Tuesday, April 19, 2011

The new American Dream

Image representing The Walt Disney Company as ...Image via CrunchBase

(This was my first column I have submitted to the Global Times over the weekend. I have not heard anything back, so I guess it could also be the last one. Find the politically incorrect parts. Here the China Media Projects writes on China’s efforts to establish credible international media.)

Who still remembers The American Dream? It was an entertainment park in Shanghai, that opened its doors in 1996 and became a high-profile failure. A special railway connected the park with the main railway station and – for the time – a huge advertisement campaign made sure nobody could miss the opening. Against the expectations of the investors, few Chinese were willing to pay a premium price for the entertainment park.
Since this month Shanghai is building on a new American dream.
More than a decade the US Walt Disney company and a wide range of Chinese government agencies negotiated about setting up a theme park in Shanghai. Over the years the Shanghai municipality already mapped in the park at different sites, displaying its eagerness to show it could do a better job than Hong Kong. Although nothing has been disclosed on who is going to pay what of the close to four billion US dollar in costs, typically eager governments have to cough up a large portion. The Hong Kong Disney park is even in majority owned by the Hong Kong government, who now has to pick up the losses, after covering for a large portion of the initial investments. Ownership deal in Shanghai is more or less the same.
The Hong Kong Disney park, started in 2005, has shown a lackluster performance. The Hong Kong park has been too small and was for that reason not interesting for mainland visitors, argued Shaun Rein, managing director of China Market Research in Reuters. For the time being, the ground reserved initially for the park is even smaller than its competitor in Hong Kong, a rather bad sign.
Even though I grew up in Europe and not in the US, Walt Disney still had a huge influence on my media mix in my childhood. Every week the latest issue of the weekly Donald Duck threatened the stability of our family life, as the five children literally fought to get their hands on the Donald Duck first. The Cinderella movies were part of our upbringing. Before Disney opened its first entertainment park in Europe, its was already established as a huge media company.
My parents came under huge pressure when the Disney park in France opened. When you want to sell a dream, it helps when your audience shares that dream.
That mix was part of its success, also in revenue streams. Children in China do not have a similar Disney-induced legacy. Walt Disney tried in its decade of negotiations to get concessions from China’s media authorities, so it could also set up a media leg in China. Not surprisingly, the US firm never got those concessions, despite its stubbornness and Shanghai’s eagerness to get into business. Now, Disney has accepted to start the park as a stand-alone venture, but that could also be its weak point: without a supporting media operation, it might not be that appealing for a domestic audience. Whether foreign visitors can make up for that, also remains doubtful.
Pricing is another touchy issue: even though income levels of China’s citizens have gone up since the failure of The American Dream, when they have to choose between the mostly expensive Disney parks and cheaper domestic entertainment parks, the price might still make a difference. Maybe more Chinese can afford to pay the price, it does not mean they will. Domestic competition is already huge. Without a media leg to convince children they have to blackmail their parents into going to the Disney park, life might be tough.
Mattel’s Barbie recently closed the doors of its first flagship store in Shanghai, because the doll did not appeal to a domestic audience. That in itself can be shocking for is American managers, who also cannot image children can grow up without Barbie. So, they overestimated the China market and are certainly not the only one. Then, closing down a store is easier than closing down a USD 4 billion entertainment park.
Perhaps, with local support, Shanghai Disney is too big to fail. But I do not see an easy life.
Fons Tuinstra


(Earlier published at Fons Tuinstra's home)
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