This is the real reason Disney may have trouble in Shanghai

[dinolounger]

Outside all the other issues that have been brought up about the Shanghai park, the most potent -- which has only been referenced obliquely in threads here -- is the impact on demand that will occur if the the construction bubble of the Chinese economy bursts.

And it looks like that may be starting:

http://www.theguardian.com/business/2015/aug/01/fears-for-chinese-economy-as-shares-fall

Key quote from the article:

"Robert Shapiro, a former economic adviser to Bill Clinton, who now works at US consultancy Sonecon, says: “The Chinese leadership have had a fundamental policy of driving growth sufficiently great to generate employment for about 10 million people a year. The main way they’ve done this is through public investment, or semi-public investment. A lot of these projects are now going bust, because there’s nobody to purchase the apartments, and there are no businesses to rent the offices.” He says the market chaos is partly a direct result of this phenomenon, as shares in construction and property firms are hit."

 

[Tonka's Skipper]

Totally agree. The Chinese bubble is about to burst because they have stolen so much/ many intellectual properties, many companies are backing off and some pulling out of the country. This could have a negative effect the Shanghai park and the Government will do whatever necessary to try and keep it afloat. This will include bouncing the Igor and his minions out the door and run the park themselves.. There is nothing the Igor can do about it!


AKK

 

[cmash95]

sincethe chinese government owns most of the park I am sure they will do whatever it takes to keep it going. However, this park is located in a centeralized location and will draw visitors from all over asia. but like hong kong, disney owns a minority interest

 

[rteetz]

sincethe chinese government owns most of the park I am sure they will do whatever it takes to keep it going. However, this park is located in a centeralized location and will draw visitors from all over asia. but like hong kong, disney owns a minority interest

Yes but unlike Hong Kong this is mainland China. Hong kong marketed as a world destination not just a Chinese one. Shanghai will strictly be marketed as a Chinese destination, they really don't want the rest of the world coming there. They are also going to do everything in their power to make this look like one of the most popular parks in the world even if it's not.

 

[DDLand]

Totally agree. The Chinese bubble is about to burst because they have stolen so much/ many intellectual properties, many companies are backing off and some pulling out of the country. This could have a negative effect the Shanghai park and the Government will do whatever necessary to try and keep it afloat. This will include bouncing the Igor and his minions out the door and run the park themselves.. There is nothing the Igor can do about it!


AKK

Remember 3 crucial reasons this won't happen:
1)Property rights are important, an outright takeover would be a hugely symbolic/public attack on one of the bastions of Western Capitalism. China can't tick off the thousands of companies that are the perfect source of new capital. China needs western money, and there's no way they're going to miss out on that cash hoard.
2)Disney has expertise in managing hotels, theme parks, and other facilities and they also have corporate synergies with their other parks. Cutting themselves off from that network doesn't make sense. Additionally Disney has expertise in designing, implementing, and managing new attractions. Disney is a valuable resource and connection, China wouldn't have made a deal with them if they didn't think that.
3)Disney offers a new source capital for future expansions. Instead of footing the bill for Marvel and Star Wars attractions and Park 2, Shanghai will be able to lean on WDC.

 

[DDLand]

Shanghai Disneyland is a longterm play, if China enters a short term recession Shanghai Disneyland will be effected. There's no doubt. However, we have to remember that just a few years after Magic Kingdom opened the US entered a recession. It slammed the company. WRE was actually slashed in large part due to that recession. Disneyland Paris was slammed a few short years after opening by recession. Just three years after Hong Kong Disneyland opened the world entered the greatest recession since the great depression. Sometimes these things are outside of the companies control, and they can be a big drain. With all that said, I don't think Disney regrets opening the Magic Kingdom. Give it time, it will work out because whereas a movie or tv show will be effected by the environment of the next three months, Shanghai Disneyland will be effected by the environment of the next 60 years.

 

[Tonka's Skipper]

Remember 3 crucial reasons this won't happen:
1)Property rights are important, an outright takeover would be a hugely symbolic/public attack on one of the bastions of Western Capitalism. China can't tick off the thousands of companies that are the perfect source of new capital. China needs western money, and there's no way they're going to miss out on that cash hoard.
2)Disney has expertise in managing hotels, theme parks, and other facilities and they also have corporate synergies with their other parks. Cutting themselves off from that network doesn't make sense. Additionally Disney has expertise in designing, implementing, and managing new attractions. Disney is a valuable resource and connection, China wouldn't have made a deal with them if they didn't think that.
3)Disney offers a new source capital for future expansions. Instead of footing the bill for Marvel and Star Wars attractions and Park 2, Shanghai will be able to lean on WDC.

Sorry friend, I disagree, becuase:

1. As I said, they have been stealing intellectual properties stolen left and right. When push comes shove....they will take anything they want...a theme park to a skyscraper. Of course they will run it though their courts.....where they always win and it looks like they are playing the game fairly.

2. There are many, many companies that have the skills to operate a theme park and hotels and would be happy to move in and take over.

3. Again they will find all the money they need at many other companies ready to move in on the project.

DDLAND.....I have seen what China has been getting away with and it only been until the last few years where the western countries are waking up.

I point to the French high speed train that China made a deal to deal provide the land, labor and resources to biuld it in China for less money. Promised to protect the design right. So the frenk and other western countries agreed and set up the plant.

5 years later.....the Chinese are marketing thier own train now on the world market...funny it looks and is designed very much lIke the western unit.

The Chinese will take the Shanghia park when and if they decide they want it.

AKK

 

[Josh Hendy]

Yes China is very, very deep economic doo-doo. As is the rest of the world. But because the bubble was wilder in some ways than in the rest of the world, the economic shock could be greater.

