suck every last dime we can get out of the park,” according to Samantha. Falling revenues and a noticeable degrading of the park’s facilities prompted long- time owners Samantha and Alan Steinberg to put the park up for sale in the fall of 2006, with an asking price of $5.8 million for the 50-acre facility. Twenty of those acres were still in woods and fields behind the 30-acre theme park area. Two other groups tried unsuccessfully to take over the operations and keep Merryland going prior to the amusement park officially closing in 2009, but both found refurbishing costs and operating costs were far more than anticipated. Rising liability

CASE 2 • MERRYLAND AMUSEMENT PARK — 2009 15

insurance costs were equally challenging. In late 2007, Alan Steinberg, now 85, and Samantha Steinberg, herself 87 years old, again had full control of the park and desire a minimum of $2 million this time around. “It has to be cash,” Samantha stated adamantly. “This time there is no leasing or holding the note.” She did quickly add that she and her husband, however, would consider proposals to do something else with the undeveloped land, such as building a corporate headquarters, expanding the park, or some other kind of development opportunity. Although Merryland only closed its doors in 2009, it has since become a target for vandals, with more than 20 break-ins recently reported. Police arrested two men a month ago after they found spray-painted swastikas and other graffiti on buildings. “They were really reckless,” Alan Steinberg lamented. “They turned over ticket booths, broke into the office, and threw furniture out the windows.”

Tony, Just Another Hard-Working Entrepreneurial Guy Born in Chesapeake, Virginia, Tony graduated from the University of Richmond with a double major in economics and accounting. He served as president of his fraternity and improved the overall quality of the food, house services, negotiated better utility rates, and achieved all of it without having to increase monthly member rent rates.

Tony’s Love for the Summer Camp Kids Between his freshman and sophomore years, one of Tony’s fraternity brothers hired him to work during the summer at an eastern Virginia youth camp. It didn’t take long for Tony to work his entrepreneurial magic again. He was instrumental in helping the camp managers get a grip on cash flow and a better system of managing camp expenses. As he imple- mented his new marketing initiatives, they quickly measured increases in both new campers and the subsequent revenue generated from the steady increase in the number of camp attendees. He was the leader, the hero, and garnished the attention once again. The campers loved the camp programs, the parents loved the camp, the camp managers loved Tony, and Tony discovered that he really, truly loved working with the kids. The camp finally had a brand identity in the marketplace, a focus, and was gaining a positive reputation through- out the community and state. Although Tony enjoyed working with the camp managers, he soon found that his one true camp love was working with the actual campers. He especially thrived from seeing kids with disabilities tackle their obstacles and discover their unique talents. The corporate sponsorship opportunity he created significantly increased the num- ber of kids who could finally attend the camp. Working with “his kids” would often cause him to tear up as he watched them learn about their special abilities and skills. His love for the kids and his ability to make them happy made this the perfect summer job throughout his college career. Sure, the pay wasn’t the best, but he got to work with his fraternity brothers. Tony was able to maintain as much fun off the clock as he had during the day with the kids. His “panty raid” attempts occasionally sparked the ire and disdain of the women counselors who felt he should have long outgrown such childish pranks. Graduation from the university landed Tony the position of business manager for the camp. The work was fun but didn’t allow the level of daily involvement with the kids, and he sorely missed that. His position did, however, bring him into increased contact with Jennifer, and she actually seemed to be “warming” up to him. Managing a not-for-profit organization put a cap on his entrepreneurial drive and prevented him from deriving finan- cial dividends from the increased profits he brought to the operation. He was far more the capitalist, with the desire to be rewarded for a job well done. Without the creativity and opportunity to innovate, he quickly lost motivation—especially in light of the lack of financial gain.

Tony as a Showbiz Pizza Business Manager The job as a business manager for a Showbiz Pizza franchise in nearby Camden, Virginia, got Tony’s entrepreneurial DNA quickly engaged again. The franchise was a combination pizza parlor, game room, and bar. A local favorite for children’s birthday parties and a

CASE 2 • MERRYLAND AMUSEMENT PARK — 2009 17

EXHIBIT 2 Merryland Amusement Park Balance Sheets 2005–

ASSETS FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Current Assets

Cash $102,600 $33,000 $54,000 $46,500 $ Other Current Assets $ 0 $ 0 $ 0 $ 0 $

Total Current Assets = $102,600 33,000 $54,000 $46,500 $

PROPERTY, PLANT, & EQUIPMENT FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Land $4,225,675 $3,877,925 $2,722,583 $2,077,748 $1,893,

Land Improvements $ 37,500 $ 32,250 $ 25,500 $ 5,000 $ 0

Buildings $ 202,600 $ 183,000 $ 172,000 $ 156,500 $ 125.

