Universal Studios -Strategic Business Proposal

Strategic Business Proposal 1 of 35

Strategic Business Proposal

for

For: NBC Universal/ Universal Studios http://www.universalstudios.com/

Prepared On: 03/22/2016

Strategic Business Proposal Page 2 of 35

Prepared By: Bernard Lee, Doral Peoples, Natalia Plazas & Joseph Carter

Instructor Name: Anneliese Quaile

Contents Introduction ............................................................................................................................................................ 4

Executive Summary ............................................................................................................................................. 4

1. Organizational Challenges & Proposed Solution ................................................................................................ 5

Organizational Challenges ................................................................................................................................... 5

Proposed Solution ............................................................................................................................................... 5

2. Environmental Scanning ...................................................................................................................................... 6

Internal Analysis .................................................................................................................................................. 6

External Analysis ............................................................................................................................................... 10

3. Strategy Formulation ........................................................................................................................................ 14

Operations ........................................................................................................................................................ 14

Sales, Marketing, & Distribution ....................................................................................................................... 15

Legal & Ethical ................................................................................................................................................... 16

4. Proposal Budget & Projections ......................................................................................................................... 17

Sales Projections ............................................................................................................................................... 17

Cost Analysis ..................................................................................................................................................... 18

Project Budget .................................................................................................................................................. 18

5. Strategy Implementation ................................................................................................................................. 19

Timeline and Key Milestones ............................................................................................................................ 19

6. Future Plans ...................................................................................................................................................... 20

Long-‐Term Opportunity and Development Plans ............................................................................................. 20

7. Appendices and References ............................................................................................................................. 21

References……………………………………………………………………………………………………………………………………………….21-‐26

Appendices………………………………………………………………………………………………………………………………………………27-‐34

Appendix 1:Competitive Analysis…………………………………………………………………………………………………………….27

Appendix 2:Operating Cost .......................................................................................................................... 28


Appendix 3:Royal Caribbean Partnership List ............................................................................................. 29

Appendix 4:Sample Marketing Material ...................................................................................................... 30

Appendix 5:Competitive Analysis ................................................................................................................ 31

Appendix 6:Sales Projection ........................................................................................................................ 32

Appendix 7: .................................................................................................................................................. 33

Appendix 8:Competitive Analysis ................................................................................................................ 34


Introduction Executive Summary NBC Universal Board of Directors,

The purpose of this proposal is to offer the opportunity for brand expansion into the cruise industry. Back on

March 31st, 2009 we took our first steps towards building a travel and leisure joint venture, by agreeing to a

partnership deal to offer exclusive vacation package deals titled Way More Than A Cruise with Royal Caribbean.

(Luxury Hospitality Daily, 2009) NBC Universal is one of the industry leaders when it comes to theme parks and

resorts, yet we are at a competitive disadvantage from our direct competitor Disney. We believe that our

proposed joint venture with Royal Caribbean is the solution for us to maximize the full potential of the

experiences created at our theme parks. The need for this joint venture is based on the need for us to compete

with the success of Disney’s Cruise Line and Royal Caribbean’s desires to cut into the lucrative family-‐cruise

niche. The venture will be formatted similarly to TUI Cruises 50/50 split with Royal Caribbean. (Royal Caribbean

Cruise Limited, 2016) Our company can benefit from this joint venture by expanding our brand into the cruise

industry as a market contender. Our move into the cruise industry will help us capitalize on a revenue stream

that Disney has been utilizing since 1995. The partnering will help Royal Caribbean accomplish a goal set by the

company back in 2011. An article from Royal Caribbean’s Blog site quoted Royal Caribbean stating “For Royal

Caribbean, the expanded deal with Universal is another move into Disney's lucrative family-‐cruise niche”. With

our three-‐year implementation strategy, we plan to use two ships (Freedom of the Seas and Enchantment of the

Seas) that will be outfitted with attractions and merchandise stores by July 2017. We plan to use the popularity

of The Wizarding World of Harry Potter as a test market on the two vessels. The first ship will sail out of Port

Canaveral and will be marketed directly to the Harry Potter fan base. With the right marketing strategies, we

believe the joint venture with Royal Caribbean can become a cornerstone of the cruise industry.

See Appendix 3


1: Challenges & Solutions Organizational Challenges On March 31, 2009, we entered into a partnership agreement with Royal Caribbean to offer exclusive vacation

packages. (Luxury Hospitality Daily, 2009) The deal provided us the opportunity to expand our brand into the

family cruise market. We have failed to capitalize on the full potential of that opportunity over the past seven

years while our biggest competitor "Disney" has taken full advantage of the revenue stream. Disney theme parks

and resorts (which include Disney Cruise Line) reported a nine percent revenue increase for the first quarter of

2016. (Sanders, 2016) That nine percent increase raised the revenue to $4.3 billion and income rose up 22% to

981 million in that quarter. (Sander, 2016) We provided these figures to show that the family cruise niche-‐

market is a viable avenue and opportunity for us to expand our brand while offering a new and thriving revenue

stream into the fold of the company.

Proposed Solution In addition to the feelings of empathy connected to the characters and the storyline, Harry Potter fans are in

love with the world Harry Potter lives in. “Every Harry Potter fan has always dreamed of receiving an acceptance

letter from Hogwarts and being able to enter into Harry's world of magic, they want to experience what it is like

to live surrounded by magic and mystical creatures and it’s Harry’s world itself that captivates fans attention”

(Khan, Z. 2016). NBC Universal/ Universal Studios understands Harry Potter’s fans needs, and for the past 6

years, they have fulfilled these needs by providing them with the experience of a lifetime at "The Wizarding

World of Harry Potter.” NBC Universal/ Universal Studios has brought to life the magic of Harry Potter’s world

and given fans the opportunity to spend time emerged into his world. We have achieved their core purpose of

delivering unforgettable experiences to our guests as it is stated on our Mission statement "To provide an

environment where our Team Members are proud to work, deliver unforgettable experiences to our guests, and

generate superior financial returns.” (Life in Our Universe -‐ Universal Orlando. n.d.)

