Overview of the Amusement & Recreation Services Industry

Weekly Corporate Growth Report, Feb 9, 2004 by Dolbeck, Andrew

The Amusement And Recreation Services industry covers a diverse range of entertainment operations. The industry includes live theater, concerts, professional sports, amusement parks, and public sports facilities such as golf courses and bowling alleys. Gambling establishments form a major portion of the sector. The industry, as defined by major SIC group 79, does not include the motion picture industry, nor does it include television and radio broadcasting, museums, art galleries, nor botanical and zoological gardens.

Over the years, the out-of-home entertainment market has shown a long record of steady growth. While the industry sees occasional slumps, it generally returns to the path of slow but consistent growth, according to Bob Rogers, the founder of BRC Imagination Arts.

The period from 1997 to 2000 saw accelerated industry growth, particularly in the area of major theme parks. Many large entertainment projects were built in that period, including Islands of Adventure, Disney's California Adventure, and Tokyo DisneySea. During this boom time, the industry expanded. But the market demand has not yet grown to meet the full capacity of the parks built during this period, and many employees hired during the boom have since been laid off.

The entertainment industry today is highly driven by intellectual properties and brand names. Two of the largest operators of theme parks - Universal Studios and Walt Disney Company - are also major producers of entertainment products in other media. Intellectual properties created for films and TV can be fed directly back into their amusement parks. Not only are amusement park rides made from successful move franchises, such as the famous Indiana Jones ride, but the reverse is also becoming true - Pirates of the Caribbean and the Haunted Mansion began as Disney rides and have since become movies.

Across the country, fairs, grandstand shows, and other special events are providing a unique venue for entertainers. While most commonly associated with country music performers, these venues are bringing in a wider range of artists. While the ticket prices at fairs are considerably lower then those typically charged for concerts, attendance is often higher. The exposure can be valuable to the performers since the fair audience is frequently composed of potential fans that would not have been able to pay concert hall prices. Furthermore, mid-sized acts that would be part of a package in a theater or stadium setting can be headliners at the local fair.

Gambling remains a popular and controversial form of entertainment. While most states have only a limited and tightly controlled gambling industry, Federal law allows recognized Native American tribes to operate gambling establishments in states in which other forms of gambling are allowed. This often leads to conflicts between the tribes and state governments. In Connecticut, for example, two large Indian casinos brought $400 million into the stale and local treasuries each year, but so many state residents objected to the casinos that the State repealed the gambling laws that allowed the casinos to operate. Connecticut's General Assembly repealed the state's charity gambling law, which allowed churches and charities to hold gambling fund-raisers, and, as a side effect, allowed the local tribes to operate gambling establishments.

California is taking the opposite approach to dealing its Indian gambling casinos. Under an initiative currently scheduled for the state's November 2004 ballot, commercial gambling establishments such as racetracks would gain the right to host slot machines unless Native tribes with gambling operations agree to certain conditions. The conditions include paying 25 percent of their casino profits to the state and agreeing to comply with several laws from which they are currently exempt. Currently the Indian tribes have a monopoly on slot machines in the state.

Gambling establishments are looked on more favorably in areas where they are run as commercial venues instead of tribal operations. In Atlantic City, for example, where commercial casinos are legal and can be taxed, regulated, and audited to a greater degree than tribal casinos, gambling operations are seen as beneficial. Atlantic City casinos provide millions in tax dollars to the state of New Jersey, bring in tourists, support big resorts, and are generally seen as improving the state's image.

Opposition to gambling isn't just an issue of Native American relations. According to the National Coalition Against Legalized Gambling, there were 45 efforts to introduce or expand gambling in 30 states in 2003. All but three of these efforts failed. Many vocal citizens object to gambling because of its social consequences. Governments benefiting from gambling must work to find a way to acknowledge these objections. According to the News Tribune, all the states that sponsor or sanction gambling, except the State of Washington, have programs that apply a portion of their gambling revenues to treat gambling addiction. Oregon treated 3,500 compulsive gamblers in 2003 with a program funded by one percent of the slate's lottery revenues.