The Globalization of Disneyland

1. What is the fundamental difference between a licensing agreement and a joint venture as related to the Disney theme parks?

2. Why did the Walt Disney Company opt for a licensing agreement for Tokyo 
Disneyland?

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Disney (D): The Globalization of Disneyland

In the late 1970s, the Walt Disney Company made the decision to begin expanding internationally. Tokyo Disneyland was to be the first Disney theme park built outside of the United States. Although the Walt Disney Company understood the enterprise environmental factors surrounding Disneyland and Walt Disney World, there were unknowns with opening a theme park in Tokyo. First, Japan has a winter season that could impact attendance. Second, Disney was unsure as to whether the Japanese would embrace the Disney characters. Having an American theme park in the middle of Japan was seen as a risk.

Although several globalization options were available to the Walt Disney Company, only three of the options are considered in this case study. Each option requires some sort of contractual agreement, and each type of agreement is impacted by the assumptions and associated risks made concerning the enterprise environmental factors. First, the company could assume the cost for constructing a theme park wholly owned by the Walt Disney Company. The cost of doing this would require expenditures in the billions of dollars. The company would have to work directly with foreign governments, labor unions, and stakeholders. While it could be done, the risks and costs involved in doing this were considered prohibitive, especially for the first theme park built outside of the United States. Therefore, the other two options were licensing agreements and joint ventures.

LICENSING AGREEMENTS

A licensing agreement is a legal contract between two parties, known as the licensor and the licensee. In a typical licensing agreement, the licensor, such as the Walt Disney Company, grants the licensee the right to produce and sell goods, apply a brand name or trademark, or use patented technology owned by the licensor. Legal restrictions often mandate that the licensee must be a company in the host’s country that is willing to accept such an arrangement with the licensor. In exchange, the licensee usually submits to a series of conditions regarding the use of the licensor’s property and agrees to make payments known as royalties.

Licensing agreements cover a wide range of well-known situations. For example, a retailer in the theme park might reach agreement with the Walt Disney Company to develop, produce, and sell merchandise bearing Disney characters. Or a construction company might license proprietary theme park design technology from the Walt Disney Company to gain a competitive edge rather than expending the time and money trying to develop its own technology. Or a greeting card company might reach agreement with the Walt Disney Company to produce a line of greeting cards bearing the images of popular Disney animated characters.

One of the most important elements of a licensing agreement covers the financial arrangement between the two parties. Payments from the licensee to the licensor usually take the form of guaranteed minimum payments and royalties on sales. Royalties typically range from 6 to 10 percent, depending on the specific property involved and the licensee’s level of experience and sophistication. Not all licensors require guarantees, although some experts recommend that licensors get as much compensation up front as possible. In some cases, licensors use guarantees as the basis for renewing a licensing agreement. If the licensee meets the minimum sales figures or theme park attendance figures, the contract is renewed; otherwise, the licensor has the option of discontinuing the relationship.

Another important element of a licensing agreement establishes the time frame of the deal. Many licensors insist on a strict market release date for products licensed to outside manufacturers. This strict release date also applies to the time needed to construct the theme park. After all, it is not in the licensor’s best interest to grant a license to a company that cannot build the theme park in a timely manner or that never markets the products. The licensing agreement also includes provisions about the length of the contract, renewal options, and termination conditions.

Another common element of licensing agreements covers which party maintains control of copyrights, patents, or trademarks. Many contracts also include a provision about territorial rights, or who manages distribution in various parts of the country or the world. In addition to the various clauses inserted into agreements to protect the licensor, some licensees may add their own requirements. They may insist on a guarantee that the licensor owns the rights to the property, for example, or they may insert a clause prohibiting the licensor from competing directly with the licensed property in certain markets.

There are advantages as well as disadvantages with licensing agreements. The primary advantage is that the licensing agreement can limit a company’s financial exposure. It is entirely possible that the Walt Disney Company may not have to provide any financial support for the construction of the new theme park. It would provide expertise in the design, construction, and management of the park and its attractions. It can demand that all attractions be identical to those at Disneyland and Walt Disney World. The theme park could be an exact duplicate of those two parks.