We want NBC Universal/ Universal Studios to take this experience once step further, and to invest and partner

up with Royal Caribbean to open a Harry Potter Theme Cruise ship. On this cruise ship; Harry Potter fans will

have the unique opportunity to literally live in this magical world for a few days. The cruise ship will be designed

with the same amount of details in recreating this world that "The Wizarding World of Harry Potter" was. Guest

will be able to experience the overall experience of being inside Hogwarts, as well as a game of quidditch, dinner

at Hogwarts great hall, classes on potions, scavenger hunts and so much more as they represent one of

Hogwarts Houses.


Carrying on the Harry Potter experience will be a great investment on NBC Universal/ Universal Studios, as it

has been shown before when "The Wizarding World of Harry Potter” fist opened at Universal's Islands of

Adventure in Orlando, FL back in 2010. Attendance increased by 20% and the revenue increased by 41% (Martin,

H. 2016). In 2014 after "Diagon Alley” and "Hogwarts Express" opened in Universal Studios, the theme park's

revenue also showed an increase of 18.7%(Pedicini, S. 2014). NBC Universal/ Universal Studios has not been the

only one taking advantage of the need Harry Potter’s fans have. Warner Brothers Studio tour in London sold out

their special Hogwarts' Christmas dinner within 24-‐hours of being announced (Edwards, V. 2015), this successful

event also lead them to have 2 days special Valentine’s Dinner in the Great Hall which also sold out (Langley, E.

2016). The Georgian House hotel in London also took advantage of Harry Potter's fans need and opened what

they called "Wizard Chambers", a limited number of rooms decorated based on Harry Potter, The Georgian

House hotel idea had such an enormous success, that their website crashed after high customer demand, in

October 2014 these rooms were already booked until December 2015 ( Petroff, A. 2014.) It’s clear that there is

high demand for the “All Harry Potter” experience and NBC Universal/ Universal Studios has the required

resources to give this experience to customers by expanding their Harry Potter world from the theme parks to a

cruise ship.

2: Environmental Scanning Internal Analysis Company Overview

NBC Universal is one of the world's leading media and entertainment companies that bring entertainment to a

global audience (NBCUniversal.com). The company develops, produces, and distributes entertainment, news

and information, sports and other media forms for people to enjoy around the world. NBC Universal can be

summed up in four different categories: Cable Networks, Broadcast Television, Film, and Theme Parks

(NBCUniversal.com). The Cable Network portion of the company has around 20 network channels such as Bravo,

MSNBC, Oxygen, Syfy, The Weather Channel, USA and many more (NBCUniversal.com). They also offer local

media and international networks as well such as NBC Sports regional networks, and CNBC International, and

NBC Universal International Television (NBCUniversal.com). The Broadcast Television operates NBC and

Telemundo Broadcast television networks, which include 10 NBC and 17 Telemundo local broadcast Television

stations. NBC Universal is one of the largest film distributors in America (NBCUniversal.com). With all of these

entertainment outlets, they also offer theme parks to bring it all together and have the real Universal experience


in one place. Universal has theme parks in Orlando, Hollywood, Japan and Singapore where they bring a real life

entertainment experience to a worldwide audience. NBC Universal offers such a wide variety in the

entertainment industry they have an enormous impact on the viewers of their content; they state that as a

company they understand the power and possibilities of media and technology (NBCUniversal.com). NBC

Universal says that as a company they uniquely positioned to inform and empower and inspire, also address the

world' most critical issues (NBCUniversal.com). NBC Universal prides itself on being culturally diverse, as a

company their objective is not to move business forward but to move people forward. NBC Universal's Credo;

"We are in business to create and deliver content so compelling it entertains, informs and shapes our world".

(NBCUniversal.com)

Financial Standings

In 2015, NBC Universal's revenue was $28.46 billion (NBC Universal, 2016). In 2014, NBC Universal revenue

increased by 7.5% to $25 billion and in the first quarter of 2015 had a six percent increase according to the

Hollywood Reporter. In 2015 total revenue grew by 3 percent, which means the company, is expanding and

growing (CSMCSA, 2016). In 2014, the total cost and expenses was about $9.5 million, which was an increase

from 2013. It was a 3.9% increase from 2013 and a 9.2% increase from 2012 because of the release of

Despicable Me 2 (CSMCSA, 2016). NBC Universal is ever expanding and looking at all the avenues to bring in

more revenue. The fourth quarter revenue increased 2.3% to $6.6 billion, and this directly contributed to the

growth of the theme parks and broadcast television (Hollywood Reporter, 2016). 2014 broadcast revenue

increased 20% to $8.5 billion, and this was due to the higher advertising and retransmission fees (Hollywood

Reporter, 2016). When this happened, it caused the operating cash flow to double to $734 million amongst the

higher operating cost and expenses (Hollywood Reporter, 2016).

NBC Universal is in good financial standings and is a publicly traded company. Comcast purchased NBC Universal

and when you are looking at the stock prices they have double since 2011. Since 2013, the stock has consistently

been around $52 (CSMCSA, 2016). In 2014, the company highest stock price were at $58.01 (CSMCSA, 2016) and

in 2015, it decreased by two dollars and sat at $56.43. In 2016, they hit a company high at $64.50, so it is safe to

say that the company has been very consistent when it comes to the ever-‐rising stock prices. In March 2016, the

stock price was sitting at $59.74, which is just under the company high (Nasdaq, 2016). Universal Studios theme

parks and resorts generated revenue increased by 14.1% in the third quarter, which was $896 million (Bilbao,

2015). The parks also showed 14.1% increase in cash flow from 2014 again in the third quarter (Bilbao, 2015).