Equipment (Rides) $ 425,000 $ 375,000 $ 325,000 $ 225,000 $ 175,

Total Prop Plnt & Eqmt = $ 4,890,775 $4,468,175 $3,245,083 $2,464,248 $2,193,

Total Assets = $4,993,375 $4,501,175 $3,299,083 $2,510,748 $2,193,

LIABILITIES & CAPITAL FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Current Liabilities

Accounts Payable $ 75,702 $ 80,950 $ 68,064 $ 89,325 $ 98, Current Borrowing $ 72,146 $ 75,388 $ 72,466 $ 74,539 $ 107, Other Current Liabilities $ 26,723 $ 28,943 $ 24,889 $ 29,385 $ 31,

Subtotal Current Liabilities $ 174,571 $ 185,281 $ 165,419 $ 193,249 $ 238,

Short-term Liabilities $ 54,723 $ 50,630 $ 46,598 $ 42,554 $ 39,

Total Liabilities = $ 229,294 $ 235,911 $ 212,017 $ 235,803 $ 277,

Net Worth = $4,764,081 $4,265,264 $3,087,066 $2,274,945 $1,916,

EXHIBIT 3 Kansas Entertainment Attractions

Name Address Facility Type Attraction Description

All Star Adventures (East)

1010 N.Webb Road Wichita, KS 67206

Amusement Park

Wichita’s only amusement park with rides for kids and go karts.

Wild West World

7300 North Wild West Drive Valley Center, KS 67147

Theme Park Featuring cowboys and Indians, Wild West World is the first major theme park in Kansas and the world’s only one sport- ing an all-Western theme. The park opened in May 2007 and closed in July 2007. Its owners declared bankruptcy and were hoping to sell the park so that it could reopen. Those plans failed, however. The rides were sold to other parks.

Zonkers 20070 W. 151st Street Olathe, KS 66061

Theme Park Zonkers (previously Jeepers!) is an indoor theme park serv- ing families with children of all ages. The park provides a diverse mix of arcade games and amusement rides built to scale for indoor use. Rides include the popular Python Pit (roller coaster), Yak Attack (mini-Himalaya), Venetian Carousel, Train, and Banana Squadron (airplane ride).

18 GREGORY STONE

Name Address Facility Type Attraction Description

Carousel Park 3834 W. 7th Street Joplin, MO 64801

Amusement Park

This is a family fun park for young and old. Park features dozens of amusement rides, two 18-hole miniature golf courses, multispeed batting cages, the fastest go karts in the area, water-spraying bumper boats, an exciting indoor arcade, indoor and outdoor birthday party areas.

Silver Dollar City

399 Indian Point Road Branson, MO 65616

Theme Park Park for all ages combines the wholesome family fun of a major theme park with the timeless appeal of crafts and a dedication to preserving 1880s Ozarks culture.

Six Flags St. Louis

P.O. Box 60 Eureka, MO 63025

Theme Park Six Flags St. Louis is a major amusement park featuring eight themed lands of adventure. The six flags that fly over the park represent the countries and states that have influ- enced St. Louis history—France, Spain, Great Britain (which at one time had jurisdiction over the area), Illinois, Missouri, and the U.S.A. The park features more than 40 attractions and game areas, more than 25 food outlets and gift shops, live shows, and a tropical paradise water park called Hurricane Harbor.

Worlds of Fun 4545 NE Worlds of Fun Drive Kansas City, MO 64161

Theme Park The park is themed around the Jules Verne book, Around the World in Eighty Days , and is divided into five major sections—Scandinavia, Africa, Europa, the Orient, and Americana. Rides, attractions, shops, shows, and restaurants are named according to the area theme. The park also has an attached water park called Oceans of Fun.

EXHIBIT 4 Missouri Entertainment Attractions

theme parks, however, offered highly attractive water parks, modern steel coasters, entertain- ers, and an endless array of promotions, discounts, and family fun “packages” that made it worth the several-hundred-mile drive to be thrilled and entertained (see Exhibit 4). Merryland’s lack of marketing and promotion in lieu of higher ticket prices further contributed to its own declining backyard patron interest. Alan and Samantha, unlike the previous owners, were far removed from the changing needs, wants, and desires of a new generation of amusement park children, teens, and adults that began to take shape in the early 1990s. Customer demographics had shifted, and Merryland didn’t shift with them. The Steinbergs initiated a lawsuit against the interim operators. In the lawsuit, they listed Louie the Clown as one of the items damaged or taken from the park. The interim operators all said they knew nothing about the missing clown’s whereabouts. The Steinbergs were also attempting to collect $450,000 in back rent and damages, but the former operators have said that they don’t owe anyone any rent for anything.

Merryland’s “Screamer” Roller Coaster For residents of Kansas City, there was only one reason to go to Merryland—the roller coaster! Some people nicknamed it the “scream machine” and with good reason. The history of the “ Screamer” reflected a constant search for greater and more death-defying thrills. Merryland Park’s Screamer roller coaster was a product of the Philadelphia Toboggan Company and one of the last surviving original wooden coasters designed by Herbert Paul Schmeck. Along with the Screamer, another of the trademark attractions was the park’s Wurlitzer organ with Louie the Clown in front of it. Patrons always loved the wooden coaster and would swear they noticed a big differ- ence in the ride of Merryland’s over others. Although it wasn’t all that tall and not as fast as those in other parks, Merryland’s made up for all those shortcomings with its sway— the back-and-forth motion that created the “out-of-control” sense of pending disaster, especially on the curves. That was due primarily to the Screamer’s state-of-the-art wheel technology.