China’s richest man just picked a fight with Disneyland

[IrishNYC]

Thank you for posting this. I've been reading some of the comments and wondering why people have been ignoring the fact that there already is a Disneyland park in China and seem to think that Shanghai is blazing new trails.

Hong Kong is very different than mainland China. They were a British colony for so long (probably well into the lifetime of many members here, including my own), they had a democratic government, still have a free press, and a very western style culture, especially as compared to mainland China. Hong Kong still enjoys a different legal system than the mainland, they have their own monetary system, and a capitalist society. Shanghai is a free trade city, and a financial center, but the western influence of Hong Kong's former British colony status has a tremendous influence on attitude both within China and how the rest of the world views them, as well as how Hong Kongers view themselves compared to mainland Chinese.

 

[mshanson3121]

While 7 years isn't good the first few years a theme park operates they don't always make a profit right away.

Agreed. I was just pointing out the error, with regards to the person who claimed that they have been profitable for "almost their entire existence". Not exactly accurate, lol.

 

[OKW Lover]

Hong Kong is very different than mainland China. They were a British colony for so long (probably well into the lifetime of many members here, including my own), they had a democratic government, still have a free press, and a very western style culture, especially as compared to mainland China. Hong Kong still enjoys a different legal system than the mainland, they have their own monetary system, and a capitalist society. Shanghai is a free trade city, and a financial center, but the western influence of Hong Kong's former British colony status has a tremendous influence on attitude both within China and how the rest of the world views them, as well as how Hong Kongers view themselves compared to mainland Chinese.

So, do no Chinese people (besides HK resident said) go to HKDL? Of course they do. Disney is not a new concept in China. They are just expanding their footprint.

 

[rteetz]

So, do no Chinese people (besides HK resident said) go to HKDL? Of course they do. Disney is not a new concept in China. They are just expanding their footprint.

Hong Kong is much different than the rest of Shanghai though. Hong Kong is very westernized due to its british influences. Shanghai on the other hand is very unfamiliar with Disney. They know Snow White but then after that they don't know much except for the modern stuff. That's why you see things like the Tim Burton version of Alice in Shanghai. Disney and China aren't going to market Shanghai to anyone else other than China.

 

[IrishNYC]

So, do no Chinese people (besides HK resident said) go to HKDL? Of course they do. Disney is not a new concept in China. They are just expanding their footprint.

Mainlanders don't really visit HK. They used to, mainly to shop, but numbers are rapidly declining. As I said before, and rteetz reiterated, Hong Kong is not at all like the rest of China.

 

[OKW Lover]

Yes, I understand that Hong Kong is different from the rest of China. My point is that there is a park in HK that is patronized by lots of people, not just those that live in HK.

People who live in Central FL my have different views, customs, habits from those that live in Brazil but that doesn't stop them from coming.

 

[doconeill]

Assuming $5.5B was the capital cost to build the park, and guest paying ~$79 per ticket at most, and an expected 10 million visitors a year, it would take at least 4.7 years to recover the cost of building the park. And that doesn't even include the operating costs, inflation, etc. So I'd say 10-20 years is a fair estimate. Building a park isn't for a quick buck - it's a long-term investment, and a risky one at that.

Wanda may want to build 15-20 parks, but when they do that, they aren't competing with Disney any more - they are competing with each other.

Also, if the Chinese government has an investment in the park, presumably they'd do a better job at protecting the intellectual property than they do for companies that aren't directly involved with the Chinese economy. Didn't Disney get another park to stop using their character knock-offs while negotiating for Shanghai?

 

[rteetz]

Assuming $5.5B was the capital cost to build the park, and guest paying ~$79 per ticket at most, and an expected 10 million visitors a year, it would take at least 4.7 years to recover the cost of building the park. And that doesn't even include the operating costs, inflation, etc. So I'd say 10-20 years is a fair estimate. Building a park isn't for a quick buck - it's a long-term investment, and a risky one at that.

Wanda may want to build 15-20 parks, but when they do that, they aren't competing with Disney any more - they are competing with each other.

Also, if the Chinese government has an investment in the park, presumably they'd do a better job at protecting the intellectual property than they do for companies that aren't directly involved with the Chinese economy. Didn't Disney get another park to stop using their character knock-offs while negotiating for Shanghai?