In exchange, the Walt Disney Company would receive royalty payments based on admission fees and the sale of food, beverages, and merchandise. The company may also receive royalty payments for the use of Disney characters, including use in themed hotels. The Walt Disney Company can also collect a percentage of sponsorship fees. The company would receive royalty payments regardless of whether the theme park lost money.

The disadvantages are limitations on profitability and possibly future opportunities. If the theme park is highly profitable, the Walt Disney Company would receive only royalty payments and would not share in the profitability. All profits may stay with the licensee. The licensee may demand that the Walt Disney Company not be allowed to enter certain markets that could be seen as competitors for the new theme park. This could limit the company’s ability for future expansion in foreign markets. Since the Walt Disney Company would not be managing the theme park under the licensing agreement, it could face a loss of quality control that affects its image and reputation. Licensing agreements, therefore, can minimize risk for licensors and maximize risk for licensees.

JOINT VENTURES

A joint venture is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing shared equity. The theme park would be shared ownership. Both parties may exercise control over the enterprise and consequently share revenues, expenses, and assets.

A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. Although joint ventures are generally small projects, major corporations also use this method to diversify or expand their business globally. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project’s start-up cost as well as the resulting profits.

Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership rather than just the immediate returns. For example, it may take years before a theme park arrives at the desired yearly attendance figures. Ultimately, both short-term and long-term successes are important. In order to achieve these successes, honesty, integrity, and communication within the joint venture are necessary.

With joint ventures, there can be a dominant partner and participation of the public. There may also be cases where the public shareholding is substantial but the founding partners retain their identity. In such cases, local governments may provide some funding in the way of loans or tax incentives in the hope of creating jobs.

Further consideration relates to starting a new legal entity on foreign soil. The licensor may have to abide by legal requirements in the host country related to ownership of shares of stock in the new venture, the use of local labor, abiding by local union contracts, how procurement will be performed, and restrictions on land development. Such an enterprise is sometimes called an incorporated joint venture and can include technology contracts (rights related to know-how, patents, trademarks, brand use agreements, and copyright), technical services, and assisted-supply arrangements.

Joint ventures are profit and risk maximization strategies for licensors and risk minimization strategies for licensees. A joint venture does not preclude the licensor (such as the Walt Disney Company) from collecting royalties. However, it does require that both licensor and licensee make significant financial contributions. The result is usually a much larger project than each party could afford if each had to do it alone. The main disadvantage is that licensor and licensee can have different opinions on critical decisions.

TOKYO DISNEYLAND

The Walt Disney Company’s partner for Tokyo Disneyland was be the Oriental Land Company. It had to decide whether the partnership should be based on a joint venture or a licensing agreement. Unsure about how the EEFs would affect the acceptance of the theme park and the fact that this was the Walt Disney Company’s first theme park outside of the United States, it opted for the risk minimization strategy of a licensing agreement. Under this agreement, Tokyo Disneyland was not partially or wholly owned by the Walt Disney Company. With the licensing agreement, the company would receive royalty payments of 10 percent of the admission fees and 5 percent of the sales on food, beverages, and merchandise. It receives its royalty payments even if Tokyo Disneyland loses money. The Walt Disney Company did have a small investment in the theme park ($3.5 million), which amounted to 0.42 percent of the initial construction cost. Because it opted for the risk minimization licensing agreement, the Walt Disney Company decided not to invest heavily in land development surrounding the theme park.

In April 1979, the first basic contract for the construction of Disneyland in Tokyo was signed. Japanese engineers and architects flocked to California to tour Disneyland and prepare to construct the new operating dreamland in Tokyo. Just one year later, construction of the park began. Hundreds of media reporters covered the story, indicative of the high expectations for the park. Although the building process was successful, the final cost of Tokyo Disneyland was almost double the estimated budget, costing ¥180 billion rather than the projected ¥100 billion Nevertheless, Tokyo Disneyland has been a constant source of pride since opening day over 30 years ago.

With only a few exceptions, Tokyo Disneyland features the same attractions found in Disneyland and Walt Disney World’s Magic Kingdom. It was the first Disney theme park to be built outside the United States, and it opened on April 15, 1983. The park was constructed by Walt Disney Imagineering in the same style as Disneyland in California and Magic Kingdom in Florida.

