Disney Shanghai park could involve media deal

SHANGHAI/LOS ANGELES Tue Jul 29, 2008 8:48pm BST

Walt Disney Company CEO Robert Iger speaks in front of the Sleeping Beauty Castle during the opening ceremony of Hong Kong Disneyland in this September 12, 2005 file photo. REUTERS/Bobby Yip

Walt Disney Company CEO Robert Iger speaks in front of the Sleeping Beauty Castle during the opening ceremony of Hong Kong Disneyland in this September 12, 2005 file photo.

Credit: Reuters/Bobby Yip

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SHANGHAI/LOS ANGELES (Reuters) - Plans for a long-discussed Disneyland park in Shanghai could include a major media agreement between Walt Disney Co (DIS.N) and the Shanghai government that could give the company unrivaled access to the market, documents obtained by Reuters show.

The joint venture agreement would give Disney a huge advantage over U.S. media rivals by allowing it to bypass foreign film import quotas and summer and holiday blackout periods, as well as television censorship, both imposed by the central government.

While its rivals vie for the 20 slots allotted by the Chinese government each year to foreign films, Disney would be tasked with creating movies, TV and web fare to promote its brand, stories and characters to grow attendance at the Disney and Shanghai government-owned park, the documents show.

Disney has engaged in on-again, off-again talks for more than a decade with the Chinese government over plans to build a large theme park and hotel complex in the southern outskirts of Shanghai's Pudong district, where Fortune 500 companies like General Motors Corp (GM.N) have regional headquarters.

Those talks were stalled by a Shanghai government scandal in 2006 and Disney's need to focus on Hong Kong Disneyland, which opened in 2005 to a string of operational problems and lackluster attendance.

The plan documents came from a presentation given by Shanghai city government officials at a meeting in April with local entrepreneurs and scholars who were then asked how to improve the plan, a source familiar with the meeting said.

Two people familiar with the documents, who declined to be identified due to the sensitive nature of the situation, said that a legally binding final agreement would not be reached until some time after the Beijing Olympics in August.

One source also said that current talks are focusing on other issues, such as potential funding and profit sharing, rather than the media and marketing proposal.

JOINT VENTURE

While the Chinese know Mickey Mouse and the Disney brand through the limited number of movies and TV shows allowed into the country each year and through Disney retail stores, they are less familiar with the fairy tales and characters that populate the parks, Disney officials have said.

The documents call for Disney to receive a large stake in a joint venture that would manage the park. Under the joint venture, Disney would handle marketing and promotions in exchange for providing capital and technology.

The Shanghai government-led local consortium, including some of the city's major developers, would provide land near the Pudong International Airport in exchange for its share.

The joint venture would be controlled by the city government, which would have the right to appoint the general manager and other senior positions, according to the same sources.

The agreement would give the joint venture the right to publish and distribute a Disney-branded magazine, and to produce animated films and television shows for local broadcast and cable TV that showcase both the Disney brand and the new park, the documents show.

The content of the magazine, movies and TV shows, and breadth of distribution would have to be approved on a case-by-case basis by the central government and relevant ministries and regulators under Chinese rules, the documents showed.

Disney also would get help from the joint venture in opening the Chinese market to its films and other programming, and in return would help distribute Chinese-made fare in the United States and other countries, the documents show.

The agreement also calls for the joint venture to authorize local manufacturers to produce Disney-branded toys in China and sell them internationally.

'IMPOSSIBLE TO PREDICT'

The final talks for a Disneyland park in Shanghai could be accelerated after the Olympics, as central government leaders in Beijing prefer keeping the global focus on China's booming economy and improving standard of living in major cities, one of the sources said.

Disney has been in talks since 1994 over the Shanghai park and was close to a deal about two years ago, when the project was stalled by a corruption scandal that sidelined several top Shanghai government officials involved in the negotiations, two sources close to the deal said.

Disney's U.S. entertainment rivals, including NBC Universal and Time Warner Inc's (TWX.N) Warner Bros, have held talks with the Shanghai city government in the past decade but could not iron out differences over concerns such as management control and copyright protection. NBC Universal is 80 percent owned by General Electric Co (GE.N) and 20 percent by Vivendi (VIV.PA).

Despite Chinese media reports that a deal is imminent, Disney parks spokeswoman Leslie Goodman said there has been "no agreement and no deal" to proceed with plans for a park.

Disney Chief Financial Officer Tom Staggs said in December of 2006 that the Shanghai park was "something that I think we'd like to see happen down the road" but that the "course ... (and) speed of that conversation" had been "impossible to predict."

Since then, the company has made no official statement about the progress of talks except to shoot down talk of a deal, emanating mainly from the Chinese press.

In March, Shanghai Mayor Han Zheng made a surprise announcement that the city had applied to the National Development and Reform Commission, China's top economic planner, which directly reports to the cabinet, for approval to build a Disney theme park in China's financial hub.

While Disney allows several years to build its international theme parks, the company was planning to set up a "special mini park" first at the World Expo in Shanghai in 2010 to promote a formal Disney theme park to tens of millions of tourists expected to attend the event, according to one of the sources.

(Reporting by Gina Keating and George Chen, editing by Gerald E. McCormick)