The company has to overcome Beijing's tight controls on foreign media to sell its stories. Analysts say it needs a TV channel there.....
SHANGHAI — In little more than a year on the job, Stanley Cheung, Disney's chief in China, can lay claim to this: "The Lion King" is coming to Shanghai this summer.
Cheung, 47, considered bringing the Broadway musical here such a feat that he made the announcement recently to 400 guests in Shanghai's Grand Theater in People's Square, heralding what would be one of his company's biggest productions in China since "Snow White and the Seven Dwarfs" played here nearly 70 years ago.
It took almost his entire tenure to work out details with government officials, illustrating the resolve Cheung and Walt Disney Co. must have as they try to crack China's booming but untapped market.
"We have got to get our stories out," says Cheung, a Hong Kong native who previously managed the Chinese operations of Johnson & Johnson and Pillsbury Co. He and his staff of 100 in Shanghai have to sell Disney's characters without the benefit of a Disney Channel, something that the company has in India, its other key emerging market.
Beijing has placed tight controls on foreign media, preventing Disney from airing its programs frequently to the 340 million households with television sets.
Cheung wouldn't discuss Disney's financial goals for China or provide a timetable for reaching certain targets. Disney Chief Executive Robert Iger has repeatedly spoken about China as a top priority but seemed acutely aware of the challenges.
"The near-term issues are great," Iger said of China in an analysts' meeting this year, "and they are not for the faint of heart."
Some analysts doubt that Disney can conquer the Chinese market without a dedicated channel for its programs.
"Disney has a business model predicated on the widest possible exposure of its media properties to drive attendance at its theme parks and purchases of home video and licensed products," said David Wolf, managing director of Wolf Group Asia, a Beijing-based media consultant. "Without broad, consistent local distribution of its films and TV shows in China, their model won't work."
Cheung hopes "The Lion King" will help raise the entertainment giant's profile with Chinese adults, many of whom identify Disney with Mickey Mouse and not much more. Reaching grown-ups is seen as crucial to breaking through cultural barriers and boosting spending on Disney goods by Chinese families.
Disney is counting on its global businesses to contribute a bigger share of profit in the coming years, and few places have as much potential as China, home to almost 300 million children under age 15.
Disney recently completed its first co-produced film in China, "The Secret of the Magic Gourd," a Chinese fable about a magical fruit that bestows special powers on a young boy. The Chinese-language movie is expected to be released nationwide this year.
Cheung's team has also revamped Disney's Chinese website and teamed with local companies to make and sell Disney-branded cellphones in the Middle Kingdom, the world's largest mobile phone market with more than 400 million users. In addition, Disney expects to add 2,200 retail stores in China this year, almost as many as it has now.
Disney's push comes as other foreign companies are chasing China's growing consumer market for toys and entertainment. Warner Bros. said recently that it planned to open about 200 stores in China over the coming years to cash in on its characters such as Bugs Bunny.
If its current operations in China are any guide, Disney won't be shooting off fireworks to celebrate its investments here anytime soon. Disney's single biggest project in China has been in Hong Kong, where it paid $314 million for a 43% stake in Hong Kong Disneyland. (The remainder is owned by the government of Hong Kong, which spent $2.9 billion for the park and surrounding infrastructure.)
The park opened in September but has had a lackluster start and a few problems that have hurt its image in China. During the weeklong Chinese New Year holiday in late January, angry customers climbed up the park gates after thousands of ticket-holders, including many from the mainland, were denied entry because of a discount promotion that backfired.
Hong Kong Disneyland announced recently that it would add three attractions, including Autopia, to the current modest lineup of 21 rides and attractions. Regular admission for a family of three costs more than $120, a hefty sum for mainland Chinese.
"Hong Kong government spent a lot of money to build the world's most famous theme park [brand], but I would say its benefit is far below the actual expectation," said Michael Li, executive director of the Federation of Hong Kong Hotel Owners. He said there was little evidence that Hong Kong Disneyland had boosted the city's hotel occupancy.
On the theme park's 100th day in operation, Disney declared that it had welcomed 1 million visitors, or 10,000 a day. Disney previously projected annual attendance of 5.6 million, about 15,300 a day.
Cheung doesn't oversee Hong Kong Disneyland, which has separate management. But he knows the success of that park as well as Disney's other ventures in China are elements in a marketing strategy that relies on developing brand loyalty based on its characters and stories. That's why Cheung is gleeful about "The Lion King," which is expected to have 100 showings.
Cheung, who has a master's degree in business administration from Indiana University, has made no secret that Disney has been negotiating to build a theme park in Shanghai. Speculation intensified recently after Shanghai Mayor Han Zheng told reporters in Beijing last month that the city was making "preliminary preparations" for a Disney park. Disney executives, though, said there was nothing to announce, reiterating that a second park in China would not be opened before 2010.
Shanghai is eager to have an international attraction for its World Expo in 2010, but Disney has hinted that it wants a Disney Channel first. So far, Cheung and Iger have had no luck in persuading Beijing to approve a 2003 application for a broadcast license.
Last year, Chinese leaders clamped down on foreigners' participation in China's burgeoning media industry, saying they want to preserve China's "cultural security."
"The channel Disney wants will just be impossible, and I expect that in the next several years there is not much possibility," said Yin Hong, director of film and television studies at Tsinghua University in Beijing.
Even working with the Communist Youth League has proved to be a challenge. Disney enlisted the youth arm of the Communist Party to boost the company's Dragon Club, named after a 30-minute Disney cartoon shown on Chinese TV, but they have held few programs together.
Disney's success in China also will hinge on its battle against rampant piracy of Disney videos, clothes and toys.
Cheung has turned to large retailers such as Carrefour, Wal-Mart Stores Inc. and some domestic chains to distribute authentic DVDs of its movies and shows. Many of Disney's products now come with a hologram tag, and this summer the company plans a nationwide promotion rewarding repeat buyers of licensed goods.
"The holograms are incredibly difficult to copy," said Ken Chaplin, who heads Disney's consumer products in emerging markets.
Then again, he said, "I'm hesitant to say anything's impossible in China."