There are seven themed areas in the park: the World Bazaar; the four classic Disney lands: Adventureland, Westernland, Fantasyland, and Tomorrowland; and two mini-lands: Critter Country and Mickey’s Toontown. Many of the games and rides in these areas mirror those in the original Disneyland, as they are based on American Disney films and fantasies. Fantasyland includes Peter Pan’s Flight, Snow White’s Scary Adventures, Dumbo the Flying Elephant, and others based on classic Disney films and characters. The park is noted for its extensive open spaces, to accommodate the large crowds that visit the park.

The day the park opened in 1983, attendance was 13,200 visitors. On August 13 of the same year, more than 93,000 people visited the park. This one-day attendance record surpassed that of all other Disney theme parks to that time. Three years later, Tokyo Disneyland broke the record again with a one-day attendance of 111,500 people.

EURO DISNEY (DISNEYLAND PARIS)

In Tokyo Disneyland’s first year of operations, 1983, it was evident that the park would be a success. In 1984, the Walt Disney Company made the decision to build a second foreign theme park, this time in Europe. The company wanted to build a state-of-the-art theme park, a decision that eventually led to “budget breaker” scope changes, and wanted it to open by 1992. Many of the changes were last-minute changes made by Michael Eisner, Disney’s CEO.

Using the first year’s results from Tokyo Disneyland, highly optimistic financial projections were established for Euro Disney based on the expectation of 11 million visitors the first year and 16 million visitors yearly after the turn of the 21st century.

The Walt Disney Company viewed the Euro Disney theme park as a potentially profitable revenue generator for decades since the company would have a leisure and entertainment monopoly in Europe. Unlike Tokyo Disneyland, the Walt Disney Company opted for a joint venture that was designed around a profit maximization strategy. The company would receive 10 percent royalties on admissions, 5 percent royalties on food, beverage and merchandise sales, a management fee equivalent to 3 percent of revenue, a licensing fee for using the Disney name and characters, 5 percent of gross revenues of themed hotels, and 49 percent of the profits. The Walt Disney Company also received royalties from companies that invested in and endorsed specific rides. If Euro Disney was as successful as Tokyo Disneyland, the Walt Disney Company could receive more than $1 billion in royalties and profit sharing each year.

Part of the decision to use a joint venture relationship was because the Walt Disney Company realized that it had made serious mistakes in Disneyland, Walt Disney World, and Tokyo Disneyland by not investing heavily in property development surrounding the theme parks. To maximize its profits, the Walt Disney Company agreed to build 18,200 hotel rooms surrounding Euro Disney by 2017.

WALT DISNEY STUDIOS PARK

The Walt Disney Company recognized that, if you want people to come back to theme parks again and again, you must add new attractions, build adjacent theme parks on closely related topics, or do both. The $2.3 billion MGM Film Studio Tour was scheduled to open in 1996, although these plans were canceled around mid-1992 due to the resort’s financial crisis. After the resort began to make a profit, the plans were revived on a much smaller scale. The new theme park included a history of films, including cinema, cartoons, and how films are made. The new budget was $600 million. The MGM Studio theme park was renamed Walt Disney Studios Park and opened on March 16, 2002. It was dedicated to show business, themed after movies, production, and behind-the-scenes. Just like Euro Disney, this park was part of the original joint venture relationship rather than just a licensing agreement.

In 2013, the park hosted approximately 4.4 million guests, making it the third-most visited amusement park in Europe and the 21st-most visited in the world though it had the lowest attendance figures of all eleven Walt Disney theme parks.

TOKYO DISNEYSEA

In 1997, Tokyo Disneyland recognized the need for a second theme park because attendance was leveling off, as indicated in Table I.

TABLE I  TOKYO DISNEYLAND ATTENDANCE: 1983 TO 1997

Year Attendance
1983 9,933,000
1984 10,013,000
1985 10,675,000
1986 10,665,000
1987 11,975,000
1988 13,382,000
1989 14,752,000
1990 15,876,000
1991 16,139,000
1992 15,815,000
1993 16,030,000
1994 15,509,000
1995 16,986,000
1996 17,368,000
1997 16,686,000

Between 75 and 80 percent of the visitors to Tokyo Disneyland were repeat visitors. Even with new attractions being built each year, there was apprehension that people might not return to the park after two or three visits. Furthermore, a drop in attendance by as much as 4 percent over the next four years was expected. A new theme park would be needed.

