Disney Gets Nod for Shanghai Theme Park
By Bob Blandeburgo
Associate Editor
Money Morning
It’s been in the works for more than a decade, but The Walt Disney Co. (NYSE: DIS) finally got the approval it needed from China’s government to build a theme park in Shanghai.
Disney’s fourth park outside the United States will be the first on mainland China, giving the company a new avenue to market its popular properties in the restriction-laden Red Dragon. The park, to be located in the Pudong district between Shanghai’s main international airport and its downtown area, will target China’s growing middle class.
“Shanghai Disney would be a huge boom,” Shaun Rein, managing director of China Market Research Group told Bloomberg News. “You have 80 million people within 3 hours’ driving distance.”
Still, a densely populated area doesn’t necessarily make for an economic slam-dunk. Take Disneyland Hong Kong, for instance: It’s easily accessible to about 60 million people in the Guangdong province and burgeoning Macau, but it drew just 5.2 million people in its first fiscal year, 2005-2006 – short of Disney’s goal for 5.6 million visitors.
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Things didn’t get much better in the following two years, as visits dropped to 4 million and 4.5 million, respectively. Meanwhile, nearby Ocean Park in 2008 enjoyed its fifth straight year of more than 5 million visitors, Fortune magazine reported.
It’s generally accepted that Disney’s shortcomings in Hong Kong and its other international locations were due to a failure to adapt to the local cultures.
“I wasn’t trying to kill the Mouse,” Ocean Park Chairman Allan Zeman told Fortune. “They’ve done it themselves.”
Indeed, it’s often said that Disney force-feeds its products to international markets, thus homogenizing culture.
“Ocean Park is more fun – Disneyland is more for kids,” Ocean Park visitor Frankie Tong told The New York Times today (Wednesday). “Disneylands are more or less the same in places all over the world – Disney is more American.”
Disney’s new leadership, under the direction of Chief Executive Officer Bob Iger changed this unofficial policy, adapting to the uniqueness of local markets and partnering with locals. The company also incorporated local customs. (Serving alcohol at Disneyland Paris helped turn it into a financial success.)
The coming theme park in Shanghai represents a new way for Disney to stoke demand for its properties without much government scrutiny.
Unlike Western nations that consistently snap up the many forms of Disney media, including movies, video games and television shows, China keeps a tight grip on the media crosses its borders.
For example, only 20 foreign films are allowed into China each year, reducing Disney’s chances of showing its popular movies there.
Disney’s Shanghai park “gives Disney an opportunity to monetize its brand without necessarily having to produce filmed content,” David Bank, an analyst with RBC Capital Markets Corp. told Bloomberg.
A theme park sans regulatory hurdles is “the real key to making money in China for the media companies,” he added.
“The cultural implication is significant as Disney theme parks represent a certain kind Western thinking,” Chinese University hotel and tourism management associate professor Leung Wai-kin told Bloomberg in a phone interview. “It doesn’t mean the government agrees to it but at least it’s comfortable with it.”
Reports indicate the new 1,000-acre park will cost Disney $3.6 billion (24.5 billion yuan). Disney’s theme park business is second only to its media arm, and saw its profit decline 19% to $521 million in the second quarter as consumers curbed their spending.
News and Related Story Links:
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Disneyland Hong Kong - Wikipedia:
Guangdong Province - Money Morning:
Gambling on Casino Stocks: Where Should Investors Place Their Bets? - Wikipedia:
Ocean Park Hong Kong - Fortune:
Disney Comes to China - The New York Times:
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China Approves Disney Theme Park in Shanghai - Wikipedia:
Disneyland Paris - Wikipedia:
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