How
June
14, 2016
Mr. Iger, Disney’s chief executive, took a
corporate jet to
After that, Disney substantially dialed back
its demands. In addition to handing over a large piece of the profit, the
control-obsessed company would give the government a role in running the park.
Disney was also prepared to drop its longstanding insistence on a television
channel.
For Disney, such moves were once unthinkable.
Giving up on the Disney Channel meant abandoning the company’s proven
brand-building strategy. “We’re kidding ourselves if we think we’re going to
get everything we want,” Mr. Iger recalled saying at the time.
Mr. Iger’s trip and the new attitude in the
talks that followed appeased Chinese officials. Before long, they had struck a
landmark deal to build the $5.5 billion Shanghai Disney Resort, opening
The
But Disney is sharing the keys to the
From the outset, Disney has catered to
Chinese officials, who had to approve the park’s roster of rides and who were
especially keen to have a large-scale park that would appeal to adults as well
as children. The Shanghai resort, which will ultimately be four times as big as
Disneyland, has a supersize castle, a longer parade than any of the other five
Disney resorts around the world, and a vast central garden
aimed at older visitors.
Worried that importing classic rides would
reek of cultural imperialism, Disney left out stalwarts such as
Disney then ran with the idea, infusing the
park with Chinese elements. The
Such accommodation is becoming increasingly
common. A growing number of multinationals have agreed to cooperate with the
Chinese state through alliances, joint ventures or partnerships, all in the
hopes of garnering more favorable treatment and gaining access to the world’s
second-largest economy, after the
And they are doing so at a time when the Chinese government is growing more assertive and nationalistic. Emboldened by the size and breadth of
its economy, China is stepping up its demands, pressuring companies to lower
their prices, hand over proprietary technology and help advance the country’s
development goals,
even if that means financing the growth of local rivals.
IBM has promised to share technology with
“This is part of the
For Disney, if all goes as planned, the
Shanghai park will create an ecosystem of demand in China for movies, toys,
clothes, video games, books and TV programs. Mr. Iger has called
That site, of course, became Walt Disney
World, a group of four theme parks that attracts roughly 40 million visitors
annually. About 11 million visitors are expected next year at the
If all doesn’t go as planned, Disney will
suffer the wrath of Wall Street, which expects the resort to offset slower
growth at ESPN, the company’s longtime profit engine, and some of its other
theme parks. The last thing Disney wants is another Disneyland Paris, a money
pit that suffered from cultural miscues and, after 24 years, is still
struggling to turn a profit. Hong Kong Disneyland, which is relatively small,
has had mixed financial results since opening in 2005.
Mr. Iger has staked his
personal legacy
on Disney’s partnership with the Chinese government. Last September, he brought
a group of Disney board members to
While he delegated certain duties to
lieutenants, Mr. Iger has been the guiding force. He pre-tasted the food, which
will include items like pork knuckles and Donald Duck-shaped waffles, and
decided which characters would appear in the parade. He has held face-to-face
talks with Chinese presidents, prime ministers and propaganda officials.
Mr. Iger, 65, has sought a personal
relationship with
When Mr. Xi stopped in
“It’s good to see the fruits of efforts over
the years,” a smiling Mr. Xi told Mr. Iger at a public meeting between the men
at the Great Hall of the People in early May. “And I believe the new
cooperation will continue to yield new outcomes.”
Mickey in the
It may be all smiles now, but Mickey Mouse
knows all too well what can happen when the Middle Kingdom gets mad.
The year was 1997, and Disney had finally
found a bit of success in
As part of a now-defunct effort to make films
for more sophisticated audiences, Disney agreed to back the director Martin
Scorsese, who wanted to make “Kundun,” about
In the end, Disney decided that it could not
let an overseas government influence its decision to distribute a movie in the
“All of our business in
Although “Snow White and the Seven Dwarfs”
was screened in
By the time of the “Kundun” debacle, the
demand was clearly there. Mr. Eisner just needed to undo the damage.
Disney hired former Secretary of State Henry
Kissinger and mounted an intense lobbying effort. In October 1998, Mr. Eisner
met Zhu Rongji, who had just been named prime minister, at
“This film was a form of insult to our
friends, but other than journalists, very few people in the world ever saw it,”
Mr. Eisner said during the meeting. (“Kundun” bombed, taking in just $5.7
million against a production budget of about $30 million.)
Mr. Eisner said the company had learned a
lesson. And he introduced Mr. Iger, then Disney’s international president, as
the person who would carry on negotiations for a theme park. The Chinese prime
minister responded favorably. Land in
And just like that, the door to
The negotiations that followed were slow and
painful. Disney had to navigate a thicket of agencies, bureaucrats and
officials. At one point, Disney essentially had to start over in
There were sticking points large and small.
Who would control the park? What kind of transportation infrastructure would
support it? How were Disney’s nightly fireworks shows going to work in smoggy
“Disney had to educate the Chinese government
on how they operate, and the government wanted to persuade Disney that they
needed a local partner to make this thing work,” said Tang Jun, one of Mr.
