An amusing rivalry between two United States entertainment giants is rapidly shaping up in Shanghai, with developers of the new Disneyland (DIS.US) resort announcing a major new retail development just days after DreamWorks Animation (DWA.US) broke ground on its own massive entertainment complex in the city.
The close timing of the two announcements may be partly coincidental but the rivalry certainly isn’t. Hollywood followers will know that DreamWorks Animation chief Jeffrey Katzenberg formerly headed Disney’s famous animation division and only left the company after a famous fallout with former Disney chief Michael Eisner.
But all of that history aside, there’s certainly room for both companies in a city of Shanghai’s size.
The clear winner in all of this will be the city itself, which will solidify its place as China’s entertainment capital with these two massive new projects that include entertainment, film-making and now a growing retail component.
These kinds of major announcement are also likely to become more common as Shanghai Disneyland prepares to open for business next year.
Let’s look at the latest news that has Shanghai Shengdi Group forming a joint venture with Value Retail to build a massive luxury retail compound next to the new Disneyland Shanghai resort.
Shengdi is one of Disney’s main partners in the new resort while Value Retail is a western developer of similar retail villages. The compound will be called Shanghai Village and will cover 50,000 square meters.
There’s not much more detail about the development, though I expect it will include not only luxury shops but also restaurants and movie theaters in a bid to become its own separate entertainment destination alongside the bigger Disneyland.
The Disneyland park itself, which is being built in the largely undeveloped Pudong new area, was in the headlines last week with word that it would feature an entire themed area based on Disney’s “Pirates of the Caribbean” franchise.
This recent Disney headlines come after DreamWorks made its own major announcement last week with its groundbreaking on a US$2.4 billion entertainment complex in Shanghai.
That project will be built in an older area of the city along the banks of the Huangpu River and will feature a major new animation studio joint venture between DreamWorks and local broadcasting giant Shanghai Media Group.
It will also feature a major theater for big movie premieres, as well as the usual mix of shops and restaurants. It is set to open in 2017.
This latest project by Value Retail reflects a snowball effect we’re likely to see in new investment as the two new developments take shape. The two core projects themselves already involve a combined investment of more than US$6 billion.
I expect this new retail complex could cost between US$500 million and US$1 billion and that we’re likely to see one or two more projects of similar scale by the time the two attractions formally open.
Of course, consumers will ultimately decide if all this investment puts Shanghai at the center of the Asia entertainment map.
Disney has a strong record for developing strong entertainment complexes, although DreamWorks is less experienced in this kind of retail-style development.
The DreamWorks project will benefit as a secondary attraction for the many people who come to visit Shanghai Disneyland and we could even see one or two major resort developers try to build additional attractions.
At the end of the day, Shanghai will emerge as a top Asian entertainment destination alongside cities like Tokyo and Hong Kong, drawing visitors not only from China but also from nearby Japanese and Korean markets.
Disneyland will emerge as the star attraction of the show and DreamWorks will be an important supporting player, but Shanghai should be the biggest beneficiary as it seeks to claim its place as a major actor on the global entertainment stage.
Bottom line: A major new retail complex being built alongside Shanghai Disneyland is part of a wave of new investment that will help turn Shanghai into a regional entertainment hub over the next decade.
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