Six Flags CEO Faces a Bumpy Ride

[rjholla2003]

http://money.cnn.com/2006/03/30/magazines/fortune/pluggedin_fortune/

Six Flags' CEO faces a bumpy ride
Mark Shapiro is courting families and their fatter wallets, and selling unprofitable locations.

By Matthew Boyle, FORTUNE writer
March 31, 2006: 10:22 AM EST

NEW YORK (FORTUNE) - Like the thrill rides he oversees, Mark Shapiro moves really, really fast and can leave you a tad bit dizzy.

Over a couple of non-fat decaf lattes at a bustling breakfast spot in the shadow of Manhattan's Grand Central Station earlier this week, Shapiro, the former ESPN programming honcho who's now running theme park operator Six Flags, detailed his strategy for transforming what he admits is a "tarnished" brand into "an entertainment supermarket."

Currently wrapping up a blitzkrieg tour of all 30 theme parks, the indefatigable Shapiro plans to bring Six Flags (Research) back to profitability for the first time since 1998 by eschewing costly new roller coasters, which, he argues, attract only teens. Instead, he's courting families (and their fatter wallets) with a no-smoking policy, more courteous employees, daily parades, brunches hosted by Bugs Bunny, and VIP seating for new attractions like petting zoos and Chinese acrobats. (He's even posted employees in the bathrooms to keep them squeaky clean.) "We're going to make it more touchy-feely," he says.

That's not all. Shapiro is also jacking up ticket prices, furiously hawking sponsorships for pizza, candy and soda, and selling off unprofitable locations to reduce the company's massive debt load -- moves designed to please Wall Street, not Main Street. The company lost $111 million on just over $1 billion in revenues last year.

Six Flags has three parks on the market now, and has hired real estate consultancy The Staubach Group, headed by NFL Hall of Fame quarterback Roger Staubach, to make recommendations on what else to sell. "Lots of homework needs to be done, but we want to shave off hundreds of millions [in debt]," says Shapiro, whose boundless energy prevents him from sitting still for longer than half an hour.

While much work remains to be done, both constituencies appear pleased: Earlier this month the company reported that per-person spending (a key barometer of its financial health) at the few parks already open had increased by double-digits over last year. (The quarter as a whole was a downer, though, with a loss of $145 million exceeding last year's $115 million loss.)

And while only one Wall Street analyst currently rates Six Flags' shares a buy -- most are in wait-and-see mode -- shareholders like Microsoft chairman Bill Gates are pleased that the stock has risen 44 percent since Shapiro was installed as CEO last December after a bitter, three-month proxy battle.

The fight pitted Shapiro's buddy Daniel Snyder, the volatile owner of the NFL's Washington Redskins, against then-CEO Kiernan Burke. Snyder emerged victorious, ousting Burke and two of his allies from the board, and replaced them with pals like Shapiro, Washington DC real estate kingpin Dwight Schar, former Congressman and NFL great Jack Kemp, and Hollywood mogul Harvey Weinstein. The company hopes to add still one more board member, preferably from the world of advertising.

Such star power befits Snyder's grand vision for Six Flags, which was founded by Dallas businessman Angus Wynne in 1961. Snyder and Shapiro hope to use their marketing and media expertise to turn Six Flags into a blue-chip entertainment brand, rather than just a summer hangout for bored teenagers. (Whether they can do this without getting on each other's nerves is an open question.)

Shapiro, a big fan of Disney's theme parks -- he visits them often with his two young sons -- is clearly using them as a model, even going so far as to hire Euro Disney's CFO Jeffrey Speed. Shapiro is also reaching into Six Flags' history for help, consulting with his good friend Bob Pittman, who ran Six Flags back when it was owned by Time Warner (the parent company of FORTUNE and CNNMoney.com) in the 1990s.

Pittman, who as COO of America Online was an architect of AOL's disastrous merger with Time Warner, now runs a media-focused private equity outfit in New York called Pilot Group. (Pittman declined to comment.)

Shapiro has also overhauled the management team, sacking five park managers and creating four new divisions inside the company's New York headquarters, including one headed by former ESPN and ABC sales chief Lou Koskovolis that will focus on corporate sponsorships, like the one Six Flags just inked with Papa John's pizza.

More, including one with an as-yet-unnamed candy company, are on the way. Those sponsorships should bring some much-needed clarity to wildly fluctuating food quality and prices: For example, the $2.99 slice of pizza in Atlanta was bigger than the slice sold in LA, which cost $5.99.

Amazingly, the general managers who run the parks -- 28 in the U.S. and one each in Mexico and Canada -- had not sat in the same room together since 2001. Shapiro brought them to Burbank in February, and encouraged them to think of each and every ride, food stand, and kid's show as a separate business unit.

"We want the employees to own and manage them," says Jay Thomas, the new GM at the Kentucky Six Flags. Thomas was also pleased that Shapiro decided to remodel the park's corporate picnic area, which has resulted in an increase in group sales of 29 percent so far this year. Of Shapiro, Thomas says, "He's a motivator unlike any I've ever seen."

He'd better be, given the challenge Shapiro faces in lifting Six Flags out of the rut it's been in over the past few years. The message board at www.themeparkinsider.com, is replete with angry comments from visitors to Six Flags' various parks, complaining about poor food, rude employees, and broken down rides.

With his moves so far, Shapiro has taken care of the low hanging fruit, but the real test comes next week when Thomas' Kentucky park and several others open for business.