China OKs Disney theme park plans

COMPANY TOWN

China OKs Disney theme park plans

Beijing's approval clears the way for the Burbank media giant and Shanghai to work out the details.

By Dawn C. Chmielewski and Hugo Martín

November 4, 2009

China, finally, is ready to build a house for Mickey Mouse.

Beijing has approved plans to build a Disney theme park in Shanghai, a major milestone in the more than decade-long effort by Walt Disney Co. to dramatically expand its reach into China.

Disney and the Shanghai municipal government jointly submitted plans in January to build a $3.59-billion park to open as early as 2014. It would be the entertainment giant's fourth theme park outside the U.S., after Paris, Tokyo and Hong Kong -- and the first in mainland China, the fastest-growing mass market in the world.

The Chinese central government approved a broad agreement, outlining the legal and financial framework for the park. The decision clears the way for Disney and Shanghai to work out detailed plans for building and operating the park, addressing such issues as subway and road access to the park as well as finances.

"China is one of the most dynamic, exciting and important countries in the world, and this approval marks a very significant milestone for the Walt Disney Co. in mainland China," Disney Chief Executive Robert Iger said in a statement.

The new Shanghai park would give Disney access to 300 million people who live within a day's travel of the city, a sprawling, affluent and modern metropolis of more than 16 million people.

Perhaps more important, however, it would secure a beachhead for Disney to sell its products and wield its brand in a market that has tightly controlled the inflow of American entertainment through restrictions on the number of movies allowed in mainland theaters and programs beamed through television channels.

Disney announced the approval in a carefully worded statement Tuesday afternoon. Government-controlled China National Radio speculated that the timing of the announcement, coming in advance of President Obama's visit to Shanghai this month, amounted to a "gift."

The Burbank-based entertainment giant has been in on-again, off-again discussions about the park since 1995, when the Shanghai government initially contacted the company about building a Disney World-like tourist mecca. Talks ebbed and flowed, with discussions resuming in earnest about two years ago, according to people familiar with the matter who asked not to be identified because of the sensitivity of negotiations.

In the meantime, Disney turned its attention to Hong Kong, where it built the 320-acre Disneyland resort that opened in 2005. The company and the Hong Kong government announced a major expansion in July, in hopes of boosting attendance by increasing the number of theme areas to seven from four over the next five years, tackling criticism that the world's smallest Disneyland didn't offer enough attractions.

James H. Higashi, a principal of Management Resources in Tustin, a consultant to the theme park industry, noted that Shanghai was one of the most populated regions in the world, offering Disney a prime location not only to draw visitors but also to market other Disney products such as movies and consumer products to a huge portion of China.

"From a strategic standpoint, it's one of the best markets in the world," Higashi said.

He said Disney theme parks have had trouble adjusting to the foreign markets -- the Paris operation is saddled with huge debt and the Hong Kong location has operated at a loss -- but he expects the company to do well in the long run, given Shanghai's rising reputation as one of the world's premier cities, both in culture and business.

Disney would take a 43% equity stake in Shanghai Disneyland, while a joint-venture holding company owned by the local government would own the remaining 57%.

The first phase, to be built on about one square mile in what is now a mostly agricultural area between an airport and the Pudong business district, would include a theme park, hotel and shopping district.

The Shanghai park is envisioned as a classic Magic Kingdom model, with a castle at the center, but with Chinese accents. As with Disney's other international parks, it will give a nod to local tastes and cultures. At the Disneyland Resort in Paris, wine is served. In Hong Kong, the Golden Mickey Show is performed in three languages -- Cantonese, the language of Hong Kong, Mandarin, which is spoken on the mainland, and English. The Shanghai park would similarly reflect mainland sensibilities, people familiar with the plans said.

Dennis Speigel, president of International Theme Park Services Inc., a consultant to theme park developers, said the latest venture was a smart move by Disney to stake a claim in Shanghai even though a theme park wouldn't be developed for six to eight years.

Speigel said Disney has had some problems adjusting its product to foreign audiences. For example, he said Mickey Mouse didn't appeal much to Disney guests at the Hong Kong park until the company researched Chinese media and mainstream culture and found he would be more appealing without a mouth.

He also said Disney has realized that the Hong Kong Disneyland is too small and confining and has been upstaged by a nearby marine-themed park called Ocean Park Hong Kong.

Still, Speigel said that by winning approval from the Chinese government now, Disney will be in a position to thrive in Shanghai "when they are ready and the time is appropriate."

Gene Jeffers, executive director of Themed Entertainment Assn., a trade group of designers and builders of theme parks and special events, said he was optimistic that Disney could succeed in Shanghai.

"Something like this is good for our industry," he said.

dawn.chmielewski@

latimes.com

hugo.martin@latimes.com

Nicole Liu of The Times' Beijing Bureau contributed to this report.

Copyright © 2009, The Los Angeles Times