When Universal opened the first Harry Potter attraction, they saw an increase of 20% attendance increase and a

41% increase in revenue (Martin, H. 2016). In 2014 when Diagon Alley and Hogwarts Express opened, the theme

parks revenue showed an increase of 14.7% (Pedicini, S. 2014). In the second quarter in 2015, the theme parks


show an increase in operating cash flow from the same quarter in the prior year (Bilbao, 2015). Universal is

attributing these constant increases to the continued success of The Wizardly World of Harry Potter.

Organizational Strengths

NBC Universal provides cutting edge news and entertainment to millions internationally (NBC Universal.com).

They are excellent at understanding what the culture wants as a whole and developing strategic plans to

establish and present the content they have produced, and then transitioning that content into merchandise.

When it comes to competitive advantages of NBC Universal they have it all, they can purchase and then produce

content as well as distribute physically and digitally directly to the customer. Universal is known for producing

and distributing their content; most of the content is later on turned into attractions at their theme parks. As a

company, we build personal relationships with the customer, which in turn creates brand loyalty among them.

Organizational Weaknesses

One of the major weaknesses of the company is that it is so large that they cannot reach and make every

customer happy. They are looking at the larger audience sometimes and can lose interest in the smaller groups,

so they need to take the niche customer into consideration in future planning (CIO.com). Universal is a

subsidiary of Comcast and the major weakness with Comcast is their customer service. The complaints present a

huge downfall when it comes to one on one with the client relationship (CIO.com). Comcast has vouched to fix

by investing millions into the customer service portion of the company (CIO.com). NBC Universal needs to take a

deeper look at their automated customer service, and they could take this disadvantage and make it into a

positive.

Customers Universal Studios has been focusing on the not so grown adults and the not so little kids since they opened their

gates. The typical age ranges are kids 8-‐10, pre-‐teens 11-‐12, teens 13-‐19, young adults 20-‐29 and adults 30+. The

parks and resorts are targeting families and older children who are looking to "explore, to be curious and to

interact with the world around them". (Research Industry Voices, 2013) The park provides young kids the chance

to participate in older, more challenging attractions. The parks provide the older children the opportunity to go

out and explore a more mature type of attractions. Our demographics has not changed over the years, and we

do not foresee any future changes to our customer base.

An excerpt from Royal Caribbean's 2010 Marketing plan states in their company overview that "Cruises as a

whole cater to all sorts of people creating a large consumer basis that is not focused in on one particular

demographic". (Royal Caribbean, 2010) Royal Caribbean marketing plan then went on to cast a wide net for their

target segment, setting their target market at male and females ages 25-‐54. (Royal Caribbean, 2010) In 2011, the


Cruise Line International Association (CLIA) defined the target cruiser market as adults 25 years or older, with a

household earning of $40,000+. (Florida-‐Caribbean Cruise Association, 2011) That statistic from the CLIA helps

validate that the cruise industry demographic is broad. In a more recent demographic study conducted by the

CLIA in 2014, they "identified the growth of Millennial passengers as a top trend for 2014". (Sampson, 2014)

Royal Caribbean started to change their onboard perception around the time this new study was released. They

now market their cruises as being designed "to be family experiences, where kids, parents, grandparents and

friends can share in the vacation together." (Royal Caribbean Blog, 2015) This new direction coincides with their

new desires to enter into the family cruise market.

Collaborators We are looking to expand our partnership that is established with Royal Caribbean to help make our proposal

successful. The cruise and theme park industry share very similar demographics and target markets. A narrowed

down focus on Royal Caribbean's target is male and females ages 25-‐54. Their particular target market includes

families, parents, and kids and couples looking for romantic getaways. (Royal Caribbean Marketing Plan, pg. 2)

Royal Caribbean has been quoted saying "they are trying to target everyone, they want their services to

accommodate everyone". (Royal Caribbean Marketing Plan, pg. 2) Our joint venture with Royal Caribbean will

provide both companies with access to the each other's core customers and market segment. There will be

some overlap when it comes to certain demographics because we both aim to service families and children who

are looking to have an unforgettable experience whether they are on land or the sea. Royal Caribbean is the

second largest cruise line behind Carnival Cruise line, and the gap is never more evident than when you look at

the market share. Royal Caribbean comes in at a modest 22.1% of the market share and then you have Carnival

towering over the competition with 42.2% of the market share. (Statista, 2016) To put these numbers in context,

the other companies on the graph made up 22.3% of the market share and Norwegian Cruise Line occupied

12.4% of the market space. (Statista, 2016) These market share percentages show that there is a significant

amount of room for growth when it comes to expanding Royal Caribbean's market share while extending our

reach into the cruise industry. We highly recommend the merger with Royal Caribbean because the mutual

benefits of taking a large cut out of Disney's cruise market gives both us and Royal Caribbean new competitive

advantages. Disney currently operates four ships compared to Royal Caribbean's fleet of 23. (Disney Cruise Line,

2016) We have an implementation strategy that will help ease us into the industry, and it will give Royal

Caribbean the edge that they desire.


