Disney's rollercoaster relationship with China wins it theme park deal

Published on Wednesday 4 November 2009 20:20

WALT Disney was yesterday granted permission to build its first theme park in mainland China in a move that could open the door for other western entertainment and media firms trying to crack Asian markets.

Approvals for plans for the park in Shanghai comes after years of on-off talks between Disney and the Chinese authorities, who are wary of too much foreign influence in the highly sensitive sectors of media and popular culture.

Last spring, Shanghai mayor Han Zheng compared the city and Disney to "lovers, still in love but having a hard time deciding when to get married".

Disney president and chief executive Robert Iger yesterday said: "China is one of the most dynamic, exciting and important countries in the world, and this approval marks a significant milestone for Disney."

He said the initial phase of the project would include a "Magic Kingdom-style theme park with characteristics tailored to the Shanghai region".

The new park planned for the Pudong new district of China's financial capital will take years to contribute to a company that rakes in more than $30 billion (18bn) in revenue.

But analysts think the move is an important step forward for Disney and other western media firms to make inroads into the vast and untapped Chinese entertainment market.

Christopher Marangi, senior analyst with Gabelli & Co, said: "They've been laying the groundwork for a park for many years by exposing the population to Disney properties, film, TV and merchandising.

"Adding a physical presence in the form of a park would really complete and add to the value chain in China."

Disney's breakthrough comes just two weeks ahead of a scheduled trip to China by US president Barack Obama, a visit that analysts had expected to help spur a decision on the park.

For Shanghai, Disneyland could keep tourists coming after the curtain falls on the 2010 World Expo.

Meanwhile Disney will hope the park, with an estimated price tag of $3.6bn, will fare better than its Hong Kong property, which has struggled with lower-than-expected attendance and financial losses since it opened in 2005.

Disney is pumping a further $465 million into the expansion of its site in Hong Kong but commentators don't expect the two parks to compete.

Paul Tang, chief economist at Bank of East Asia, said: "Visitors from Guangdong and southern China will still find Hong Kong more convenient, while Shanghai will attract visitors from northern and eastern China."

As well as its Hong Kong site, Disney has offices in Shanghai, Beijing and Guangzhou. News of Disneyland's arrival in Shanghai received a mixed reception from local people in the Pudong district, some fearing homes and farms might be cleared to make way for the park.