The concepts and designs for a Disney sea park had been in development at Walt Disney Imagineering for more than 20 years. However, the Walt Disney Company recommended that the new theme park be similar to the Walt Disney Studios Park that was in the planning stages for Euro Disney. Disney’s partner in Japan, the Oriental Land Company, believed that the Japanese would not be as enamored with moviemaking as were Americans and Europeans. Instead, the decision was to build a Tokyo DisneySea for about $3.5 billion, based on recognition of the Japanese love for the sea. Unlike Tokyo Disneyland, the new park would be more adult-themed, including faster, scarier rides and shows designed for an older audience.

The success of Tokyo Disneyland made it quite apparent that the Walt Disney Company would have been better off financially had it chosen a joint venture rather than a licensing agreement. However, a sea park was not the same as a Disneyland park. The Walt Disney Company believed that the Tokyo DisneySea did have some risks. The Oriental Land Company believed that the Tokyo DisneySea could be just as successful as Tokyo Disneyland, but coming up with $3.5 billion was very risky. The Oriental Land Company would have preferred to minimize its risks by having a joint venture but eventually negotiated a licensing agreement for the $3.5 billion theme park. The debt for Tokyo Disneyland had been paid off in three years after the park opened. The Oriental Land Company believed that the Tokyo DisneySea could also be paid off in a reasonably short period of time.

In 2013, Tokyo Disneyland hosted 17.21 million visitors, moving its ranking to the world’s second-most visited theme park, surpassing Disneyland in California but falling behind the Magic Kingdom in Florida. However, as seen in Table II, 
the Tokyo DisneySea attracted 14.08 million visitors in 2013, making it the world’s fourth-most visited them park. In 2013, a total of 132,549,000 visitors visited Disney theme parks.

TABLE II  2013 ATTENDANCE FIGURES FOR SELECTED THEME PARKS

Theme Park 2013 Attendance 2013 Worldwide Ranking
Walt Disney World’s Magic Kingdom, Orlando 18,588,000 1
Tokyo Disneyland 17,214,000 2
Disneyland, Anaheim 16,202,000 3
Tokyo DisneySea 14,084,000 4
Disneyland Paris 10,430,000 6
Disney’s Animal Kingdom at Walt Disney World 10,198,000 7
Disney’s Hollywood Studios, Walt Disney World 10,110,000 8
Ocean Park, Hong Kong 7,475,000 12
Hong Kong Disneyland 7,400,000 13
Walt Disney Studios, Disneyland Paris 4,470,000 21

FUTURE OF TOKYO DISNEYLAND

Since the park opened in 1983, Tokyo Disneyland has regularly been the most profitable Disney resort. By 1994, over 140 million people had entered through its gates (the population of Japan is only 127.6 million), and its popularity had increased. Just two years later, it employed 12,390 people, marking Tokyo Disneyland as the biggest workplace in Japan’s diversionary outings. Although the attendance trend is similar to that of other Japanese theme parks, the revenue produced by Tokyo Disneyland is larger than all other national theme parks combined, thus greatly profiting the Japanese economy. Many speculate that Tokyo Disneyland is such an economic success due to timing and location; the theme park lies in a metropolitan area with a population of 30 million and opened at the height of a booming economy where hard-working citizens desired a fun escape from reality. One of the main goals of Tokyo Disneyland was to keep improving the park and move away from the restrictions of the Walt Disney Company. Japan had merged its national identity with Tokyo Disneyland ark by adding attractions with distinctly Japanese qualities. Cinderella’s Castle displays the classic Disney character and story plot yet presents the story through the eyes of the Japanese. Meet the World, located in World Bazaar, shows true national identity and pride as it embodies Japanese history; instead of costumes, Meet the World characters wear the traditional Japanese kimono. Once nominated by Disney Legends, Masatomo Takahashi, the former president of the Oriental Land Company, states that this growth and development is one of the company’s primary goals: “We must not just repeat what we receive from Disney. I am convinced that we must contribute to the cultural exchange between Japan and U.S.A.”1

HONG KONG DISNEYLAND

In 1988–1989, negotiations began to bring the original Disneyland to Hong Kong. Hong Kong was recognized as an international finance center and the gateway to China. The Walt Disney Company recognized that, even though many countries and cities in Southeast Asia may be on the cutting edge of technology, they were not familiar with many of the Disney products, including comics of Disney characters such as Mickey Mouse. Because of the potential risk of limited brand awareness, marketing and advertising would be critical. Even with limited brand awareness, the Hong Kong government recognized significant benefits in the venture:

· Hong Kong Disneyland would attract millions of tourists a year, create thousands of jobs, enrich the quality of life, and enhance Hong Kong’s international image.