I'd say the cost was closer to $6B, and whether it happens or not the Chinese government is going to say the attendance is greater than 10 million most likely.

 

[Lesverts]

Not sure where you got that idea. Go back to page 1:

Hong Kong Disneyland had seven straight years of losses until finally making a profit in 2012. It made money for a few years then had a loss for fiscal 2015.

My bad, last I read was that HKDL had been very successful and hasn't experienced all of the pitfalls that DLP had. But that was a few years ago. But I'd be careful with accepting reports of losses in the entertainment industry. According to WB few of the Harry Potter movies made money.

I just don't think all this negativity towards Shanghai is going to amount to match. The Chinese government will want this to succeed.

Between 55 and 60 million people visit China yearly. If only 2% of those spend a day in SDL, you have foreign tourism accounting for over 1 million visitors. The Japanese and Taiwanese that visit Shanghai are going to be a major segment of SDL's demos.

 

[rteetz]

My bad, last I read was that HKDL had been very successful and hasn't experienced all of the pitfalls that DLP had. But that was a few years ago. But I'd be careful with accepting reports of losses in the entertainment industry. According to WB few of the Harry Potter movies made money.

I just don't think all this negativity towards Shanghai is going to amount to match. The Chinese government will want this to succeed.

Between 55 and 60 million people visit China yearly. If only 2% of those spend a day in SDL, you have foreign tourism accounting for over 1 million visitors. The Japanese and Taiwanese that visit Shanghai are going to be a major segment of SDL's demos.

HKDL hasn't suffered like DLP because it's still up kept like it should be. Paris was left to rot in some areas.

 

[OKW Lover]

Paris was left to rot in some areas.

We were at DLP in October and they've done some very good things to bring that park up to standards. I wouldn't hesitate to recommend it now.

 

[rteetz]

We were at DLP in October and they've done some very good things to bring that park up to standards. I wouldn't hesitate to recommend it now.

I agree Paris is really looking great now but before Disney took over it was rough in some areas.

 

[Eoghann]

I just don't think all this negativity towards Shanghai is going to amount to match. The Chinese government will want this to succeed.

There's a certain amount of wish fulfillment going on in these forecasts of disaster for Shanghai.

People don't like China politically, they don't like the way jobs have moved from here to there and they don't like that Disney is spending so much money overseas. They want it to fail.

 

[LittleDreamer]

But I'd be careful with accepting reports of losses in the entertainment industry. According to WB few of the Harry Potter movies made money.

To go off topic for one second. Movies have a strange accounting method. The rule of thumb is they are profitable is they make twice their budget. The doubleing to account for marketing and other costs. Yet there are many big movies, such as Batman Vs Superman which has a listed 250 mil budget but rumor is the actual was 400 mil. Doubling that puts it at 800 mil, BvsS has only made 871 mil. This could be why there is so much shake up in the DC movie departments now.

HKDL hasn't suffered like DLP because it's still up kept like it should be.

HKDL has had an odd path in it's 10 years of being open. Since opening day that park is changing or has had a lot added to it. I think this is part of the reason it hasn't been profitable or very popular. It almost seems like Disney opened an unfinished park and are filling it in as time goes. It opened in Sep 2005, in summer 2006 they get Autotopia, Small world in 2008, Toy story land in 2011, Grizzly Gulch(their frontierland) in 2012, then finally Mystic Point in 2013. Then there is Iron Man coming in the future. That is some spread out large costs, but it also means money has been flowing into the park for a long time. HKDL short history is almost feeling like the early years of Disneyland.

 

[rteetz]

To go off topic for one second. Movies have a strange accounting method. The rule of thumb is they are profitable is they make twice their budget. The doubleing to account for marketing and other costs. Yet there are many big movies, such as Batman Vs Superman which has a listed 250 mil budget but rumor is the actual was 400 mil. Doubling that puts it at 800 mil, BvsS has only made 871 mil. This could be why there is so much shake up in the DC movie departments now.

HKDL has had an odd path in it's 10 years of being open. Since opening day that park is changing or has had a lot added to it. I think this is part of the reason it hasn't been profitable or very popular. It almost seems like Disney opened an unfinished park and are filling it in as time goes. It opened in Sep 2005, in summer 2006 they get Autotopia, Small world in 2008, Toy story land in 2011, Grizzly Gulch(their frontierland) in 2012, then finally Mystic Point in 2013. Then there is Iron Man coming in the future. That is some spread out large costs, but it also means money has been flowing into the park for a long time. HKDL short history is almost feeling like the early years of Disneyland.