External Analysis

Competitors Entering the cruise ship industry as its own entity NBC Universal/ Universal Studios would have three direct and

indirect competitors, which are Disney Cruise Line, Carnival Cruises, and Royal Caribbean Cruises, but with hopes

of entering the cruise ship industry as a partner with Royal Caribbean Cruises, NBC Universal/ Universal Studios

faces two top direct and indirect competitors, which are Disney Cruise Line, and Carnival Cruises. Disney Cruise

Line would be our direct competitor primarily because they already have four ships that currently offer movie

themed cruises similar to our proposal. For example, the Disney Fantasy ship has introduced a Star Wars Day at

Sea that features a full day of Star Wars celebrations, including a deck party, meet-‐and-‐greets with favorite

characters, Star Wars-‐themed youth activities, unique food and beverage offerings, and special merchandise

(PR, N, 2015). While Carnival Cruises currently offers the Seuss at Sea experience and appeals to a similar

demographic they are our indirect competition because their ships cater to a broader audience of family

attendees opposed to how the Disney Cruise Line caters to families that seek to gain real life experiences and

interactions at sea with some of their favorite childhood Disney characters, movies, superheroes, and villains.

Business Climate

The International Maritime Organization (IMO) will regulate expanding the NBC Universal/ Universal Studios

brand into the cruise ship industry. The IMO is an international regulatory body with 170 Member States

including the United States that develops and oversees global regulations, and standards for the maritime

industry, including the safety and operation of cruise ships. (Cruise Lines International Association, 2016) In the

United States, the Coast Guard is both the principal regulator and the principal enforcement agency of the laws,

regulations, and international treaties applicable to cruise ships. With the proposal that we are pitching to both

NBC Universal/ Universal Studios & Royal Caribbean Cruises, which would be considered a joint venture, the

Federal Trade Commission (FTC )would have to approve of this partnership/merger as Section 7 of the Clayton

Act prohibits mergers and acquisitions when the effect "may be substantially to lessen competition, or to tend

to create a monopoly (Mergers, 2016).

A cruise ship represents all four faces of the tourism industry: transportation, accommodation including food

and beverages, attractions and tour operators all at sea causing environmental issues, so there are many

economic issues that may impact our business. For example, many cruise line companies are faced with million

dollar lawsuits and environmental fines each year as they continuously break the law by illegally dumping water

waste, garbage and other toxic waste into coastal and international waters (The Cruise Industry, 2016). Another

problem that can occur in the cruise line industry that can cause economic issues are the impacts from crisis and


natural disasters. For example, Royal Caribbean was forced to issue 4,500 full refunds to passengers back in Feb

2016 all because a ship was battered due to severe storms that ultimately caused them to have to cancel the

cruise (Press, A. 2016). In addition to returning passengers full refunds for the cancelled cruise they also throw in

certificates for half off a future cruise, and if that wasn’t enough out of 4,500 passengers there was at least one

reported passenger that filed a class action lawsuit claiming that the cruise line should have known or knew

about the hurricane that struck the cruise. The refugee crisis at sea is causing cruise lines to lose money as well

because they are forced to stop their ships at sea and rescue refugees because ships are bound by international

law to assist those in distress at sea (Palmeri, C. 2015). In July 2015, a Carnival ship, the Island Princess, rescued

117 refugees off the coast of Greece, and in a statement released by Arnold Donald, chief executive officer of

Carnival Corp customers are sharing their concerns about the refugee crisis causing them to second guess

traveling at sea.

As stated previously cruise line companies represent all four faces of the tourism industry and the attractions,

and on board amenities tend to be what shapes the consumer buying patterns the most. According to Dr. Jean-‐

Paul Rodrigue the three major trends that shape the cruise market are the cruise ship's amenities, massification,

and concentration. Massification in the cruise line industry is when cruise companies develop larger ships to

attract larger audiences, and concentration in the cruise line industry refers to acquiring high ownership in the

market, which Royal Caribbean has because Royal Caribbean and Carnival cruises combined take up 73% of the

market (Rodrigue, J. 2016). The amenities are key factors that play important roles into the decision making and

purchasing process of consumers in regards to selecting the perfect cruise that fits and caters to their

preferences. The experience that the consumer’s gain from the cruise is based on what types of amenities the

cruise has to offer them (Rodrigue, J. 2016). For example, parents that have children who are highly interested

and involved the Walt Disney culture would typically book family cruises with the Disney Cruise Line primarily

because of the loyalty to the Disney brand. Disney Star Wars Day At Sea would be the perfect example of how

Disney implemented a movie theme on a cruise and sold amenities and attractions to the customers based off

their preferences for the Star Wars movie.

Given the fact that we are living in times where technology and the internet have become an everyday necessity

to our lives, technology innovations are very important to the cruise line industry. Cruise ships can

accommodate up tens of thousands of passengers at once so implementing the right technology gadgets and

internet to deliver the perfect experiences for customers can have very positive impact on the business. For

Example, Royal Caribbean Cruises has added a new feature to all of their ships called the Wayfinder, which

happens to be a plasma LCD touch screen gadget that’s placed in various locations of the ships. The Wayfinder

purpose is to help attendees navigate themselves through the ships and check activity times & location spots


throughout the ships. (Gambino, A. 2012) Capturing the experience while on vacation happens to be very

important to cruise attendees and cruise line companies know this because they have been capturing photos for

customers that attend their cruises for many years. Instead of sorting through thousands of photo gallery’s

cruise line companies are starting to implement facial recognition technology that can identify your face from

everyone else’s, and place those photos into your own personal photo album. (Gambino, A. 2012) Technology of

this sort can bring very positive impact to our business, as it would allow us to generate more revenue off

photos because the technology would allow us the accessibility to be able to take more photos of the guest

attendees without losing potential customers due to a slow turnover rate that we would possible have if we had

to take the photos, and sort them out manually.