· The world-class theme park had the potential to provide Hong Kong with a net economic benefit of billions of dollars over 40 years.

· It was estimated that attendance in the park’s first year of operation would be over 5 million, gradually rising to around 10 million a year after 15 years.

· About 18,400 new jobs were expected to be created directly and indirectly on opening, rising to 35,800 over a 20-year period.

· Around 6,000 jobs were expected to be created during the construction of facilities for Phase I of Hong Kong Disneyland. In addition, some 10,000 jobs were expected to be created by the land reclamation and other infrastructure works funded by the government.

The benefits of the base case were based on several assumptions, including these:

· The park opens in 2005.

· The park’s total attendance in its first year of operation is estimated at 5.2 million.

· The park gradually reaches full annual capacity of 10 million total visitors after 15 years.

· Nearly all employees at Hong Kong Disneyland would be from Hong Kong. About 40 Disney employees from around the world would manage the park initially. But eventually about 35 local employees would be trained to take up these management duties.

· Disney would provide master planning, project management expertise, real estate development, design of the attractions, and other such support activities.

· Staff training for key personnel would take place in Hong Kong and the United States. In the United States, trainees would receive hands-on experience at existing Disney theme parks.

· In Hong Kong, the company would develop suitable training packages for a wide spectrum of Hong Kong Disneyland employees. A Disney University would be established as part of this process.

· Hong Kong Disneyland would attract 3.4 million incoming tourists from outside Hong Kong in Year 1, rising to 7.3 million after 15 years.

Hong Kong Disneyland is located on reclaimed land in Penny’s Bay, Lantau Island. It is the first theme park built in Hong Kong, and is owned and managed by the Hong Kong International Theme Parks. Unlike Disneyland Paris, the Walt Disney Company preferred to be actively involved in park management rather than just being an investor. As part of a negotiated joint venture agreement, the government contributed $2.9 billion to build the park and Walt Disney Company contributed $314 million.

Risks

Despite the Walt Disney Company’s experience with other theme parks, there were several risks in regard to the Hong Kong project. Some of these risks that emanated from EEFs included:

· The Chinese people’s willingness to accept an American theme park.

· The Chinese culture.

· Potential cost overruns that could require that the Walt Disney Company provide additional financial support.

· Weather conditions.

· Uncertain market conditions.

· Hong Kong had another theme park, Ocean Park, which had opened in 1977. Both parks could be competing for the same tourists.

· Political uncertainty.

· A change in the government’s policy for acting as a financial partner.

· Legal barriers affecting the joint venture.

· Counterfeit products.

The park opened to visitors on September 12, 2005. The park consists of five themed areas: Main Street, U.S.A., Fantasyland, Adventureland, Tomorrowland, and Toy Story Land. Cast members speak in Cantonese, English, and Mandarin. Guide maps are printed in traditional and simplified Chinese as well as English, French, and Japanese.

The park has a daily capacity of 34,000 visitors—the fewest of all Disneyland parks. The park attracted 5.2 million visitors in its first year, below its target of 5.6 million. Visitor numbers fell 20 percent in the second year to 4 million, which led to criticism from local legislators. However, park attendance increased by 8 percent in the third year, attracting a total of 4.5 million visitors in 2007. In 2013, the park’s attendance increased to 7.4 million visitors, making it 13th in world park attendance.

Feng Shui Culture

The Walt Disney Company learned an unpleasant lesson about the importance of culture and EEFs from the negative publicity following the launching of Disneyland Paris. The company was attacked as being insensitive to European, and especially French, culture. The Walt Disney Company attempted to avoid similar problems of cultural backlash by attempting to incorporate Chinese culture, customs, and traditions when designing and building the resort, including adherence to the rules of feng shui. Feng shui is a local culture where numbers, colors, and images can represent good luck as well as bad luck. Buildings and structures must face in certain directions depending on their surroundings. There must be a balance between the elements of earth, wood, and fire. For instance, a bend was put in a walkway near the Hong Kong Disneyland Resort entrance so good qi (chi) energy would not flow into the South China Sea. Lakes, streams, and waterfalls were strategically placed around the theme park to signify the accumulation of wealth and good fortune.

