How China got Disney to share keys to Magic Kingdom

A man visiting Shanghai Disney Resort during a Grand Opening event in Shanghai.
A man visiting Shanghai Disney Resort during a Grand Opening event in Shanghai. PHOTO: REUTERS

Plans for the $7.4-billion park were stalled until Disney scaled back its demands

SHANGHAI • Disney had pushed China too hard, putting the company's plans for a new theme park here in limbo. Now, Disney's chief executive, Mr Robert A. Iger, wanted to kick the years-long negotiations into high gear.

He took a corporate jet to Shanghai in February 2008 to meet the city's new Communist Party boss, Mr Yu Zhengsheng.

Over dinner at a state guesthouse, Mr Iger offered a more conciliatory approach, setting the tone for the next phase of talks.

After that, Disney substantially dialled back its demands. In addition to handing over a large piece of the profit, the company would give the government a role in running the park. Disney was also prepared to drop its long-standing insistence on a television channel.

For Disney, such moves were once unthinkable. Giving up on the Disney Channel meant abandoning the company's proven brand- building strategy. "We're kidding ourselves if we think we're going to get everything we want," Mr Iger recalled saying at the time.

His trip and the new attitude in the talks that followed appeased Chinese officials. Before long, they had struck a landmark deal to build the US$5.5-billion (S$7.4-billion) Shanghai Disney Resort, opening China to a singularly American brand and setting the pace for multinational companies to do business in the country.

The Shanghai park, which opened on Thursday, has become mission critical for Disney as it faces business pressures in other areas such as cable.

It is designed to be a machine in China for the Disney brand, with a manicured Magic Kingdom-style park, ToyStory-themed hotel and Mickey Avenue shopping arcade. More than 330 million people live within a three-hour drive or train ride, and Disney is bent on turning them into lifelong consumers.

But Disney is sharing the keys to the Magic Kingdom with the Communist Party. While that partnership has made it easier to get things done in China, it has also given the government influence over everything from the price of admission to the types of rides at the park.

From the outset, Disney has catered to Chinese officials, who had to approve the park's roster of rides and who were especially keen to have a large-scale park that would appeal to more than children.

The Shanghai resort, which will be four times as big as Disneyland, has a supersize castle, a longer parade than any of the other five Disney resorts around the world and a vast central garden aimed at older visitors.

Worried that importing classic rides would reek of cultural imperialism, Disney left out stalwarts such as Space Mountain, the Jungle Cruise and It's A Small World. Instead, 80 per cent of the Shanghai rides, such as the Tron light- cycle roller coaster, are unique, a move that pleased executives at the company's Chinese partner, the state-owned Shanghai Shendi Group, who made multiple trips to Disney headquarters to hash out blueprint details.

Disney then ran with the idea, infusing the park with Chinese elements. The Shanghai resort's signature restaurant, the Wandering Moon Teahouse, has rooms designed to represent different areas of the country. The restaurant is billed as honouring the "restless, creative spirit" of Chinese poets.

Such accommodation of the Chinese is becoming increasingly common. A growing number of multinationals has agreed to cooperate with the state through alliances or joint ventures, in the hopes of gaining access to the world's second-largest economy, after the United States.

And they are doing so at a time when the Chinese government is growing more assertive. Emboldened by the size of its economy, China is stepping up its demands.

IBM has promised to share technology with China. LinkedIn has agreed to censor content inside the country. Even Google has been scrounging for a way back into China, despite a highly public departure in 2010 after accusations of government censorship and intrusions by state-backed hackers.

For Disney, Mr Iger has called Shanghai the "greatest opportunity the company has had since Walt Disney himself bought land in Central Florida" in the 1960s.

That site became Walt Disney World, a group of four theme parks that attracts about 40 million visitors annually. About 11 million visitors are expected next year at the Shanghai park, with annual attendance estimated to reach 20 million within a few years, according to Ms Jessica Reif Cohen, an analyst at Bank of America Merrill Lynch.

If all does not go as planned, Disney will suffer the wrath of Wall Street, which expects the resort to offset slower growth at ESPN, the company's long-time profit engine, and some of its other theme parks. The last thing Disney wants is another Disneyland Paris, a money pit that suffered cultural miscues and, after 24 years, is still struggling to turn a profit. Hong Kong Disneyland has had mixed financial results since opening in 2005.

Mr Iger has staked his legacy on Disney's partnership with the Chinese government. In September, he brought a group of Disney board members to Shanghai to show off the park. They took in the world's largest Disney castle, looking on as 11,000 construction workers raced to finish a Pirates Of The Caribbean-themed under- water voyage. Mr Iger, 65, has been the guiding force and has held face-to-face talks with Chinese presidents, prime ministers and propaganda officials.

He has sought a personal relationship with China's paramount leader, President Xi Jinping.

After he learnt that Mr Xi's father, Xi Zhongxun, a revolutionary leader, had visited Disneyland in 1980, he pressed his staff to find a photograph. A colour photograph shows the president's father, who died in 2002, wearing a Mao suit, shaking hands with Mickey Mouse. Mr Iger presented it to the Chinese leader as a gift and a symbol of their partnership.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on June 18, 2016, with the headline 'How China got Disney to share keys to Magic Kingdom'. Print Edition | Subscribe