Disney Spent $5.5 Billion Building This Utopia in Shanghai. Can It Win Its Bet on China?

"Authentically Disney, distinctly Chinese." Disney has never made a bigger bet than this one, and it has used every skill it has.

At noon on June 16, the first visitors walked through the gates and Shanghai Disneyland opened for business. By then most of its secrets had been given away: everyone seemed to know already that Soaring Over the Horizon is the best ride, that a Fastpass saves you the wait, and that the turkey leg is the park's star food.

Shanghai Disneyland took 17 years and $5.5 billion to build, and 100,000 people worked on it from start to finish. Disney CEO Bob Iger, who gave a public address in Shanghai on June 15, was still president of Disney's international division in 1999, when the project began.

His Chinese rival Wang Jianlin was astonished by the $5.5 billion price tag. On the eve of the opening he told reporters: "This one park cost $5.5 billion to build. I completely cannot understand it — internally we are all trying to work out why it is so expensive." The Universal Studios park now under construction in Beijing carries an investment of $3.3 billion. Six Flags, the American chain that sells itself on hair-raising roller coasters, says on its official website that building a single Six Flags park costs at least $300 million.

Disney's $5.5 billion covers more than the park: two hotels, Wishing Star Park and Disneytown. A 2013 report in Forbes said the hotels alone could cost as much as $700 million, and in early 2015 Hong Kong Disneyland announced a third Disney hotel at a cost of HK$4.25 billion.

Spent otherwise, $5.5 billion would pay for 34 Warcraft movies, 40,000 Angry Birds games, or 200 million medium-sized Mickey Mouse dolls.

During the trial run, 1 million people came to the Disney resort and 600,000 of them went into the park. At that average attendance, a 499-yuan daily ticket would bring in about 6 million yuan a day, or roughly 220 million yuan a year.

For comparison: Oriental Land, which operates Tokyo Disneyland, reported that in fiscal 2014 each visitor to the park spent an average of 10,955 yen, of which the ticket accounted for 4,660 yen — only about 42%.

Most of the money goes on merchandise, hotels and food. Chen Deli, food and beverage director for the Disney resort, would not tell QDaily how much food the park gets through in a day, but he said the 3,000 turkey legs prepared daily always sell out. Most hotel rooms for June are already booked, at average prices above 1,000 yuan.

Advertising sponsorship counts as park revenue too. Like the shops renting space in Disneytown, every non-Disney logo inside the park is there to promote something: it puts a brand in front of visitors from all over China. So Soaring Over the Horizon is presented by UnionPay, and there is also China Eastern Airlines' Dumbo the Flying Elephant, Chevrolet's TRON Lightcycle Power Run, China Pacific Insurance's castle light show, and Tmall's Pirates of the Caribbean: Battle for the Sunken Treasure. Going by Disney parks overseas, such deals usually run 10 years or more.

Even counting all of that, the parks have the lowest profit margin of any Disney business, television, film and consumer products included. In the fiscal-year report Disney published in November 2015, covering October 2014 to September 2015, revenue passed $52.4 billion and net profit passed $8.3 billion. In cash-flow terms, though, Disney had about $3.2 billion.

Whether you judge by the company's fortunes or by his own career, Shanghai Disneyland is an enormous bet for Bob Iger.

The heart of that bet is not the park itself, but whether Disney can use the park — its ultimate battlefield — to put all of its firepower in front of consumers. Every Disney business starts with a story, then develops every form in which that story can be sold to consumers; the model is widely held to be the future of Hollywood.

The park's role in this is to be the place where every fantasy becomes physical. Whether or not consumers arrive with expectations of Disney's characters, Disney wants them to feel those characters' personalities in as lifelike a way as it can manage. In Bob Iger's words: "This is an enormous physical space… Visitors don't only see and hear the characters, they interact with them, they live with them. The memory that leaves is deeper, and it makes the bond between visitors and Disney's characters stronger."

That means everything from the hardware to the way staff behave has to follow the canon Disney has set in films, television and every other medium. The rules covering all of it are minutely detailed and strict, to the point of rigidity.

When visitors want a photo with Darth Vader, for example, he is supposed to refuse, because "refusing is the first thing a villain has to get right." And in the queue area for Pirates of the Caribbean: Battle for the Sunken Treasure, a middling-sized room has been dressed as the pirates' kitchen; besides the pots and pans, there is a meat-pie easter egg to be found on the wall.

In China, though, Disney has been missing from media for a long time. As QDaily has noted in earlier reporting, content controls meant Disney's stories only began reaching consumers often, in the form of films, in the past few years. What the company does best in China is sell licensed merchandise — pencil cases, water bottles — not sell a fictional character to consumers or build one out.

That makes Disneyland's job a complicated one: it has to introduce itself to large numbers of people who don't know where the joke is, which is no easier than sharing the pleasure of a film with a friend who only half-follows the plot, or doesn't follow it at all.

"I'd like to know how many Mickeys and how many Minnies there are in one Disney park. The performers who play Mickey and Minnie are fairly fixed, so will I run into them somewhere else?"