Iger’s former lieutenants in China.
By 2009, the Chinese government was finally
on board. It took a 57 percent stake in the
It was in stark contrast to the deal with
At the groundbreaking ceremony for the
Confetti was blasted into the air. A
50-member children’s choir sang as Chinese dancers and drummers paraded
onstage. Mickey and Minnie Mouse frolicked in traditional Chinese costumes.
“This is a defining moment in our company’s
history,” Mr. Iger said. “Along with our partner, the Shanghai Shendi Group,
today I am very proud to announce the official launch of the Shanghai Disney
Resort.”
When the Communist Party first invited
overseas companies into the country in 1979, global businesses had to team up
with the state. It wasn’t pretty.
As commercial interests clashed with
socialist principles, there were wage disputes, allegations of intellectual
property theft and conflicts over corporate strategy. To put it in the parlance
of a Chinese proverb, it was like two people sleeping in the “same bed,
dreaming different dreams.”
Pepsi found itself managing a tanning
factory, as part of its Chinese partnership. McDonnell Douglas claimed that some machine tools had
been diverted to a factory that made missiles, in violation of
“I now tell people, ‘If you don’t have to do
a joint venture, don’t,’” said Don St. Pierre Sr., an American businessman who
worked for Beijing Jeep.
After the blowups,
The partnership has significant perks for
Disney. State-run construction companies cleared a 1,700-acre tract to build
the resort, which will ultimately include two additional Disney theme parks and
thousands of Disney hotel rooms, analysts say. Authorities have relocated residents,
moved graves and closed more than 150 polluting factories. The government built
new infrastructure, including a subway line that goes directly to the park’s
front gate.
Officials have also taken unusual steps to protect Disney from
piracy in China,
a country where copyright infringement is common and the government rarely
intervenes. Whether the state can stand by that pledge is uncertain. But early
signs are promising. Last November, regulators fined five copycat Disney hotels
located near the theme park. Around the same time, nearly 2,000 counterfeit
Disney items, including hundreds of Winnie-the-Pooh shirts, were seized in
The partnership is “structured so that it
will work,” said Mr. Iger. “They have a tremendous amount riding on it.”
But Disney is stepping into a potential
minefield. State leaders are growing more confident about exerting influence
over multinationals. The government is pushing to upgrade
Along with its stake in the park, Shendi stands to make a fortune
from a 4,000-acre plot of land that it controls around the resort. In
other locales, Disney has typically maintained a firm grip on the immediately
adjacent real estate. Shendi wants to use such land for hotels, spas and
retail, like its new
The
“
The partnership structure puts Disney in a
complicated spot. Shendi
is really a consortium of four powerful government-owned companies: the
Shanghai Radio, Film and Television Development Company; Jin Jiang Hotels;
Bailian retail shops; and a property developer, the Lujiazui Group. And each of
those companies has separate business ties to Disney’s new resort.
The Jin Jiang Group has a contract to provide
tourism services for the park. The Lujiazui Group helped develop the world’s
largest Disney Store. The Shanghai Media Group, a division of the development
company, is positioned to capture a big share of the park’s television and
advertising budget, since it controls the city’s biggest television stations,
as well as major newspapers, magazines and radio properties.
So Disney will have to deal with a
bewildering array of state affiliates acting as partners, suppliers and even
competitors, making contract negotiations complex and raising thorny
conflict-of-interest issues. Shendi, for instance, has set up its own energy
company to supply natural gas to the theme park site. And Shanghai Media Group
has formed alliances or made investments with Disney competitors like Sony,
Warner Bros. and DreamWorks Animation.
“The more partners you have, the more
potential conflicts,” said Oded Shenkar, a professor of business at
“Each of those state companies may come with
multiple other affiliations,” he added. A multinational must then “contend with
a whole network of relationships and interdependencies they often cannot decipher.”
A Master of Control
When Disney unveiled the website for the
But criticism has begun, too. Disney has been
pilloried in local media for its prices ($1 for a
single steamed bun, or about five times the street price). Some initial
visitors trampled the public gardens. And Disney has had to deploy uniformed
security guards to maintain order at popular rides, where lines during the soft
opening stretched up to three hours.
“The frenzy of Mickey Mouse and Donald Duck
and the era of blindly following them have passed,” Wang Jianlin, the chairman
of Dalian Wanda Group, which operates a chain of Chinese theme parks, said on
state television in May.
Mr. Iger brushed off Mr. Wang’s criticism as
“patently absurd,” and said media reports about food pricing complaints were
overblown. “We made a decision with our quick-service restaurants to go
higher-end, and there’s a cost to that,” he said.