Business Opportunities Creating a new revenue stream by partnering with Royal Caribbean Cruises and entering the cruise line industry

would be the perfect opportunity for NBC Universal/ Universal Studios. Both companies already have

established business relationships between each other as they have previously partnered with each other to

deliver customers an exclusive vacation package (Royal Caribbean International, 2016). A few things that are

included in the vacation package consist of: 3/4-‐Night Bahamas or 4/5/7-‐Night* Eastern/Western Caribbean

cruise onboard Royal Caribbean 2/3/4-‐Nights at an Universal Orlando Resort including on-‐site hotel

accommodations and Park-‐to-‐Park admission to Universal Studios Florida, and Universal’s Islands of Adventure

during your stay. With Royal Caribbean Cruises and NBC Universal/ Universal Studios already providing the

tourism industry with exclusive vacation packages we believe that merging both companies to deliver an

exclusive Harry Potter at Sea experience for consumers that appreciate the Harry Potter brand would be the

perfect opportunity for both companies to cross market between each other, and establish a profitable revenue

stream.

Business Threats With high hopes of entering the cruise line industry by partnering with Royal Caribbean Cruises, which

happens to be one of the top two cruise line companies NBC Universal/ Universal Studios will face a

minimum amount of threats. Reason why is because Royal Caribbean Cruises and Carnival Cruise combined

account for more than 73% of the cruise line industry (Rodrigue, J. 2016). Therefore making it harder for

new entrants into the market, and with both companies being the top two in the industry they are more

than likely in control of setting prices in regards to what the typical cruise would cost for a potential

customer. With two companies taking up more than 73% of the cruise line industry, that makes the market

unsaturated which would give NBC Universal/ Universal Studios and Royal Caribbean Cruises a very good

chance at competing with Carnival Cruises and Disney Cruise Line with introducing the Harry Potter


themed cruise ship into the market as a new competing product. Disney would pose a threat to NBC

Universal/Universal Studios and Royal Caribbean Cruises because they have similar product offering with

themed cruises based on successful movies. Star Wars Day at Sea is one of their main themed cruises that

they have promoted and capitalized on in the family cruise market (Announcing Star Wars Day at Sea on

Disney Fantasy Sailings, 2016).


3: Strategy Formulation Operations Starting a joint venture with Royal Caribbean will be an expansion of our original partnership agreement

"Way More Than a Cruise," created on March 31, 2009. This partnership was designed to give the

customers the ability to generate booking and travelling packages between Royal Caribbean and Universal

Studios Theme Parks and Resorts (Luxury Hospitality Daily, 2009). This joint venture will offer NBC

Universal/Universal Studios the opportunity to become an active participant in the cruise line industry. By

partnering with Royal Caribbean, the number two cruise line in the industry, our transition into the

industry will be smoother, easier and cost efficient.

Our partnership will lower the learning curve and reduce the need for the development of new technology,

yet it will create a demand for a new organizational structure. After the merge of the two companies, Royal

Caribbean's Chief Executive Officer Richard Fain and our Chief Executive Officer Tom Williams will be in

charge of selecting two members of their board of directors to serve on the newly formed board to lead our

joint venture. Staffing needs will increase in areas such as managerial, and operations. Per ship we will hire

one attraction manager that will be paid $12.93/h, three attraction attendants that will be paid $ 8.93/h,

and four sales associates that will be paid $10.02/h (Universal Studios Hourly Pay. n.d.)

Royal Caribbean's Freedom of the Seas ship will be the first to set sail on the joint venture, which will have

Harry Potter Attractions onboard as paid attraction just like the "Scuba in the pool" attraction where

additional fees apply (Royal Caribbean International -‐ Things to do onboard. n.d.). We will provide the

cruise ship Freedom of the Seas the license to Harry Potter attractions and merchandise to be sold on the

ship. Royal Caribbean will have the right to price the attraction according to the pricing scale they already

have in place. The licensed merchandise we provide will be priced according to the prices set at the theme

park and the website. The Wizarding World of Harry Potter Cruise Adventure will use Royal Caribbean's

three-‐time award-‐winning LCD Wayfinder system, a system of interactive touch-‐screen displays that helps

guests and employees to find their way safely around the cruise ship (Royal Caribbean Blog, 2011).

Freedom of the Seas will provide our guest with the excitement of being on an exotic journey while giving

them the thrill of enjoying an attraction at Universal Studios. Our licensing agreements will allow for an

actor dressed as a Hogwarts professor will be onboard to help answer any questions the guest may have

about their new home (Royal Caribbean International, 2016).


To build the attractions, we will need a theme park attraction designers and an engineering team. The team

will be responsible for completing all facets of the ride development process. They will brainstorm, sketch

some ideas, and create three-‐dimensional models to calculate how the attraction will run; they will also

determine how the attraction will be built and supervise the construction (Theme Park Ride Designer and

Engineer. n.d). We will hire this team project by project as is usually done in this industry as well as quote

the best prices for great quality.

Sales, Marketing, & Distribution NBC Universal/ Universal Studios Executive Vice President of Marketing and Sales Alice Norsworthy oversees

marketing and sales for Universal Studio's theme parks and resorts (Alice Norsworthy, EVP Marketing. 2011).

Royal Caribbean Cruises Senior Vice President Vicki Freed oversees the Sales, Trade Support and Service Division

(Royal Caribbean International. 2016). Together, both will combine their expertise to deliver the proper

marketing campaign to reach our target audience.

We will use the marketing campaign that Royal Caribbean Cruises currently uses for their cruise ships along with

new marketing strategies that NBC Universal/ Universal Studios uses to attract their theme park audiences.

