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Disney plans China park Shanghai proposal gains momentum
SHANGHAI, Jan 12 In a bullish bet amid a weakening global economy, Walt Disney Co. is moving forward on a proposal to build a US$3.59 billion (RM13 billion) theme park in mainland China.
Shanghai Disneyland, which would be one of the largest-ever foreign investments in China, is gaining momentum amid broad economic worries and Disneys struggles with three-year-old Hong Kong Disneyland.
The media giant and the Shanghai municipal government last week agreed to submit a proposal to the Chinese central government that outlines a jointly owned park, hotel and shopping development on the outskirts of the coastal city.
The move, which faces lengthy approvals and likely revisions, marks a significant step forward after nearly a decade of on-again, off-again discussions. And it comes at a time of new challenges at Disneys US flagship parks in Orlando, Florida. and Anaheim, California.
Disney has long sought a mainland park for the access to the vast Chinese market that it would offer. The US$37.8 billion media giant will be able to pitch the park as creating 50,000 new jobs amid a cooling Chinese economy.
The downturn has given the park new urgency, according to a person familiar with the situation. I think it will really fly now given the current economic climate, that person said.
Still, Leslie Goodman, an executive vice president at Disneys Parks and Resorts unit, stressed the proposal is preliminary and faces a long road ahead of it.
As part of this lengthy process, we worked on a joint application report with the Shanghai government which will be submitted to the central government for review. She cautioned: No deal has been signed, no project has been approved.
A Shanghai government spokesman declined to comment. Approvals by Chinas central government could take up to a year.
The agreement signed Thursday in Shanghai represents a framework to be considered by Chinas State Council, the central governments highest administrative body. If it authorises the project, a formal contract would need to be negotiated and approved by other central government bodies, such as Chinas Commerce Ministry.
The proposal provides for Burbank, California-based Disney to take a 43 per cent equity stake in Shanghai Disneyland while a joint-venture holding company owned by Shanghai would hold 57 per cent, according to the person familiar with the terms.
The parks first phase, encompassing about 1.5 square kilometres, would include a theme park, a hotel and shopping outlets and cost up to 24.48 billion yuan, (RM13 billion), that person said. A site near Shanghais Pudong International Airport has been designated for the project.
For Disney, the project represents something of a compromise. In its current iteration, the proposal lacks any Chinese broadcast element. When discussions began in 1999, the company had declined Shanghais invitations to invest believing it needed its own television channels.
In the US, Disney owns broadcast network ABC and cable-networks.
Media exposure is a crucial part of its strategy to lure millions of Chinese mainlanders to the park and extend its brands to the worlds largest population.
Disney believes broadcast exposure would quickly build awareness among Chinese consumers to Disney franchises and could help entice them to the Shanghai park.
The lack of a Chinese Disney channel has hurt Hong Kong Disneyland, which has struggled since it first opened in 2005 with sub-par attendance and complaints that it is too small. In its first year, it fell 400,000 people short of its target 5.6 million audience. The number of visitors fell to just over four million in its second year.
The joint application was signed Thursday in Shanghai by Nick Franklin, executive vice president for new business development at Walt Disney Parks and Resorts, and a Shanghai district governor, Li Yiping, the person said.
The agreement marks a significant step forward by offering an outline for the intricate arrangement that would allow Disney and the local government to split ownership of the project.
The framework agreement envisages a six-year construction period for the first phase and says the park could open as soon as 2014.
Landing the Shanghai theme park has been a top priority for Disney. Rampant piracy of everything from Snow White DVDs to Disney-branded Mickey Mouse toys handicaps the companys ability to take full advantage of the local market.
A mainland park has the potential to alter that equation. It would give the company a venue to sell its products without the threat of piracy. It would also allow the company to get greater control over the way its brand is perceived throughout China.
Disney executives also hope goodwill associated with a big investment can help them get approval to expand their local television programming.
Though under discussion for years, the project heated up in early 2008 as global economic growth prospects weakened. In recent months, Shanghai officials have spoken favourably but vaguely about the possibility of a Disney project.
Last month, Disney Chief Executive Robert Iger visited Shanghai. Months earlier, a Shanghai vice mayor toured Floridas Walt Disney World.
Rumours of an impending deal last year prompted a flurry of land speculation in the area near the city's international airport where Shanghai Disneyland would be built.
In the US, Disney is offering a variety of promotions and discounts at its US theme parks and resorts to encourage visits during the recession. New promotions include free birthday admission to the Disney parks and a buy four, get three nights free deal.
Iger said in November that bookings had fallen off considerably for the early part of 2009. Disney relies on its theme parks for 30 per cent of its revenue.
Shanghai Disneyland is expected to feature Chinese cultural characteristics as well as attractions built around traditional Disney characters and themes. Only approximations of the theme parks layout are spelled out in the framework agreement.
The ownership structure resembles some aspects of Disneys deal in Hong Kong, where a joint venture is majority held by the local government. In recent weeks, the two owners said they are in negotiations to expand the Hong Kong site.
In Shanghai, a newly formed company named Shendi will hold the local governments interest in the park. Shendi is owned by two business entities under district governments in Shanghai, as well as a third company owned by the municipal governments propaganda bureau.
