Merlin Entertainments General Discussion

Talk about what is going on in the theme park and attraction industry in general.
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RustyRider
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So you say merlin studios is a separate entity to merlin entertainments. So potentially could they be contacted from clients who want for example, a central theming piece to an awards ceremony? Or is it strictly a merlin exclusivity deal?

Its all very strange...
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ponder
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I would imagine that Merlin Studios runs as a separate company and charges the price it does to the parks purely for tax reasons.

The park's pay a certain percentage of tax on all profit and that tax band is higher if the profit margins are higher. If some of this money goes into Merlin Studios instead, then that tax isn't being paid, but the money is still going in to Merlin. I'd imagine there's an element of being able to claim back VAT on Studio products, too, but can't be 100% on that.

So imagine that you have 1 business earning £1 billion and paying 40% tax on it's profit, your second business is earning £200 million and paying 25% tax on profit. The threshold for the 40% tax is £700 million. So business 1 pays business 2 £300 million for something. Both businesses then pay 25% tax. Business 1 suffers and business 2 benefits in terms of figures, but seeing as they're both owned by the same parent company, the overall business benefits, especially in terms of stock market value.

So, yes, it is all about money, but I wouldn't look it at from a purely negative perspective. It's something all companies do, and as long as the actual cost of the studios involvement is in the initial budget for a park development, then I don't really see what the problem is.
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RustyRider
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That's all well and good ponder, but what a few people are saying is, the parks are using the studios less as they charge rediculous amounts of money for small things, such as a height board, or 8k for fence painting?
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Jubby
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^ Yes, that it the problem. What they should be doing is telling the parks that they have no choice but to use Merlin Studios, then what ponder wrote works (which I what I would agree they use this system for).

A couple of other thoughts - Don't Disney use this system as well with WDI being a seperate company and charging a lot of money? Maybe this is why both Merlin and Disney seem to spend a massive amount of money creating a new attraction, far more than any independant theme park and the result, more often than not, doesn't look like that amount has been spent.
djtruefitt

It does all seem very strange, Merlin own a perfectly good company that do painting, signs, etc. Yet they charge too much so Alton go elsewhere to get what they want, rather than internally.

It should be the case that it costs Alton very little to get what they want from studios. And of course if studios want to do business outside of Merlin they will then charge a higher rate for that. But a lower rate for internal work.

Im guessing there must be some reasoning as to why they charge so much, something linked to tax, or profits or something, I just find it very strange.

And 8,000 to paint a fence? I think I might set up my own fence painting company if thats the kind of money I can make!
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thefatone
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RustyRider wrote: So you say merlin studios is a separate entity to merlin entertainments. So potentially could they be contacted from clients who want for example, a central theming piece to an awards ceremony? Or is it strictly a merlin exclusivity deal?

Its all very strange...
Pretty sure I read an article about studios being open to any development - the rename to "Merlin Magic Making" was to coincide with being able to sell their design products to other companies if they wish for it.

Can't imagine many going for it unless it's the right price though.
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djtruefitt wrote: And 8,000 to paint a fence? I think I might set up my own fence painting company if thats the kind of money I can make!
I think people are missing the point with this whole '£8k to paint a fence' thing. I'd have thought it's not so much that the fence cost £8k to paint, more that £8k needed to be accounted for.
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I only really know one thing about Studios. They rip off the Merlin parks by charging them a fortune for silly little things :P

If you ask me Merlin Studios should operate as a themeing and set design company like say Sarner, or Farmer Studios who can be used by anyone. However, the Merlin owned attractions receive heavy discounts on jobs. Surely that would provide Merlin some extra income without ripping off their own parks?

I don't at all questsion the prices DanB quoted. Last I heard something as simple as an exit sign costs hundreds of pounds to produce. I could go down the road to the local signwritter and get one made myself for £25 :|
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haydn!
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What you have to remember though, is yes, Merlin Studios is part of the group, but the people who work for the studios are still highly qualified, experienced and skilled designers and craftsman. Those trades by nature do not come cheap.

I doubt the Studio's operates for 'profit' but it will certainly be at market cost. And so it should be. Otherwise you run the risk of loosing those skilled professionals to private creative firms.
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Jammydodger
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I always thought of if kind of like a Franchise.
They're run independently, because the franchisee doesn't want to do it themselves, but still want some money, so the franchisee ultimately sets them some rules to continue using their brand name and get royalties for it. Now because the parent has no real say in what they do with their company assuming they follow the rules, and sit their and inject money when they see fit, the two companies, park and Studios have to operate as individuals. And the only way Studio's can keep up is by charging high prices to the park.