Disney needs to avoid getting lost in
translation, an especially difficult proposition in
Already, Shanghai Disneyland is triggering
concerns about American cultural imperialism. At a gathering of
“I suggest that we shouldn’t allow too many
Disneyland theme parks to be built” in
The country’s leaders have also grown more nationalistic in recent
years: Everything must serve the state’s interest. The Communist Party is using
Disney to bolster the country’s own media and entertainment companies, as well
as to improve
Disney is going to extraordinary lengths to
prove its commitment to
Disney is working with
“When global brands ask me what they need to
do to improve their chances in China, I often paraphrase John F. Kennedy: Ask
not what China can do for your business, but what your business can do for
China,” said John A. Quelch, who teaches at Harvard Business School and has
extensive experience in China. “They need to demonstrate that they are willing
to promote things the government is interested in.”
Mr. Iger is trying especially to give
Shanghai Disney some Chinese flair. He instructed park designers to infuse as
many Chinese elements as possible.
Builders collected indigenous trees from all
around
Mr. Iger even came up with a new slogan for
the
“What are we doing here that will make this
park successful in
Follow
David Barboza @DavidBarboza2 and Brooks Barnes @brooksbarnesNYT on Twitter.
NEWSWEEK
By Jeff Stein On
6/29/16
Insurance company Wright
Updated | Federal
investigators are taking a close look at the Chinese ownership of an American
insurance company that has been selling legal liability insurance to senior
CIA, FBI and other intelligence officials and operatives for decades.
The company, Wright
The links between Guo and
Wright
(The FBI declined to
comment, and Fosun denies the FBI has asked it for any documents.)
On Tuesday, perhaps in
response to
A Fosun representative
said the concerns about the security of Wright
Wright’s niche insurance
business is little known outside
Wright’s business nearly
doubled between 2001 and 2008, from about 17,000 to 32,000 policyholders,
“spurred in part by a spate of lawsuits, investigations and criminal
prosecutions related to mistreatment of detainees from
Indeed, Wright
A CIA spokesman declined
to comment.
Some senior security officials
were fatalistic about the potential security breach, in light of
“They already have our
info from that,” a Homeland Security official said. “They probably have a photo
of me and other data from my passport. My room’s been tossed every time I’ve
gone over there. They don’t even try to hide that they have information on you.
They’ve got folders on all of us.”
Nevertheless, some former
U.S. intelligence and security officials, alarmed by Wright’s sale to Fosun,
have been thinking about how to get the company barred from selling Federal
Employees Liability Insurance to the CIA and other agencies—or maybe even to
take over its business.
“Wright’s FEPLI insurance
business gives it an extraordinary ability to target, collect and aggregate
very sensitive information about U.S. intelligence staff and contractors,” Tom
Woolston, a former CIA officer, wrote last year in a private report for a group
of potential investors. He concluded that Guo’s
“The Communist Party of
China, for purposes of
Fosun evidently felt the
combined heat of federal investigations and media inquiries. On June 6, eight
months after it was acquired by Fosun, Wright
[Fosun spent $2.3 billion
over two years acquiring Wright
In his 2015 memo, Woolston
advised that Wright’s “failure to prospectively disclose” its foreign ownership
could leave it liable to civil and criminal prosecution.
None of the half-dozen
former CIA officials contacted by Newsweek remembered receiving any
notice of Fosun’s ownership of Wright, including the company’s June 6 letter to
policyholders. One, who recently retired under cover as a State Department
officer, said that letter looked like junk mail so he “didn’t pay any attention
to it.” Prompted by Newsweek, he retrieved the envelope and opened it.
“It’s shocking,” he said after reading the letter. “It’s amazing that nobody
else has mentioned it.”
“They may be trying to
figure out what the hell is going on,” he said of
“It’s one thing to say the
[Chinese] government hacked it, It’s another thing to suggest Wright was
somehow complicit in facilitating a transfer of information,” the Fosun
official said. "It was not."
A Treasury spokesperson
said the department was forbidden by law to disclose any information to the
public about its investigations.
After repeated inquiries
from Newsweek and facing multiple investigations, Fosun on Tuesday
announced that it was selling Ironshore, Wright
"It is most likely
that this sale of Ironshore is a reaction to the FBI investigation…" said
Philip Manuel, a former Pentagon counterintelligence agent and lead
investigator for the Senate Permanent Subcommittee on Investigations, who is
also advising potential investors in Wright. “Ironshore/Fosun,” he alleged in
an email to Newsweek, “are trying to do damage control to head off
bad publicity.”
Manuel said the security
concerns over Wright
Michelle Van Cleave, who
headed the policy-making National Counterintelligence Executive during the
first George W. Bush administration, said Fosun’s ownership of Wright USA posed
a grave security risk, whether it knowingly provided information to its Chinese
parent company or not.
The breach only begins,
she said, when intelligence officials, including undercover personnel, provide
Wright with their real names, home addresses, telephone numbers and email
addresses. But it widens considerably when officials file claims because a federal
or congressional investigation causes them to hire a lawyer.
“Knowing that an
individual in a sensitive position may have a problem at work is red meat to an
espionage service looking to recruit inside sources,” Van Cleave told Newsweek.
“Usually, spies have to work hard for that information. Owning the insurance
company means that the unwitting American is filling out the forms that say
‘target me.’”