SHANGHAI -- Disney had pushed China too hard, putting the company's plans for a new theme park in limbo, and Robert Iger, Disney's chief executive officer, wanted to kick the yearslong negotiations into high gear.
Iger 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, 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 also was 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," Iger recalled saying at the time.
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 an established American brand and setting the pace for multinational companies to do business in the country.
The Shanghai park, which opens Thursday, has become mission 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 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 ultimately 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 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 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 honoring the "restless, creative spirit" of Chinese poets.
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 the world's second-largest economy.
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 their 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. 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, if all goes as planned, the Shanghai park will create an ecosystem of demand in China for movies, toys, clothes, video games, books and TV programs. 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, of course, became Walt Disney World, a group of four theme parks that attracts roughly 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 Jessica Reif Cohen, an analyst at Bank of America Merrill Lynch.
If all doesn't go as planned, Disney will suffer the wrath of Wall Street, which expects the resort to offset slower growth at ESPN, the company's longtime 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, which is relatively small, has had mixed financial results since opening in 2005.
Business on 06/15/2016