It was being built at the end of Eisner's career and he approved it. They wanted to cut costs and that's why it opened with very little to do. A second park was in the works but is on hold because of Shanghai.

 

[doconeill]

To go off topic for one second. Movies have a strange accounting method. The rule of thumb is they are profitable is they make twice their budget. The doubleing to account for marketing and other costs. Yet there are many big movies, such as Batman Vs Superman which has a listed 250 mil budget but rumor is the actual was 400 mil. Doubling that puts it at 800 mil, BvsS has only made 871 mil. This could be why there is so much shake up in the DC movie departments now.

I don't believe there is any particular rule as to the profitability of movies like that. Studios are allowed to take the "profits" of one movie to offset the costs of another. With that accounting, VERY few films have ever been recorded as having made a profit. Actors, directors, etc. know that if they are offered "points on the net", they will be getting nothing on that end of the contract. Those with the pull can negotiate for "points on the gross", which means they get paid of the income regardless of it making a profit.

However, the establishment has been taken to task a lot lately for their accounting practices.

 

[Eoghann]

I don't believe there is any particular rule as to the profitability of movies like that. Studios are allowed to take the "profits" of one movie to offset the costs of another. With that accounting, VERY few films have ever been recorded as having made a profit. Actors, directors, etc. know that if they are offered "points on the net", they will be getting nothing on that end of the contract. Those with the pull can negotiate for "points on the gross", which means they get paid of the income regardless of it making a profit.

However, the establishment has been taken to task a lot lately for their accounting practices.

It's not a rule in the accounting sense. It's just a back of the hand calculation that's used when people are discussing if a movie was a financial success or failure. Regardless of what the books actually say, if it makes more than twice it's official cost the studio likely came out ahead on the deal and there's a chance of a sequel.

 

[Josh Hendy]

I'd say the cost was closer to $6B, and whether it happens or not the Chinese government is going to say the attendance is greater than 10 million most likely.

China is the world leader of NPLs or Non Performing Loans. Allegedly there are very few enterprises which actually make profits and pay back their capital. Instead they just keep being lent money under the table by the government, which essentially prints more money to keep the entire, fake bubble going. Not very capitalist, but it differs from what's happening in Japan, Europe, USA and the rest of the "capitalist" world only superficially and perhaps in the ratio of NPL to PL.

I don't know what the specific situation is for Shanghai Disney. It sounds like ... unlike a typical, large Chinese "capitalist" enterprise which might be kept afloat indefinitely by government connivance ... Disney actually signed on the dotted line for potentially a decade, or two, or three of losses.

Suppose this billionaire guy builds "pretty good" knockoff parks that actually compete in the same space as Disney. If the rumors are true about NPLs being hushed up and non-performing enterprises being kept afloat indefinitely, then it's THIS guy whose attendance numbers the Chinese government is going to exaggerate. It may mean nothing at all to the PRC to have a foreign company suffer pain and embarrassment in their Chinese ventures, but they may subsidize a homegrown Disney competitor til the cows come home.

 

[cbsnyber1]

Wanda may want to build 15-20 parks, but when they do that, they aren't competing with Disney any more - they are competing with each other.

Shanghai is within a three hour drive of 300 million Chinese (almost the entire population of the US). But that's only about 20% of the Chinese population. So spacing a number of parks around China will serve different population clusters, and will not necessarily cannibalize attendance among the parks.

 

[doconeill]

Shanghai is within a three hour drive of 300 million Chinese (almost the entire population of the US). But that's only about 20% of the Chinese population. So spacing a number of parks around China will serve different population clusters, and will not necessarily cannibalize attendance among the parks.

Not a lot different than Six Flags in the U.S., and they don't seem to have made much of a dent in Disney Parks.

Anyways, Wanda's already thumbed their nose at Disney (although they officially blame a tenant store), and Disney's preparing the launch codes...

http://www.msn.com/en-us/money/comp...hite-appears-at-wanda-park/ar-BBtDpIQ?ocid=se