The Walt Disney Company hired a feng shui expert to assist with designing the park and the attractions to focus on bringing the largest amount of good luck. The company was taking no chances with even the smallest details. Some of the feng shui features that were implemented are listed next.

· September 12 is considered as a lucky day for opening a business. Hong Kong Disneyland was officially opened on September 12, 2005.

· Various earthly elements important in feng shui, such as wood, fire, earth, metal, and water, were carefully balanced throughout the resort . For example, projections of a rolling fire in one restaurant bar enhance the fire element at that location, while fire is prohibited in other areas.

· Hong Kong Disneyland’s main gate and entrance was positioned in a north–south direction for good luck. Another landscaped area was designed east of the theme park to ensure this north–south positioning, also enhanced by large entry portals to the area.

· Hong Kong Disneyland was carefully positioned on Lantau Island in Penny’s Bay among hills and sea for the best luck. The lucky feng shui hill formations in the area include “white tiger” and “green dragon.”

· The actual park entrance was modified to maximize energy and guest flow in order to help the park’s success.

· Individual attraction entrances inside the Disney Park have been positioned for good luck as well.

· Large rocks are placed throughout Hong Kong Disneyland because they represent stability in feng shui. Two boulders have been placed within the park, and each Disney hotel in the resort has a feng shui rock in its entrance and courtyard or pool areas. The boulders also prevent good fortune from flowing away from the theme park or hotels.

· Water features play an important role in the Hong Kong Disneyland landscaping because they are extremely beneficial in feng shui. Lakes, ponds, and streams are placed throughout the park to encourage good luck, fortune, and wealth for the resort. A large fountain featuring classic Disney characters welcomes guests at the entrance to the park and to provide good luck (and for the taking of pictures).

· The Hong Kong Disneyland Hotel and the Disney’s Hollywood Hotel were built in carefully selected locations with water nearby in a southwest direction to maximize prosperity from feng shui.

· The Hong Kong Disneyland Resort hotels have views of the waterfront onto the ocean and South China Sea. This provides good feng shui.

· The main ballroom at the Disneyland Hotel at the Hong Kong Disneyland Resort is 888 square meters, because 888 is a number representing wealth.

· The elevators at the Hong Kong Disneyland Resort do not have the number four, and no building (including the resort hotels) has a fourth floor. The number four is considered unlucky in the Chinese culture because, when pronounced, it sounds like the Chinese word for death.

· Red is an extremely lucky color in Chinese culture, so it is seen frequently throughout the park, especially on the buildings on Main Street, U.S.A.

· No clocks are sold at Hong Kong Disneyland stores because in Chinese the phrase “giving clock” sounds like “going to a funeral.”

· No green hats are sold in Hong Kong Disneyland stores because it is said in Chinese culture that a man wears green to indicate that his spouse has cheated on him.

CRITICISMS

Overcrowding

Just before the grand opening, the park was criticized for overestimating the daily capacity limit. The problem became apparent on the charity preview day on September 4, 2005, when 30,000 locals visited the park. The event turned out to be a disaster, as there were too many guests. Wait times at fast food outlets were at least 45 minutes, and wait times at rides were up to two hours.

Although the park’s shareholders and the Hong Kong government pressured the park to lower the capacity, the park insisted on keeping the limit, agreeing to relieve the capacity problem only by extending the opening time by one hour and introducing more weekday discounts. However, according to park officials, local visitors tended to stay in the park for more than nine hours per visit; thus, the adaptations would do little to solve the problem.

During Chinese New Year 2006, many visitors arrived at the park in the morning bearing valid tickets but were refused entry, because the park was already at full capacity. Disgruntled visitors attempted to force their way into the park by climbing over the barrier gates. Management was forced to revise the ticketing policy and designated future periods close to Chinese public holidays as special days during which admission would be allowed only with a date-specific ticket.

Initially, there were only 22 attractions, fewer than any other theme park. In July 2009, an agreement was reached between the Hong Kong government and Disney to add 20 more attractions. The Walt Disney Company would invest $450 million in the expansion and provide a loan to the theme park.