And yes, China is pretty blatant about ripping off patents, copyrights and trademarks from other countries.

These things may not result into SDL being abandoned or expropriated however.

To balance the wilder aspects of China's role in the Great Inflationary Bubble (my term for it), Chinese individuals and the central government have also in many cases tried to save more money and precious metals than have nearly all individuals and governments in the West. The per-capita debt situation may not be as bad as in USA, EU and Japan. Some think that the Chinese central bank has stockpiled a lot more gold than they've let on, which is a possible bulwark against drastic loss of RMB spending power in the future (in a hyperinflation scenario). So the funding of very prestigious projects like SDL may not dry up.

That's on the finance side. On the intellectual property side, I don't think that any overt move against TWDC in terms of kicking them out, or unilaterally expropriating their intellectual property is necessary. The Chinese partners already control everything in the business and will get the lion's share of the profits. Why steal the cow when you're already getting its milk? And stealing the intellectual property is hardly necessary. I would guess that 90% plus of the Disney movie CDs, video games and Disney-related toys, etc. sold in China are already pirated, or else if official, pay only a very small amount of royalties to Disney. And even if they do, the Disney profits are locked into China anyways through a combination of Chinese and US tax laws which make repatriating the profits to America very ... not worth it. Such profits that they made in China are undoubtedly the funds that Disney used to invest in its partnership in SDL.

Long story short ... I don't know jack about what's happened or what's going to happen ... but in the case of SDL its future may not be all that drastic or shocking. Unless China and USA really do get into some kind of war over those south sea reefs.

 

[ParrotBill]

I believe China's Disney Park will be 99% reliant on China visitors. With Visa requirements for most countries, China isn't make it easy to visit. That will make it worse if they do experience a recession.

 

[old lady]

Disney have to find ways to bring people into their parks like other theme parks. They use gimmicks like dinner plans, new hotels, rides and shows,etc.

 

[rteetz]

I believe China's Disney Park will be 99% reliant on China visitors. With Visa requirements for most countries, China isn't make it easy to visit. That will make it worse if they do experience a recession.

Shendi really does only want Chinese visitors unlike Hong Kong.

 

[rteetz]

Disney have to find ways to bring people into their parks like other theme parks. They use gimmicks like dinner plans, new hotels, rides and shows,etc.

 

[nilla]

If the economy does take a nose dive in China, foreign tourism could take on new importance. Which do you think would be more profitable: Shanghai Disneyland in a more open China, or Chinaland park for locals only?

Remember, we've seen other large, powerful "communist" nations undergo some significant changes for economic reasons.

China's been successful for a lot of the reasons America became successful, but as we found out, you can only crap on labor and the environment for so long before people get fed up.

 

[tcufrog]

China has an enormous real estate bubble. They keep putting up luxury housing and no one's moving in. There's abandoned housing developments all over China that look like modern day ghost towns. The bubble has to burst eventually and the blow back will definitely hit the US.

 

[dinolounger]

China has an enormous real estate bubble. They keep putting up luxury housing and no one's moving in. There's abandoned housing developments all over China that look like modern day ghost towns. The bubble has to burst eventually and the blow back will definitely hit the US.

You are absolutely correct. I travel to China 3-4 times a year and the scale of the massive unoccupied real estate developments (both residential and commercial) is staggering.

Empty mall:

 

[dinolounger]

China has an enormous real estate bubble. They keep putting up luxury housing and no one's moving in. There's abandoned housing developments all over China that look like modern day ghost towns. The bubble has to burst eventually and the blow back will definitely hit the US.

Tcufrog, your words above were visionary. The below piece from CNBC exactly parallels what you said and is frankly frightening, in terms of what is coming our way in the U.S. due to what has happened with real estate in China. Simply put, the China bubble has been propping up the financial house of cards in the west and it is all about to come crashing down.

Quote from Article:

"According to Stockman, it's only a matter of time before the collapse in China trickles down to other markets. "The whole global economy since 2008 has been driven forward by this massive investment and construction and borrowing spree in China," said Stockman. "The point that I'm making is that it's over.""


And the implications of that for Disney go far beyond Shanghai. The party in Burbank of relentless park and resort price increases is about to come to an end.

http://www.cnbc.com/2015/08/07/stocks-are-a-disaster-waiting-to-happen-stockman.html

 

[dinolounger]

The dominos in China that began to keel over over a month ago are now beginning to cause our to topple. The Dow today ended with the biggest weekly drop in over four years.

http://www.cnbc.com/2015/08/21/us-markets-global-growth.html

And as I pointed out earlier, if this is the beginning a major equity correction, that is going to cause big problems across our entire economy, including Disney. Their days of endless price increases may soon be ending.

 

[OKW Lover]

I guess I wonder what Disney's role is in the new park. Are they equity investors? Or are they just licensing their IP? How do they get paid?

 

[rteetz]

I guess I wonder what Disney's role is in the new park. Are they equity investors? Or are they just licensing their IP? How do they get paid?

The Shanghai is similar to their roles in Hong Kong and Paris where they have a lesser equity in the parks and are not majority investors. Obviously Disney is now majority owners of Paris. Also Shanghai Government is much different than what Hong Kong was like when they did that deal. Tokyo is the only park where they just license the characters.

 

[Josh Hendy]

I assume that someone is already checking the neighborhood of SDL for unlicensed "international logistics facilities" a.k.a. hazardous waste dumps ... unfortunately that's the kind of bizarre thing that happens over there.

If god forbid something really tragic like that happened, it would be just as well for Disney if they were a minority partner and not the controlling interest.