Walt Disney Co. may have found a way around the Great Wall of China that has thwarted U.S. studios attempting to sell their goods in the world’s most populous country: Disney and the Hong Kong government announced Monday night they have clinched a highly anticipated deal to build a $3 billion theme park in the former British colony.
Hong Kong Disneyland comes after months of arduous negotiations between the entertainment giant and Hong Kong officials. The talks ended in an agreement in principle several hours after a deadline the partners set last June.
The planned park, with projected attendance of 5 million its first year building up to 10 million, marks a triumph for Disney and expands the company’s Asian presence to Hong Kong, a funnel to the enormous Chinese market. Disney already has a theme park in Japan, where it is building a Tokyo DisneySea park to flank Tokyo Disneyland.
“Following an extensive worldwide review, we came to recognize Hong Kong as a unique city in an extraordinary nation at a remarkable time,” Disney chairman and CEO Michael Eisner said. The project, he added, demonstrates the company’s confidence in the Hong Kong market and its commitment to a strong presence in the Asia Pacific region.
Observers note that a successful theme park may give Disney extra leverage or at least a store of good will in dealing with Chinese bureaucratic red tape when it comes to distribbing theatrical pics in mainland China, which continues to have severe restrictions on distribution of foreign films.
The theme park arrangement still needs formal approval by Hong Kong’s Executive and Legislative Councils and Disney’s board.
Financial details weren’t released, but the Hong Kong government has reportedly agreed to pony up $800 million along with $1.5 billion worth of land and infrastructure to launch the project in exchange for a 55% ownership stake. Disney’s contribution will be about $250 million for 45% of the venture.
Construction will likely begin in April with the opening targeted for 2005.
The park will rise at Penny’s Bay on Lantau Island, just west of central Hong Kong, the former British colony that reverted to Chinese rule two years ago. On a main transit route from the new Hong Kong Intl. Airport, the development will be easily accessible by rail, highway and ferry, the partners said.
The park will feature Sleeping Beauty Castle with attractions like Main Street USA, Adventureland, Fantasyland, Toontown, Frontierland and Tomorrowland, as well as three or four hotels and a 92,000-square-foot retail, dining and entertainment complex. Project is eventually expected to create 36,000 jobs, 18,400 of those in its first year.
China, with a population pushing 1.3 billion, is a huge potential market for Western-style goods and services as its economy continues to grow and create wealth and opportunity. Disney’s deal could spark a similar move by Seagram Co.’s Universal Studios and other U.S. theme-park operators. Indeed, as Disney’s talks with Hong Kong dragged on and seemed to hit some roadblocks, Universal was understood to be stepping in as a possible park partner.
Hong Kong, with a population of 6.8 million, is eagerly counting on the theme park to boost its sagging economy and tourism industry.
Disney also could use a boost. Despite a strong box office, the company and Eisner have been under fire for months as disappointing earnings battered the Mouse’s stock. The retail business has been the main culprit, but Wall Streeters also have criticized the ho-hum performance of ABC Television (which now appears to be having one of its strongest seasons in years), and a nasty and expensive court battle with Jeffrey Katzenberg. It has also pretty much exhausted its animation library for homevideos.
To raise some cash and streamline, Disney sold Fairchild Publications to Conde Nast for a reported $650 million and is pondering a sale of its sports teams, baseball’s Anaheim Angels and hockey’s Mighty Ducks.
The company is expected to announce its third-quarter results Thursday and plans to meet in Los Angeles with Wall Street analysts Nov. 10 to discuss its earnings and prospects.