Tuesday, March 17, 2009

A High Stakes Case Of Chicken For The Mouse...


I know some of you have seen this in the news...

The abrubt end of negotiation over Hong Kong Disneyland. It was to be expected as the negotiations that have dragged on haven't came to a satisfying conclusion for TeamDisney Burbank. I can understand the Hong Kong Governments frustration as the park hasn't turned out to be the success it wanted. I can understand Disney's desire to expand the park and have the city government help foot the bill. But this impasse is both Disney's fault and not its fault.

What you are seeing on display here is a high stakes game of chicken. To see who will blink first. The Hong Kong government feels(rightly so, I believe) that they put forth a great deal of money for a disappointing return and right now they don't want to invest more without a proper guarantee of results. Very little money was put down on the project by Disney under Eisner's regime, but they got a great deal. The park they built is a very beautiful theme park and the resort is nothing if not picturesque. Eisner didn't skimp on the theming when it came to China's first park, but he did skimp on the attractions. Several key attractions that would have drawn more guest through the turnstiles were left for a second phase. Pirates, Haunted Mansion and IASW would have to wait. A big mistake that the Mouse is now having to deal with. They opened Small World last year and got an immediate attendance boost that shows if you build what guest want, they come. Well duh...

Small world is a nicely themed, very needed addition to worlds smallest Disney park, but it was built because the will of the company to fork over the cash for a major attraction like POTC or HM wasn't there. Still isn't there. Not yet, anyway...

Make no mistake about my argument here. HKDL is a very nice park, but it's one that absolutely should have opened with two or three more iconic Disney E-Tickets and the company and the local government are now in a fight because of it. Will they build the much ballyhooed Second Phase that will cost over a half billion dollars? They want to, they intend to and they should. But right now, the HK officials are having a fit and expecting Disney to pony up more than Iger and company feel is feasible. I think that as disappointing as this news is, Disney is the one with the bigger cards... or card I should say.

Shanghai.

That is a card that will make government officials in Hong Kong think twice. They're trying to expand the tourist trade in their area and the Mouse plays a bigger role than they're going to admit. I think they expected Disney to just give in and fund the project themselves. As the time gets closer to an announcement of a mainland Disney theme park the government will come around. If they don't they're going to have some serious explaining to do in five or six years. As much as a bad decision it was for them to build that resort and expect a dramatic debut for the park, it'll be an even more dramatic ending were they to let the park fail. Which, I believe they aren't about to do.

Interesting times are ahead for the Mouse and the Middle Kingdom this year...

4 comments:

Anonymous said...

Disney's practice of playing one project against the other (Anaheim vs Long Beach, France vs Spain, etc.) may have been able to wrangle concessions from various governmental agencies, but I really don't think they gain much in the long run. It eventually puts Disney on bad terms with the agencies they deal with.

That has happened with attractions (Harrison Ford/Indiana Jones, Lucus/Star Wars, etc) and ended up putting Disney on poor terms with people they need to do business with.

Disney just needs to realize that THEY need to make some significant investments and create significant quality attractions the will result in profitable draw in attendance. They cannot continue to expect others to cover all the financial burden and then get upset when Disney's low quality "creativity" results in poor response.

Anonymous said...

I hear a very different story inside Disney. Disney continues to want to invest in the park and would be willing to fund expansion on its own but the agreement with HK requires the government to co-fund anything that Disney does. Disney would love to take back control of the park from HK because it is a very difficult arrangement. Even if Disney wants to spend, if HK does not, nothing goes forward. And the HK government has approval over EVERYTHING down to every piece of signage in the park. Disney just cannot operate the way it needs to under this arrangement. However, the HK government is unwilling to relinquish either its ownership stake or control to Disney. So given those constraints, HK must agree to anything Disney wants to do and co-fund. Disney did want to install POTC but ran into cultural approval issues with the HK government. At the root of all of this was Eisner's bad deal-making which gave too much control to HK but also required them to spend a lot of money to build transportation, etc. for the park. To fund that, they taxed the local HK people and there is a lot of resentment. Iger would love to get out of this mess, but the HK government is not willing to offer any solutions. Let's hope they don't make the same mistake in Shanghai where the politics are even worse!

jedited said...

To the first Anonymous above, how was/is Disney's relationship with Anaheim damaged? Why should Disney care that their relationship with Long Beach was damaged?
And the same questions for France vs Spain.

Anonymous said...

according to the latest local news, spokesman from The Commerce & Economic Development Bureau says the Hong Kong Government will proactively negotiate with The Walt Disney Company and they hope to reach a deal that would enhance the attractiveness of HKDL as well as beneficial to the city of Hong Kong, ASAP.