Even the Mouse Capitulated
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.”
One Bed, Different Dreams
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.’”