Royal Caribbean Cruise marketing campaign runs across TV, radio, and print, digital and social media (Royal

Caribbean Blog Marketing. 2016). Examples of what the campaign will include consist of 5-‐second ads advertised

on Facebook, Twitter, Instagram, and YouTube so we will continue using the same social media platforms. There

will be 15 to 30 second TV ads placed during programs with massive live viewership such as The Voice and Late

Night with Jimmy Fallon, live broadcasting on Periscope to promote live guests experiences, and live billboards

that will feature live look-‐ins to Royal Caribbean's ships media (Royal Caribbean Blog Marketing. 2016). There

marketing strategies are being implemented with the goal of reaching the Millennial and our core demographics

of ages 25-‐54. NBC Universal/ Universal Studios will advertise directly at the Harry Potter theme park along with

the other theme parks owned by Universal Studios, on the company's website as well as both companies social

media platforms. In conjunctions with the in park marketing we will focus our initial marketing campaigns

directly to the heads of Harry Potters fan sites and forums, similar to how the marketing campaign started for

the in park attraction. We will also promote print materials in various locations such as Publix expanding on prior

promotional campaigns established at these sites.

We will distribute tickets through multiple travel agencies such as Expedia, and Travelocity. Tickets will be sold

and distributed directly to our target audiences through Universal Studios and Royal Caribbean websites.

Merchandise including t-‐shirts, caps, wands, robes and cups, along with onboard attraction and amenities will

be distributed directly to the cruise ships.


Legal & Ethical

Legal Factors There are a few legal factors we may have to consider in regards to moving forward with our proposal. Before

NBC Universal/ Universal Studios can implement the Harry Potter experience on a cruise ship with Royal

Caribbean Cruise, we must first revisit our existing license agreement that we have between J.K. Rowling's and

Warner Brothers. We will amend the agreement to ensure the proposed joint venture with Royal Caribbean is

covered within the agreement. According to New York Times NBC, Universal/ Universal Studios agreement with

J.K. Rowling's and Warner Bros would permit new attractions and initiatives connected with its "Harry Potter"

presence at the Universal Studios theme parks (Cieply, M. 2013). After conducting further research, we found a

theme park license agreement between J.K. Rowling's, Warner Bros and Universal City Development Partners

that revealed details on the license and other rights that each party has in regards to the Harry Potter brand.

The risk that NBC Universal/ Universal Studios would face with moving forward with implementing Harry Potter

on a Royal Caribbean Cruise is not getting the proper approval by the other licensees. The agreement states that

approvals will have to be received if the venture doesn't fall within the initial agreement (Theme Park License

between Warner Bros. Consumer Products, Inc., 2016). NBC Universal/ Universal Studios will also have to

consider the fees, laws, and terms associated with entering into a joint venture agreement with Royal Caribbean

Cruises. The partnership contract between NBC Universal and Royal Caribbean will have to be renegotiated and

amended. The amended contract will detail that our partnering has evolved into a 50/50 joint venture.

Ethical Considerations Royal Caribbean Cruises has endured bad media attention in the past after receiving a score of D from Friends Of

The Earth on its annual report card on environmental impact in regards to its Code of Business Conduct and

Ethic's (Hil, N. 2015). Unfair labor concerns surrounding low wages, and inhumane treatment has been a huge

issue for Royal Caribbean Cruises as well as environmental issues. Our primary concern at NBC Universal/

Universal Studios before entering into a joint venture partnership with Royal Caribbean Cruises would be for us

to create solutions that will help us resolve these issues with our employees. We want to ensure that all

employees are treated fairly, equally and up to the standards of NBC Universal.

Employees of Royal Caribbean Cruises have complained about working excessive hours and receiving pay as low

as $1.25 an hour. With NBC Universal/ Universal Studios entering into a joint venture with Royal Caribbean

Cruises we will look to find new ways to fairly compensate our employees, decrease their workloads without

disrupting our operating cash flow, and revenue.


4: Proposal Budget & Projections Sales Projections With hopes of establishing a 50/50 split joint venture with Royal Caribbean Cruises using their Freedom of The

Sea and The Enchantment Of The Sea ships, our sales projections are based on the average revenue generated

per passenger each cruise. According to Cruise Market Watch the average traveler spends $1,350 on tickets and

$429 on onboard spending totaling $1,779 per cruise (Financial Breakdown of Typical Cruiser. 2016). Onboard

spending consists of multiple categories so to simplify it we broke it down into two sections, which are

merchandise and attractions/amenities.

According to Cruise Ship Deck Plans the average amount of passengers that board the Freedom of The Sea ship

is 3,782 and 2,500 that board the Enchantment of The Sea ship (Royal Caribbean Deck Plans, 2016). Year one

the Freedom of The Sea ship will be the first ship to launch introducing the Harry Potter attraction, and we

project to ticket sale prices to be at $1,350 to an average of 3,782 passengers per cruise with the ship sailing at

an estimated amount of sixty times each year. Year two the Enchantment of The Sea ship will launch introducing

its Harry Potter attractions, and based on the success that we project the Harry Potter attraction will bring to the

Freedom of The Sea ship, we will increase ticket prices 3% on both cruise ships. Increasing tickets from $1,350 to

$1,390.50 in year two we project to sell an average of 6,282 tickets per cruise between both ships to the average

spending passenger. Year three stateroom ticket prices for both ships will increase another 3% rising from

$1,350.50 to $1,432.00.

For all three years, we project the average passenger on both ships will spend an average of $64 on merchandise

per cruise, and $350 on other onboard amenities and attractions per cruise. These figures are based on existing

sales revenue generated on all cruise lines worldwide (Financial Breakdown of Typical Cruiser. 2016).

On average, both ships, the Freedom of The Seas and the Enchantment of The Seas, sail sixty times individually

with a combined total of 120 trips each year, so we project to generate revenue from tickets, merchandise, and

onboard attractions and amenities attracting an average of 6,282 spending passengers per cruise between both

ships. The information for the number of times each ship sail can be located on Royal Caribbean Cruises booking

search results (Search Results -‐ Royal Caribbean International, 2016).

