Newspaper article International New York Times

How China Won the Keys to the Magic Kingdom ; Disney's Plans for Resort in Shanghai Had to Bow to Beijing's Demands

Newspaper article International New York Times

How China Won the Keys to the Magic Kingdom ; Disney's Plans for Resort in Shanghai Had to Bow to Beijing's Demands

Article excerpt

Plans for the $5.5 billion Shanghai Disney Resort, which opens Thursday, stalled until Disney dialed back its demands on the Communist Party.

Disney had pushed China too hard, putting the company's plans for a new theme park here in limbo. Now, Robert A. Iger wanted to kick the yearslong negotiations into high gear.

Mr. Iger, Disney's chief executive, took a corporate jet to Shanghai in February 2008 to meet with the city's new Communist Party boss, 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 dialed back its demands. In addition to handing over a large piece of the profit, the control- obsessed company would give the government a role in running the park. Disney was also prepared to drop its longstanding 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.

Mr. Iger's trip and the new attitude in the talks that followed appeased Chinese officials. Before long, they had struck a landmark deal to build the $5.5 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 opens on Thursday, has become critical for Disney as it faces business pressures in other areas like cable television. It is designed to be a machine in China for the Disney brand, with a manicured Magic Kingdom-style park, "Toy Story"- 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 customers.

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 ultimately be several times bigger than Disneyland in California, 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 percent of the Shanghai rides, like the "Tron" lightcycle 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 in California to hash out blueprint details.

Disney then ran with the idea, infusing the park with Chinese elements.

Such accommodation of the Chinese is becoming increasingly common. A growing number of multinationals have agreed to cooperate with the state through alliances, joint ventures or partnerships, all in the hopes of garnering more favorable treatment and gaining access to China, 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 and nationalistic. Emboldened by the size and breadth of its economy, China is stepping up its demands, pressuring companies to lower prices, hand over proprietary technology and help advance the country's development goals, even if that means financing the growth of local rivals.

IBM has promised to share technology with China. LinkedIn has agreed to censor content inside the country. …

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