Monday, May 29, 2017

Who will be the Disney of China? - Jeffrey Towson

Jeffrey Towson
Entertainment parks are becoming big business in China, but there are at least three players trying to come the Disney of China, including Disney itself. Who will be the real Disney of China, wonders Beida business professor Jeffrey Towson on his weblog.

Jeffrey Towson:
The takeaway here is that while Disney’s dream is capturing the Chinese market, that is not the objective of the government, which is actively operating in this sector as both policeman and player. They are focused on the development of an entertainment industry in Shanghai. 
And while the government needs Disney today, it is worth keeping in mind this will not always be the case. 
Finally, well-funded locals, like Wanda and Alibaba Pictures, are now giving chase. This force is the most worrisome. 
Disney is off and running in China. But so are well-funded local competitors. Dalian Wanda Group clearly wants to be the “Disney of China” and has come out with guns and press releases blazing. They are opening multiple theme parks and are the largest owner of movie theaters in China and the U.S. (and #2 in Australia). They are also actively acquiring in Hollywood. Plus you have Alibaba Pictures, Huayi Brothers and others. The competitive picture is daunting. 
However, lots of rich companies have tried to be Disney in the past and have failed. When Disney entered Europe and Japan, lots of local companies had the same ambition. And for decades, other Hollywood studios have tried to replicate Disney in the US. All have largely failed. It turns out copying Disney is pretty difficult. 
Two companies have arguably had some success: Dreamworks, founded by Jeffrey Katzenberg (who previously ran Disney Animation); and Pixar, run by John Lasseter (purchased by Disney in 2006). You could also perhaps point to Lucasfilm, creator of the “Star Wars” franchise (now owned by Disney as well). But all of these are essentially pure media companies. None have replicated Disney’s combination of animation and theme parks. 
I think this has a lot to do with cash flow. Creating animated (and singing) movies that children love is tricky. It takes years of work for one movie, costs a lot of money and is “hit or miss”. If the movie is a hit, you make lots of money. If not, you probably go bust. The unpredictable cash flow makes funding animated movie development and then building large, expensive theme parks impossible for most all companies. Disney’s advantage is that it already has a stable of popular characters and international operations that create financial scale and stability. 
But even Disney has had trouble being Disney at times. It had great success under Walt Disney but struggled in the 1980s as its movies lost their appeal. And when the movies aren’t hits, the theme parks can suffer. New leadership took over (Eisner and Katzenberg) and a string of successes like “The Little Mermaid” and “Aladdin” followed. Disney again stumbled in the early 2000s until it bought Pixar, which made Steve Jobs the largest Disney shareholder. 
So now Chinese companies are trying to be like Disney in China, which is actually really difficult. Wanda is opening theme parks and starting to make animated movies. We will see if they are more successful than past attempts by cash rich companies. Overall, it is going to be an interesting fight to watch.
More at Jeffrey Towson's website.

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