See Appendix 5

Cost Analysis According to Market Realist, our projected budget for our operating expenses will be divided into eleven


different categories: Marketing, selling, administrative, fuel, payroll, onboard and other, travel agency

commissions, transportation, depreciation and amortization expenses (Cederholm, 2015).

With hopes of establishing a 50/50 split joint venture with Royal Caribbean Cruises, NBC Universal/ Universal

Studios will share all operating cost associated with both cruise ships. NBC Universal/ Universal Studios will pay

an initial investment fee of $50 million to Royal Caribbean to help offset certain cost. NBC Universal/ Universal

Studios currently pays $10 million a year in licensing fees to J.K. Rowling's for the use of the Harry Potter brand

(Fryer, J. 2010). Along with other licenses that we currently hold at NBC Universal/ Universal Studios we plan on

revisiting those license agreements, and amending them as well if needed as we are seeking to implement our

other attractions into the cruise line industry. A compensation clause will be included into the amended

agreement to put a cap of up to 2% on the amount our licensors can request. Once NBC Universal/ Universal

Studios propose the idea to J.K. Rowling's of extending the Harry Potter brand into the cruise line industry with

Royal Caribbean we believe the proposal will be approved of, therefore our licensing fees will already be

covered under the initial license agreement.

See Appendix 2

Project Budget See Appendix 5 & 6 (Sales Projections)

Universal/Royal Caribbean Year 1 Year 2 Year 3

Three year totals

Three year profit

Expenses

$ 585,356,760.00

$ 585,356,760.00

$ 585,356,760.00

$ 1,756,070,280.00

$ 301,724,460.00

Ticket revenue

$ 508,842,000.00

$ 524,107,260.00

$ 539,749,440.00

$ 1,572,698,700.00

Merchandise revenue

$ 24,122,8

80.00

$ 24,122,8

80.00

$ 24,122,8

80.00

$ 72,368,64

0.00 Attractions/Ame $ $ $

$


nities revenue 137,575,800.00

137,575,800.00

137,575,800.00

412,727,400.00

5: Strategy Implementation Timeline & Key Milestones Below we have provided a three-‐year timeline for our joint venture with Royal Caribbean that begins with us

amending our licensing agreements for our attractions. Over the course of the first year, our objective is to build

awareness and momentum. Our “The Best on Land and Seas” Marketing Campaign will be used to bring

attention to the venture. By using social media to interact directly with our target markets, we plan to build on

the momentum of our Way More Than A Cruise package. We will announce and begin construction on The

Wizarding World of Harry Potter attraction aboard the Freedom of the Seas. The ship will not be pulled out of

the cruise cycle because construction for the attraction can be completed while the ship is sailing. Year two our

focus shifts towards turning the momentum we've established in year one into revenue by the end of the year.

We will be live streaming and recording our The Best on Land and Seas Commercial via Periscope. Year two will

also see the announcement of our Harry Potter attractions that will adorn the ships Freedom of the Seas and

Enchantment of the Seas. Year three will see an announcement of four ships in Royal Caribbean's Voyager and

Radiance class by 2020 and the Sovereign and Oasis class by 2022.

Year One Date/Timeframe Event/Milestone

January 27th 2017 Licenses Agreements Amended March 2017 Joint Venture Proposal to Royal Caribbean June 2017 Social Media Milestone: Joint Venture Announcement via Periscope. Test Market

Harry Potter Attraction Announced. June 2017 Freedom of the Seas Announced as first ship to sail under the joint venture.

Construction On New Shows And Attractions. July 2017 Marketing Milestone: We are One campaign launches

September 2017 Freedom of the Seas Sets Sail From Port Canaveral Year Two Date/Timeframe Event/Milestone

February 2018 Social Media Milestone: We Are One Commercial recorded live via Periscope


March 2018 Harry Potter Themed Attractions Announced For Enchantment of the Seas. March 2018 Staterooms and Luxury Staterooms Open To The Public May 2018 Sales Milestone: 700+ Staterooms Booked For Freedom of the Seas Maiden Voyage

August 2018 Freedom of the Seas Sails Out Of Port Canaveral, Enchantment of the Seas Sails Out Of Port Tampa Bay

Year Three Date/Timeframe Event/Milestone

January, 2019 Two New Ships Announced for 2021 March, 2019 Two New Ships Announced for 2023

6: Future Plans Long-‐term Opportunity & Development Plans To evaluate the success of our joint venture with Royal Caribbean, and our new attractions installments on their

cruise ships, we will start off by testing the market by only installing a Harry Potter attraction on Royal

Caribbean's "Enchantment of The Sea" and "Freedom of The Sea" cruise ships. Within our three-‐year

projections, we expect to generate $ 100,574,820.00 net profit in three years. By the year 2020, we are hoping

to add four new ships on top of the two we already have.

After evaluating the success of our three-‐year projections, our goal is that our venture with Royal Caribbean will

grow and expand. The venture expansion will include placing more attractions throughout the entire Royal

Caribbean fleet and implementing different themes, using the different licenses we have for other attractions

such as Transformers, Despicable Me, The Simpsons, etc.

To measure our success, we will analyze ticket sales and merchandise sales, our revenue and our net profits

within our first three years. To successfully grow and expand we have to achieve the following benchmarks.

·∙ By the year 2021, we will expand Universal attractions onto two more cruise ships on the Radiant Class

Voyager Class, apart from the two cruise ships we already have on the Freedom Class, and Vision Class.

·∙ By the year 2023, we will expand Universal attractions onto two more cruise ships in the Oasis Class, and

Sovereign Class, adding two different attractions to the cruise ships (Minions and transformers).

