Shanghai Disney

TAKEAWAY: SHANGHAI DISNEY

Kraft:
So you opened the Shanghai Disney Resort, and this commitment, I know, for your company exceeded $6 billion. I believe the government is a partner with you, or I'm not sure. Could you speak a little bit about what you learned about doing business in China and what role that park has in your future?

Iger:
First of all, the park cost over $5.5 billion to build, and we're partners with the government in that entity. So we didn't put up all the capital for the park itself. But the government also put in probably $4-5 billion extra to build infrastructure around it—roads, power, waste removal. So the $10 billion that you mentioned earlier is about right, but a lot of it was Chinese money.

It's an interesting question to ask me, because I'm not sure I could answer it in one afternoon. I first set foot on that property, surveying on behalf of Disney, back in 1999. So it was 17 years from the moment I stood on the property to the moment I actually cut the ribbon. In those 17 years, it was one heck of an education.

To simplify it, patience obviously is required for any entity that wants to do business on a large scale in China. I'm sure Jeff certainly knows that. One of the reasons for that is China is a very, very dynamic marketplace. It is still a developing country. Because of that, it's changing rapidly, and that change is coming in a variety of different ways. So you have to be unbelievably capable of adapting to that change and understanding that the China that you started considering doing business in or negotiating with and the China that you finished with are vastly different.  

The differences—you see it everywhere. Obviously growth in spendable income and the economy is one huge one. But just dealing with a country whose government is trying to contend with that change and manage it effectively into the future is tricky, because every decision the government makes, even on the commerce side, is made because they are thinking about where China is going, where China might go, what is good for China, and what isn’t good for China.

So first of all, you can't enter the market thinking that the deal that you make is going to be one-sided, meaning all for you. I think it's even probably appropriate to suggest that you can’t even go in with an absolute win-win. They need to feel that it is fundamentally right for them. That's probably the most important.

In our case, we were bringing a business to China that was service-oriented. They're trying to move their economy from a manufacturing economy to more service-oriented. So we obviously served that need. We created 10,000 direct and another 30,000 to 40,000 indirect jobs at opening day, but the land that we have sits on seven square kilometers, and there's plenty of room to expand. So we'll create a lot more jobs just in that business. And then the developing land around it, which will develop more rapidly because of our presence—that will create a lot of jobs. So that clearly worked.

The government of China also wanted to send a signal to its people that it was open to not only doing business with large Western companies and brands, but we bring to China a type of ideology—admittedly, a relatively benign one as it relates to politics in China, but still a Western ideology. In many ways, that had value to them, because I think they wanted to prove that they were not as closed off or as protective as I think a lot of people accuse them of being. So we served their needs. They certainly served ours.

It was a lengthy negotiation that got into a variety of very complex concepts like land ownership, which is not legal there, as a for-instance. And partnership—they’re the majority partner, but we had to have control. That was obviously complicated. But we ended up with control of all the decision-making. The whole issue of what gets built and to what extent it represents American culture versus Disney culture—and we actually ended up building something that I called authentically Disney, distinctly Chinese. That was because I wanted very much to avoid being a cultural imperialist in China, because we had experienced similar things when we built parks in other places around the world. And I thought with a rising tide of Chinese nationalism, we could fall prey to something we would have a hard time recovering from, that being accusations about American cultural imperialism, and we avoided that.

To make a long story short, very complex, very satisfying, because we ended up not only getting it done, but the park that we’ve opened is doing extremely well. We've not been particularly public about it yet, because it's only been open since June, but the first 100 days were incredibly successful. Millions of people have already gone, and they’re staying for almost two hours longer per day, meaning per visit, than we had anticipated. So the guest satisfaction, which we measure in very granular ways, is very, very high.