"There is only one Mickey, because Mickey is Mickey — he is real. In the park, in China, you will only find one Mickey. But sometimes he strolls down Mickey Avenue to meet friends, and sometimes he goes to the castle stage to perform. Mickey is a very important star for us. We have only one Mickey."

This muddled exchange took place at a 2015 panel discussion on the design highlights of Shanghai Disneyland. Reporters put the question to Wu Jierui, a senior creative producer who works in Disney's Imagineering department.

Walt Disney, the company's founder, set up that department in 1952, because he thought the amusement parks of the day could not offer entertainment that children and adults would both enjoy.

In its early years, when it was called WED Enterprises, the department's main job was building animatronic figures. Walt Disney brought in a stage performer to dance a routine, then worked with the Imagineers in the hope of reproducing that dance exactly with marionettes. Later they built robots that could be worked with a joystick, and the sequence of movements could be recorded, which made semi-automatic control possible.

In 1967 Disney formally registered the name Imagineer. They still build animatronic figures — you can see them on Peter Pan's Flight in Fantasyland and Pirates of the Caribbean: Battle for the Sunken Treasure in Treasure Cove — but their work now extends to how technology, Disney's stories and consumers meet.

On Peter Pan's Flight, visitors become fairies flying through the sky behind Peter Pan. Dolce Wang, who joined the Shanghai Disneyland Imagineering team five years ago to do technical work, told QDaily that Disney used an entirely new suspended ride system in the design; without it the flight could not feel real. And Lu Jingtian, a creative director at Disney Imagineering, said the magnetic control system used on Pirates of the Caribbean: Battle for the Sunken Treasure had been in development for six years, a technology Disney had never tried before.

The same holds for the 3D light projection that turns a skeleton into Captain Jack on Pirates of the Caribbean: Battle for the Sunken Treasure, and that turns the castle into a dazzling light show at night.

Disney believes Chinese consumers are especially keen on the Pirates of the Caribbean films. Asked why Shanghai got a pirate-themed Treasure Cove, the Imagineer Lu Jingtian told QDaily: "Every time we describe the pirate idea to people, or show them a photo of Captain Jack, everyone gets excited straight away — they recognize what it is at a glance."

Disney learns what Chinese consumers like through market research, then interprets it its own way.

Mulan's story got more attention than ever before. On Voyage to the Crystal Grotto, a boat ride, the Imagineers set aside a stretch of the route just for her. "Mulan stands in the Mulan Pavilion, and the pavilion is surrounded by the decoration of a traditional Chinese classical garden, and that garden sits beside a tea plantation. Mushu stands next to Mulan, looking at her full of affection," the Imagineer Lu Yali said. "To make sure we faithfully reproduced details of a Chinese classical garden, we spent a lot of time visiting gardens in China, including in Shanghai, Suzhou and the areas around them."

To win Chinese visitors over, Disney kept adding money. The park's original budget was $4.4 billion. As attractions were added — Soaring Over the Horizon, Frozen: A Sing-Along Celebration, the Wandering Moon Teahouse and more — the investment finally reached $5.5 billion.

"We badly wanted to recreate a red-and-blue brick we had seen in the Caribbean, so we went to a ceramics expert here, and it took him a full year to meet our requirement and make that special brick for us," Lu Jingtian told QDaily.

Disney is not sure, though, that the effort will be appreciated. Judging by the trial run, the best-reviewed attraction was Soaring Over the Horizon on Adventure Isle — a film ride where your seat is lifted into the air and scenery from around the world plays across a giant spherical screen. Next after it comes TRON Lightcycle Power Run, which young visitors like best for the jolt of accelerating instantly to 60 miles an hour.

So far, none of that differs from the appeal of the rides at a park like Happy Valley. What's more, Disney has not forecast the crowds optimistically.

The average wait for Soaring Over the Horizon ran over four hours, the queue taking up most of Adventure Isle. TRON Lightcycle Power Run fared much the same, and even Pirates of the Caribbean: Battle for the Sunken Treasure, which is not considered especially popular, had a line that reached into Fantasyland next door. On May 31, the first day of the trial run, many rides stopped running for one reason or another, and visitors mobbed the staff.

Disney had tried to deal with this before. In 2011 it launched the MagicBand, hoping the wearable would let it monitor crowd flow and make spending easier for visitors. The Imagineers objected strongly. As Joe Rohde, a retired Imagineer, put it: "If I come to Disneyland to feel a fairy-tale world, then that fairy-tale world should not have MagicBands or smartphones in it."

Long waits, retail prices, even how visitors behave as a group — all of it could dent consumers' interest in Disneyland.

In his June 15 remarks, Bob Iger said: "Nothing helps consumers connect with our brand and our characters better than the theme-park experience."

He has been to China at least 30 times, and almost every time he says the same line: "Authentically Disney, distinctly Chinese." He came up with it specifically for Shanghai Disneyland.

Photos: QDaily