Disney hands China the keys to Magic Kingdom

Shanghai Disney Resort to open Thursday after allowing Communist government many unprecedented concessions

Eight years after Disney CEP Robert Iger first met Shanghai’s Communist Party leader Yu Zhengsheng, the €4.9 billion Shanghai Disney Resort gets ready to open its gates on Thursday.

But to make it happen, Disney had to make a lot of compromises.

In addition to handing over a large piece of the profit, the control-obsessed company also gave the government a role in running the park. Disney also had to drop its long-standing insistence on a television channel.

The Shanghai park has now become mission critical for Disney as it faces business pressures in other areas like cable.

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.

Authentically Disney and distinctly Chinese: Shanghai Disney Resort blends magic of Disney with spirit of China
Authentically Disney and distinctly Chinese: Shanghai Disney Resort blends magic of Disney with spirit of China

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.

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, 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 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.

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.