Fingerprinting

As at other Disney theme parks, visitors to Hong Kong Disneyland have their finger biometrics scanned at the entry gate. Visitors are not warned of the policy beforehand. Fingerprinting is done of all visitors older than 11 years of age and is used to associate a ticket with the person using it. The company claims that the surface of a guest’s finger does not contain sufficient information to re-create a fingerprint image. Nonetheless, forensic specialists note that the data collected are more than adequate to establish a positive identification.

Public Relations

The Walt Disney Company initially refused to release attendance figures after media reports surfaced saying the park’s attendance numbers might be lower than expected. The company finally declared on November 24, 2005, that the park had over 1 million guests during its first two months of operation.

In response to negative publicity locally and to boost visitor numbers, Hong Kong Disneyland offered $50 discounts for admission tickets to holders of Hong Kong identification cards in the period before Christmas 2005. Also, from March to June 2006, the park offered Hong Kong identification card holders the opportunity to purchase a two-day admission ticket for the price of a single-day ticket.

OCEAN PARK HONG KONG

Ocean Park Hong Kong opened in 1977. At that time, the park had a monopoly on theme park entertainment in Hong Kong since it was the only theme park. As it was the only park and was owned by the government, over the years, many attractions became outdated. It was not under any pressure to add more attractions and grow. When a deal was reached in 1999 to bring Disneyland to Hong Kong, it sounded like a death sentence for Ocean Park Hong Kong because it did not have the financial strength of the Walt Disney Company.

Initially, Ocean Park seemed to have lost its identity. But Ocean Park’s strength was the fact that it seen as an educational park rather than an entertainment park. The park had an aquarium and live animals as well as some attractions. Its ticket prices were significantly lower than the proposed admission fees to Hong Kong Disneyland.

Rather than risk park closure, a reengineering effort was initiated. A subway line was built to the park, and the Chinese government gave the park a pair of pandas, bringing the total to four pandas. Additional hotels were built. The government also acted as guarantor for a loan to the park. The park successfully fended off the threat of Hong Kong Disneyland and hosted foreign visitors who wanted to visit both parks. In 2012, Ocean Park was the winner of the prestigious Applause Award; it was the first ever Asian attraction to be recognized as the best theme park in the world. In 2013, Ocean Park’s attendance surpassed that of Hong Kong Disneyland.

FUTURE GLOBALIZATION

The future of the Walt Disney Company may focus on vacation resorts surrounding theme parks. But to get people to the theme parks, the company must get young children acquainted or hooked on Disney characters. In China, the company is getting children acquainted with its brand name at an early age. The Walt Disney Company operates dozens of English-language schools throughout China, where Disney characters and stories are used as teaching aids.

The Walt Disney Company opened Shanghai Disneyland in 2015. It is three times the size of Hong Kong Disneyland and cost $5.5 billion. Two additional theme parks will be attached to Shanghai Disneyland sometime in the future. The park was financed 30 percent with debt and 70 percent with equity. The Walt Disney Company has a 43 percent stake in the joint venture; with the remaining 57 percent controlled by the state-run holding company Shanghai Shendi Group, which is a consortium of three companies owned by the Shanghai government.

It is expected that the Walt Disney Company will continue its globalization efforts and expand elsewhere over the next several decades.

QUESTIONS

1. What is the fundamental difference between a licensing agreement and a joint venture as related to the Disney theme parks?

2. Why did the Walt Disney Company opt for a licensing agreement for Tokyo 
Disneyland?

3. Why did the Walt Disney Company opt for a joint venture agreement with Euro Disneyland?

4. Does the size of the theme park have a bearing on whether a licensing agreement or a joint venture should be selected?

5. What is the difference between a theme park and a vacation resort?

6. If the goal is a vacation resort, should the Walt Disney Company negotiate a 
licensing agreement or a joint venture?

7. Why was it necessary to build the Walt Disney Studios Park as part of Euro 
Disneyland?

8. Why was it necessary to construct Tokyo DisneySea?

9. For the agreement with Tokyo DisneySea, would the Walt Disney Company have preferred a licensing agreement or a joint venture?

10. What did the Walt Disney Company see as the risks with Hong Kong Disneyland?

11. What is the feng shui culture?

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