·∙ By the year 2026, we will expand Universal attractions to eight more cruise ships, adding different

attractions to each cruise ship.

·∙ By the year 2030, we will expand Universal attractions to all of Royal Caribbean cruise ships; each ship will

have different attraction, and we may use the same attractions in 2-‐3 ships depending on the success of the

attraction.


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Appendices

Appendix 1: Competitive Analysis

Revenue (Billions)

N/A 4.3 billion 8,073,855 15,884

Themes Harry Potter Disney Dream International cruises, Celebrity cruises, Azamara club cruises, Pullmantur, Croisieres De France, Tui Cruises

Carnival Sunshine

Attractions Wizardly Buffet, Harry’s Scavenger Hunt

Villain’s Tonight, AquaDuck, Kid’s Club

Surf Simulator, Zip line, Aquatic theater, Musical Stages,

Water works slides, HASBRO, The Game Show, DJ Irie, The Punchliner Comedy Club, Seuss At Sea, EA Sports Bar, Playlist Productions, Stage Shows, Carnival's Seaside Theatre, Pools, SportSquare, Mini Golf, Kids' Active Play, Blue Iguana’s Mexican Fiesta, Teens' Digital Play, Camp Carnival, SkyCourse, SkyFitness, Teens' Active Play

Quarterly Stock Price

$59.37 $96.78 $ 74.76 $44.44


Appendix 2: Operating Cost


Appendix 3: Royal Caribbean Partnership List

Cederholm, T. (2015, January 22). Cruise Lines -‐ Market Realist. Retrieved from http://marketrealist.com/analysis/stock-‐analysis/consumer/cruise-‐lines/charts/?featured_post=217627&featured_chart=217658


Appendix 4: Sample Marketing Material

Cruise Rewards. (2016). Universal Orlando Royal Caribbean Land Sea Cruise Package. Retrieved from http://www.cruiserewards.com/universal-‐royalcaribbean.htm


Appendix 5: Sales Projections

Year one Freedom of the Sea Enchantment of the Sea Merchandise

Average on board spending per customer $ 64.00 $ 64.00 Average passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60

Project Merchandise sold $ 14,522,880.00 $ 9,600,000.00

Year two Average on board spending per customer $ 64.00 $ 64.00

Average passengers per cruise 3,782 2500 Average times a ship sails in a year 60 60

Projected merchandise sold $ 14,522,880.00 $ 9,600,000.00

Year three Average on board spending per customer $64 $64

Average passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60

Projected Merchandise sold $ 14,522,880.00 $ 9,600,000.00

Three year total $ 43,568,640.00 $ 28,800,000.00 Combined total $ 72,368,640.00

Universal Total Merchandise Revenue $ 36,184,320.00

Royal Caribbean Total Merchandise Revenue $ 36,184,320.00


Appendix 6: Sales Projections

Year one Freedom of the Sea Enchantment of the Sea Other attractions and amenities spending

Average spending per passenger $ 365.00 $ 365.00 Average number of passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60

Total on board spending on attractions and amenities $ 82,825,800.00 $ 54,750,000.00

Year two

Average spending per passenger $ 365.00 $ 365.00 Average number of passengers per cruise 3,782 2,500 Average times a ship sails per year 60 60


Year three

Average spending per passenger $ 365.00 $ 365.00 Average number of passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60


Three year total $ 248,477,400.00 $ 164,250,000.00 Combined three year total $ 412,727,400.00

Universal total $ 206,363,700.00

Royal Caribbean total $ 206,363,700.00

Total of all three revenue streams over three years $ 1,855,294,740.00

Total three year revenue for Universal $ 927,647,370.00 Total three year revenue for Royal Caribbean $ 927,647,370.00


Appendix 7: Expenses

Year one Freedom of the Sea Enchantment of the Sea Expenses

Average operating cost per passenger $ 1,553.00 $ 1,553.00 Average passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60

Total Expenses per year $ 352,406,760.00 $ 232,950,000.00

Year two

Average operating cost per passenger $ 1,553.00 $ 1,553.00 Average passenger per cruise 3,782 2,500 Average times a ship sails a year 60 60


Year three Average operating cost per customer $ 1,553.00 $ 1,553.00 Average passengers per cruise 3,782 2,500 Average times a ship sails in a year 60 60


Three year total of operating expenses $ 1,057,220,280.00 $ 698,850,000.00 Combined three year total $ 1,756,070,280.00


Appendix 8: Net Profit

Year One Freedom of the Sea Enchantment of the Sea

Avg. price of Ticket $ 1,350.00

Avg. passengers per cruise 3,782

Avg. times a ship sails in a year 60

Not sailing year one

Total Revenue from one year of ticket sales $ 306,342,000.00

Total Revenue for Universal $ 153,171,000.00

Total Revenue for Royal Caribbean $ 153,171,000.00

Year Two 3% Increase on tickets= $40.50

Avg. Price of Tickets $ 1,390.50 $ 1,390.50

Avg. passengers per cruise 3,782 2,500

Avg. times a ship sails in a year 60 60

Total Revenue from one year of ticket sales $ 315,532,260.00

$ 208,575,000.00

Total Revenue of both ships $ 524,107,260.00



Year 3 3% Increase on tickets=41.50

Avg. Price of Tickets $ 1,432.00 $ 1,432.00

Avg. passengers per cruise 3,782 2,500


Avg. times a ship sails in a year 60 60

Total Revenue from one year of ticket sale $ 324,949,440.00

$ 214,800,000.00

Total Revenue of both ships $ 539,749,440.00



Three year total $ 1,370,198,700.00

Three year total for Universal $ 685,099,350.00

Three year total for Royal Caribbean $ 685,099,350.00

Documents

Universal Studios -Strategic Business Proposal