Advising the city government in the deal is Shanghai Investment Consulting Corp. The Wall Street Journal Asia
SHANGHAI, Jan 12 In a bullish bet amid a weakening global economy, Walt Disney Co. is moving forward on a proposal to build a US$3.59 billion (RM13 billion) theme park in mainland China.
Shanghai Disneyland, which would be one of the largest-ever foreign investments in China, is gaining momentum amid broad economic worries and Disneys struggles with three-year-old Hong Kong Disneyland.
The media giant and the Shanghai municipal government last week agreed to submit a proposal to the Chinese central government that outlines a jointly owned park, hotel and shopping development on the outskirts of the coastal city.
The move, which faces lengthy approvals and likely revisions, marks a significant step forward after nearly a decade of on-again, off-again discussions. And it comes at a time of new challenges at Disneys US flagship parks in Orlando, Florida. and Anaheim, California.
Disney has long sought a mainland park for the access to the vast Chinese market that it would offer. The US$37.8 billion media giant will be able to pitch the park as creating 50,000 new jobs amid a cooling Chinese economy.
The downturn has given the park new urgency, according to a person familiar with the situation. I think it will really fly now given the current economic climate, that person said.
Still, Leslie Goodman, an executive vice president at Disneys Parks and Resorts unit, stressed the proposal is preliminary and faces a long road ahead of it.
As part of this lengthy process, we worked on a joint application report with the Shanghai government which will be submitted to the central government for review. She cautioned: No deal has been signed, no project has been approved.
A Shanghai government spokesman declined to comment. Approvals by Chinas central government could take up to a year.
The agreement signed Thursday in Shanghai represents a framework to be considered by Chinas State Council, the central governments highest administrative body. If it authorises the project, a formal contract would need to be negotiated and approved by other central government bodies, such as Chinas Commerce Ministry.
The proposal provides for Burbank, California-based Disney to take a 43 per cent equity stake in Shanghai Disneyland while a joint-venture holding company owned by Shanghai would hold 57 per cent, according to the person familiar with the terms.
The parks first phase, encompassing about 1.5 square kilometres, would include a theme park, a hotel and shopping outlets and cost up to 24.48 billion yuan, (RM13 billion), that person said. A site near Shanghais Pudong International Airport has been designated for the project.
For Disney, the project represents something of a compromise. In its current iteration, the proposal lacks any Chinese broadcast element. When discussions began in 1999, the company had declined Shanghais invitations to invest believing it needed its own television channels.
In the US, Disney owns broadcast network ABC and cable-networks.
Media exposure is a crucial part of its strategy to lure millions of Chinese mainlanders to the park and extend its brands to the worlds largest population.
Disney believes broadcast exposure would quickly build awareness among Chinese consumers to Disney franchises and could help entice them to the Shanghai park.
The lack of a Chinese Disney channel has hurt Hong Kong Disneyland, which has struggled since it first opened in 2005 with sub-par attendance and complaints that it is too small. In its first year, it fell 400,000 people short of its target 5.6 million audience. The number of visitors fell to just over four million in its second year.
The joint application was signed Thursday in Shanghai by Nick Franklin, executive vice president for new business development at Walt Disney Parks and Resorts, and a Shanghai district governor, Li Yiping, the person said.
The agreement marks a significant step forward by offering an outline for the intricate arrangement that would allow Disney and the local government to split ownership of the project.
The framework agreement envisages a six-year construction period for the first phase and says the park could open as soon as 2014.
Landing the Shanghai theme park has been a top priority for Disney. Rampant piracy of everything from Snow White DVDs to Disney-branded Mickey Mouse toys handicaps the companys ability to take full advantage of the local market.
A mainland park has the potential to alter that equation. It would give the company a venue to sell its products without the threat of piracy. It would also allow the company to get greater control over the way its brand is perceived throughout China.
Disney executives also hope goodwill associated with a big investment can help them get approval to expand their local television programming.
Though under discussion for years, the project heated up in early 2008 as global economic growth prospects weakened. In recent months, Shanghai officials have spoken favourably but vaguely about the possibility of a Disney project.
Last month, Disney Chief Executive Robert Iger visited Shanghai. Months earlier, a Shanghai vice mayor toured Floridas Walt Disney World.
Rumours of an impending deal last year prompted a flurry of land speculation in the area near the city's international airport where Shanghai Disneyland would be built.
In the US, Disney is offering a variety of promotions and discounts at its US theme parks and resorts to encourage visits during the recession. New promotions include free birthday admission to the Disney parks and a buy four, get three nights free deal.
Iger said in November that bookings had fallen off considerably for the early part of 2009. Disney relies on its theme parks for 30 per cent of its revenue.
Shanghai Disneyland is expected to feature Chinese cultural characteristics as well as attractions built around traditional Disney characters and themes. Only approximations of the theme parks layout are spelled out in the framework agreement.
The ownership structure resembles some aspects of Disneys deal in Hong Kong, where a joint venture is majority held by the local government. In recent weeks, the two owners said they are in negotiations to expand the Hong Kong site.
In Shanghai, a newly formed company named Shendi will hold the local governments interest in the park. Shendi is owned by two business entities under district governments in Shanghai, as well as a third company owned by the municipal governments propaganda bureau.
Advising the city government in the deal is Shanghai Investment Consulting Corp. The Wall Street Journal Asia
