Wang Jianlin throws a challenge to Disney

May 27, 2016 15:10
Wang Jianlin, chairman of Dalian Wanda Group, says Shanghai Disneyland won't have an easy ride. Photos: Reuters

Walt Disney Co. is preparing to open its Shanghai theme park next month, betting that the US$5.5 billion resort will provide a new earnings driver for the US family entertainment and media giant.

The company is confident that the theme park -- Disney's first in mainland China -- will be able pull in millions of visitors and be a financial success.

However, a prominent Chinese tycoon -- Wang Jianlin, the chairman of Dalian Wanda Group -- is pouring cold water on the venture, saying it is unlikely to have an easy ride. 

In an interview with China Central Television last Sunday, Wang said Shanghai Disneyland won't make a profit for the next 10 to 20 years, partly due to competition from Wanda.

As Wanda is building several theme parks of its own across China, it is not surprising that Wang has tried to run down his arch competitor.

That said, the assessment appears not entirely unjustified. Wang does raise some serious questions about the prospects of Shanghai Disneyland.

First, Wang pointed that Disney has adopted an outdoor style in its Shanghai park, just as it did in its California, Florida, Paris, Tokyo and Hong Kong facilities, without taking the local weather into consideration.

Shanghai has a lot of rain in summer, while the winter is fairly cold there.

The city has wet weather for almost a third of the year, according to data from the Shanghai Observatory. That is quite different from the abundant sunshine in California and Florida.

As for the winter, Shanghai often has near-freezing temperatures, while Hong Kong and Tokyo have relatively milder weather.

An outdoor theme park in Shanghai will mean that it will be unfit for business for a good portion of the year, Wang pointed out.

In addition, Shanghai, like other eastern Chinese cities, experiences heavy smog from time to time, during which most people would avoid outdoor activities.

Second, Wang pointed out that Disney has been relying on characters like Mickey Mouse and Donald Duck since opening its first theme park in California in 1955. Six decades later, these characters have limited appeal for the young generation nowadays, he said.

"The frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed. They are entirely cloning previous intellectual property, cloning previous products, with no more innovation," he said.

Moreover, given the huge project cost, Disney needs to mark up its ticket prices. It's said that tickets for the Shanghai resort will be priced at the equivalent of HK$599 on holidays, 10 percent higher than the prices at its Hong Kong park.

The expensive tickets will discourage some mainlanders from visiting the Shanghai facility.

Hong Kong Disneyland drew many mainland tourists since the park opened in 2005. But the resort kept losing money for a long time, managing to break even only between 2012 and 2014.

Last year, the Hong Kong park swung to loss again due following a 9.3 percent drop in visitors.

Now, the investment on the Shanghai resort is seven times more than that on Hong Kong Disneyland. The Shanghai park needs to pay huge amounts to Disney group each year in franchise and management fees regardless of whether it makes profit or not.

"One tiger is no match for a pack of wolves. Shanghai has one Disney, while Wanda, across the nation, will open 15 to 20, and every theme park will be different with a combination of both indoor and outdoor activities," Wang said.

Disney will do well not to dismiss the tycoon's comments, given the ambitious plans that Wanda has outlined for its entertainment business in China.

Wanda's theme parks are all tailor-made for the mainland market, incorporating local features.

Wang may sound boastful, but his challenge must not be taken lightly.

This article appeared in the Hong Kong Economic Journal on May 27.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist