First year success shows Disney charms China

Family planning policy change to boost appetite for Disney

Shanghai Disneyland has successfully made inroads into the Chinese market as the theme park has received 11 million visitors in the one year since it opened.

Analysts have cited the joint venture as an example of cultural exchange between China and the U.S., but urged Chinese firms to learn from the U.S. company in a bid to boost China's soft power.

The Shanghai park is on track to becoming the world's most profitable Disney theme parks on the back of strong first year operations in the Chinese mainland, exceeding expectations.

The estimated $5.5 billion resort is a joint venture between Disney and Shanghai Shendi Group, a State-owned enterprise that owns 57 percent of the resort. Disney said 4 million people visited the park in its first four months of operations, the Hollywood Reporter reported Friday.

"More than 11 million guests have already visited, and we look forward to welcoming many more," according to Disney CEO Bob Iger on Friday, the report said.

Disney said the resort's first-year performance "exceeded [our] expectations, from theme park attendance to guest satisfaction."

Disney CFO Christine McCarthy was quoted as saying by the report that "The financial results for the park's first full quarter of operations were ahead of our expectations. As we look to fiscal 2017, we expect Shanghai Disney Resort to be very close to breaking even for the year."

"Based on its financial performance, Shanghai Disney could recoup its investment in the next 10 years," Chen Shaofeng, deputy dean of the Institute for Cultural Industries at Peking University, told the Global Times in an earlier interview.

China's Dalian Wanda Group Chairman Wang Jianlin's prediction became the focus of media and public discussion. Wang said on the eve of the resort's opening in June 2016 that Wanda, China's leading commercial property developer, which also has theme park interests, will make Disney unprofitable in China over the next 10 to 20 years, because Disneyland's pricing is too high, and Disney merchandise lacks more creativity, according to media reports.

"Wang's comments are self-conceit and he is applying Wanda's park business model to Shanghai Disneyland, but neglected other factors which Chinese customers embrace," Song Ding, an industry analyst from the China Development Institute, told the Global Times on Sunday.

Beyond the obvious revenue sources from tickets, in-park transportation and catering, there are many other revenue sources, including merchandise and intellectual property rights, Song said.

For example, the worldwide promotional tour for Disney's latest film from the Pirates of the Caribbean franchise included a stop at Shanghai Disneyland in May, which was attended by the film's stars Johnny Depp and Orlando Bloom, and coincided with the resort's 10 millionth guest, Bloomberg reported.

The success of Shanghai Disneyland is not surprising, since the company enjoys worldwide brand recognition, Zhang Yiwu, a cultural scholar at Peking University, said.

"Disney's foray into the Chinese mainland is based on extensive research, and they picked Shanghai where its petty bourgeois culture is obvious," Song said, noting the high prices connote a status symbol.

Data reported by the Shanghai-based news portal xinmin.cn shows the TRON Lightcycle Power Run as the most popular ride, one of Disney's fastest rollercoaster rides ever, which was first launched at the Shanghai park.

The theme park is a downstream product of the company's mature industry chain, led by its movies, like the Marvel franchises, Zhang said.

In May, the Walt Disney Company announced an increase in quarterly earnings from parks and resorts for its second fiscal quarter by 9 percent to $4.3 billion, and an increase in segment operating income of 20 percent to $750 million.

Zhang said he predicts Disneyland will become even more popular in China as the country further relaxes its family planning policy, and the middle class appetite for entertainment and leisure grows. Zhang also said China should allow more flexibility in cultural works to improve the country's storytelling skills.

In November 2016, Disney broke ground on a new Toy Story Land, which will be the park's seventh and the "first of several planned expansions in Shanghai," Iger said.

Toy Story Land, based on the hit Toy Story animation franchise, is expected to open in 2018 as part of Disney's efforts to add more capacity.