Thrill Rides, James Bond, and "The Big Easy"

By Brian Hill - August 3, 2012 | Tickers: ATVI, ELY, CMCSA, SIX, SNE | 0 Comments

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The modern American consumer is blessed to have more entertainment and recreation choices than there are hours in the day available to enjoy them. For the companies providing products and services to help us have fun, the challenge is to keep coming up with "the next big thing."

An Exciting Ride to Higher Profits

Six Flags, Inc. (NYSE: SIX) has become the world's largest regional theme park company -- with revenues exceeding $1 billion -- by, as CEO Jim Reid-Anderson says, "delighting our guests with innovative new attractions and great service at an exceptional value." At their Hurricane Harbor park in Jackson, New Jersey, the company has just opened its "King Cobra Water Slide" which features a 25-foot plunge that culminates with riders appearing to be swallowed by the cobra's massive jaws.

A stomach churning plunge followed by a suffocating feeling. Sounds like this ride is a great way for youngsters -- the next generation of investors -- to get acclimated to how they'll feel at the onset of the first bear market they go through.

Things are definitely bullish at Six Flags, however. The company also announced that second quarter revenue jumped 11 percent over 2011 to a record $375 million. EBITDA for the quarter was a record total as well, $141 million, a 24 percent increase from last year's second quarter. The number of guests visiting their parks went up an impressive 12 percent. Guest spending per capita was $39, illustrating that Six Flags offers great thrills, not necessarily cheap ones.

Your Chance to Be As Cool As Mr. Bond

Now let's look at indoor thrills, video games. For my part when I scan the selection of video game titles on retail shelves, the action/adventure titles are definitely targeted to a much younger demographic than myself.  Activision Publishing, Inc., a wholly owned subsidiary of Activision Blizzard (NASDAQ: ATVI), may have figured out a way to bridge this generation gap. In October, they will release 007^TM Legends, with voices for the game characters provided by actual stars of James Bond films, current and past. And the past for the twenty-two film Bond franchise goes all the way back to 1962. If you're old enough to remember "The Spy Who Loved Me" or "Moonraker," this might be a video game adventure you'd enjoy. It's a chance to use all the cool Bond gadgets, visit exotic locations and do it all with wit and style.

The current James Bond, Daniel Craig, will lend his voice to the game, and conveniently the game features a mission based on the upcoming Bond film, "Skyfall" to get everyone excited about attending the movie. Interestingly, in June retail sales of video games were down 29% over the same month last year. Maybe Mr. Bond can make it his mission to rescue these suffering retailers. In business we recognize it's sometimes easier to win the Cold War than the battle for market share. The scariest villain after all is declining sales.

A number of companies are involved in the licensing and distribution of the 007^TM Legends game including Metro-Goldwyn-Mayer, Inc. (MGM) co-owner of the copyright for the existing James Bond films. MGM's major owners include Comcast Corporation (NASDAQ: CMCSA) and Sony Corporation (NYSE: SNE), each with a 20 percent share of MGM.

On the Comeback Trail

Most professional golfers experience a slump or two during their careers, and fans always enjoy seeing a popular player make a comeback. Sometimes the companies that make golf clubs find themselves in comeback mode, as we see with Callaway Golf Company (NYSE: ELY). On the surface, the golf equipment industry might seem a fairly simple one. Amateur golfers are desperate to improve the sorry state of their games, and are above average in disposable income so they can afford equipment that is fairly expensive. But golfers are forever in search of that "next big thing" and equipment companies have to constantly innovate. Popular brands rise and fall.

Callaway has been undergoing a restructuring to turn around the company's fortunes. In mid-July CEO Chip Brewer announced the company would cut 12 percent of its 2,100 person workforce.

What a great name for a golf company CEO, "Chip," sounds like a person who really understands the game and the golf industry. As shareholders, you don't want your golf company turnaround to be led by someone named Shank Hackman, for example, even if he's highly experienced with consumer products marketing.  

It would be refreshing, though, for a CEO to talk about rescuing the company by increasing sales rather than getting rid of loyal employees. Well, we can dream.

Callaway announced that second quarter sales were up $7 million over the same quarter last year. They estimate a full year proforma loss per share of $0.55-$0.75.  A bright spot for the company occurred at the recent Open Championship in Britain, where Ernie Els, who plays Callaway clubs, was the victor. The Callaway press release says, "Els' win marks the third major championship victory for the Callaway RAZR Fit driver this season…"

I imagine Ernie, who's known as "The Big Easy," might assert that the consistently fine way he swung the RAZR Fit driver that week had at least something to do with the victory.  

Six Flags, Activision and Callaway may compete in completely different industries, but for each of these companies success depends on the same key factors: continually innovating as well as operating their companies efficiently. And in today's difficult economic environment, consumers are seeking the most value they can get for their entertainment and recreation dollars.  From the consumer's standpoint, one measure of value is whether the company delivers a more exciting entertainment experience, or helps the consumer get more enjoyment out of the games he plays through providing better engineered products.

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