If say Studio's wanted to expand, and Merlin didn't want to invest more money, they would have to raise that money themselves, which is more than possible because they exist as a separate entity but to do that they'd have to make that money by either branching out or raising their prices. But the problem here is that one of those rules set by the parent company, probably said they couldn't expand. 

Obviously this is all theoretically, and not exactly how it works, because the park obviously isn't a franchise but that's just how I'd assume it works roughly....
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Badgy
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It did used to be that companies used to have different trading arms to manage their tax liabilities especially where a company would create an off-shore trading arm that would "sell" services to the main trading bodies at inflated prices to avoid tax. FRS24 (financial reporting standard) sets out the methods of working out the transfer price from one company to another within the same group.

The method with the most likely highest cost would be the "comparable uncontrolled price" method, where you base the selling price on purchasing the same goods or services to a comparable unrelated company. You could argue that Disney Studios or similar is an equivalent company and therefore they charge similar prices to those. Franks Frence Painting would not neccessarily class as a similar company and thus they wouldnt have to take into account that the same service could be obtained cheaper.

In the end it makes little difference as any proffit transfer between groups has to cancel out on consolidation of the group accounts (FRS2).

Just in case you think that these rules might get flouted, then you would find that the independant auditors would not sign off the accounts which would be extremely bad for the company. On this happening all creditors would stop supplying goods and services unless on an upfront cash payment basis. the next thing that would happen is you would get a full tax audit by the joyous souls at HMRC and depending on what they found then a large fine and probable jail time for company directors.

So to sum up, Merlin Studios are almost certainly charging "fair" prices for their goods and services. Whether we think they are inflated is a different matter.

You can all wake up now.

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aru
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I work for a large utility company that has almost exactly the same Parks / Merlin Studios arrangement. It is the symptom of a very large company where departments act as individual business units.

It may seem bonkers, but this is how it is set up to ensure that Merlin Studios can justify itself and seemingly make money, add value etc (even if it is Merlin £££ in the first place).  :? :D
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AndreJD
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Hey wanted to visit Thorpe Park since I'll be in London for a few days, was wondering if there's any difference at all between the 19th, 20th, 21st of June (Tue, Wed, Thu) in terms of business. I didn't think there was but just in case there's a holiday or an event on it might be best to avoid. Thanks for any help
SpinballEdders

AndreJD wrote: Hey wanted to visit Thorpe Park since I'll be in London for a few days, was wondering if there's any difference at all between the 19th, 20th, 21st of June (Tue, Wed, Thu) in terms of business. I didn't think there was but just in case there's a holiday or an event on it might be best to avoid. Thanks for any help
It should be empty due to kids being in school

:)
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Completely and utterly stupid system. Another example of "clueless" M£rlin!

All attractions owned and created by Merlin should be done through Studios. It should be their personal design and theming department, non-profit, where everything is done for the parks at cost price.

Can you imagine if the Towers handymen started charging "per job" instead of just being on a regular hourly wage? They would probably charge £8k to change a light bulb!  Or what if the ticket sales staff turned around and said "that'll be £2,000 today please, I sold 500 park tickets for you".  Now litter pickers, start charging by each pick!

It can't have always been this way though as back in the day everything was done by studios.
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aru
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Does anyone find the whole ':roll: Merlin' thing on here a bit tiresome? It gets used all the time like Merlin somehow keep bumping into walls and backing themselves into corners.

Merlin are a big (and successful) company, and with a big company come systems to make sure that all elements of the business are justified. I imagine the Studios gets asked to quote for work internationally from all of the Merlin portfolio - to keep a handle on this it will have to prioritise work, set budgets, produce a business plan and behave like a business in its own right. This is the only way it can function within such a large organisation.

Lots of companies do this! The company I work for does this!  :)
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BigAl
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That still doesn't explain why a lot of work is sent elsewhere. If they charge too much for work and that makes the attractions have to turn elsewhere then that's just... well... daft!
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thefatone
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They don't always go elsewhere - i imagine it depends what it's for. If it's signage, they probably charge a bit as the studios are more pre-occupied on doing other things.
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BigAl
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Well if they have that much work then surely it might be an idea to expand Merlin Studios?
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haydn!
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They probably outsource work to specialists in a required field. No company does everything well, but many specialise in a few areas and do it great.

Plus, even when they do outsource, Merlin Studios still do the initial design work. So in reality it's no different to thousands of other companies around the World.
Last edited by haydn! on Sat Apr 21, 2012 10:55 pm, edited 1 time in total.
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