Will the Magic Kingdom ever make it to the Middle Kingdom?

 

Bob Iger, CEO and president of The Walt Disney Company, dreams of making his company a household name in China. He should be more careful what he wishes for.

Iger took control of the Magic Kingdom on October 1 last year. In the ensuing 14 months, Disney has become much more famous in North Asia, but for the wrong reasons: its name has been linked with two of the biggest corruption scandals in Taiwan and China.

News of Disney's involvement has left a bad taste in the mouth of Iger and his board of directors. Some investors are also beginning to be concerned. American legislation prohibits US companies from paying bribes to foreign nationals. There could be grave consequences for those found flouting this rule.

IBM, for example, is currently embroiled in a legal tussle in China. A court in Beijing said it paid US$225,000 to an agent to bribe Zhang Enzhao, former chairman of the China Construction Bank to secure a large contract. Zhang is in jail. IBM has declined to comment on the matter.

Disney is hoping it will not get into such dire straits. In Taiwan, it was found that the daughter of President Chen Shui-bian, together with other members of the family, had been dipping into the state coffers to pay for their shopping. The daughter, a doctor and mother of three, bought a set of Disney toys to teach English to her children, which she billed to the president's discretionary fund. A list of such purchases has been made public and is widely circulated. The Disney toys are now said to be in the hands of state prosecutors building a case against the first family. Disney itself is not involved in the investigation.

In China, Disney is much more involved. Iger and his people had been in deep discussions to put up a theme park in Shanghai, China’s biggest city. Shanghai officials wanted the park badly. They had even set aside a huge plot of land many times larger than the Disneyland in Hong Kong.

Iger, whose reconciliatory style of negotiation works better in China than that of his predecessor Michael Eisner, is using the lure of a Disneyland to push for greater access for his movies and television shows. His stance is classic Disney – the company is selling a franchise, and there is no point in putting up a large theme park in China until the potential consumers are knowledgeable about the Disney characters. To do that, Disney needs to reach them via its movies and TV shows. China has placed severe limits on foreign broadcasting and movies to preserve its traditional values. Iger has tried to work around those restrictions by offering joint production in China, where he was willing for Disney to take a minority stake.

This is a concession seldom offered by Disney. But China, with 200 million people who are 14 or younger, is too big a prize for Iger to ignore. At any rate, piracy is so rampant in China that counterfeit Disney toys, books and DVDs are already widely circulated.

"If we don't do anything, Donald Duck and Mickey Mouse are going to end up there anyway, and we're not going to get anything," Iger said at the opening of Hong Kong Disneyland last year. (Iger had wanted China to allow the broadcasting of the Disney Channel in at least some cities before Disneyland opened its doors. What he got was the sale of the "Desperate Housewives" series, produced by ABC, part of his company, to Chinese television companies. A minor victory, but not what he was looking for.

In the past year, the pathetic performance of Hong Kong Disneyland only strengthened Iger's determination to push for greater exposure in China. The theme park has failed to get the required number of visitors. Most of those who turned up are from China with little or no knowledge of the Disney characters. They treated the Disneyland as another amusement park with rides and shops and failed to get the best out of its many interwoven themes. Per head spending there is said to be the lowest among Disney’s 11 theme parks. Management of the Hong Kong park has now resorted to giving visitors a 15-minute briefing on Disney characters at the gate.

Until recently, Iger had made much headway in nailing down the details for a Shanghai Disneyland and, together with it, a Disney Channel, or so he hoped.

At home, Iger has been a regular donor to both Democrat and Republican parties — he gives money to Hillary Clinton as well as the Republican National Committee amongst others. The donation and his status as head of Disney got him an invitation by George H W Bush, the former president, to attend a lunch in honour of former Chinese president Jiang Zemin.

In an interview with Time magazine, Iger said he "sat with him (Jiang), and his conversation was very animated, very warm, very spirited and very supportive of Disney's entering China. He expressed interest in our building a theme park in Shanghai, and was clearly knowledgeable about the company."

Jiang is the leader of the so-called Shanghai Gang (or Shanghai Mafia), a group of high level politicians who turned China’s biggest city into a separate fiefdom that runs largely independent of other parts of the country. Jiang built up his base while he was president. After he retired, the Shanghai Gang was run by Chen Liangyu, secretary of the communist party in Shanghai whose seniority and backing by Jiang put him nearly on par with most of the top guys in Beijing. Chen was the driving force behind building a Disneyland in Shanghai. Ostensibly his interest in the project was because it will help generate investments and jobs. But the huge sums involved – an estimated US$5 billion – and the large tracts of land required for it would also open up opportunities for corruption.

In September, President Hu Jintao and Premier Wen Jiabao launched a lightning strike against the Shanghai Gang, and he was taken into custody for misuse of billions of dollars of the city pension fund. Chen’s removal effectively put the Disneyland project on hold. Residents of Shanghai found the name of Disney removed from the signboards. Anti-corruption officials from Beijing have been busy arresting junior members of the Shanghai Gang. Jiang himself has been forced to the sidelines and is unable to protect his former protégés. A widening investigation has found many cases of corruption, but, so far at least, Disney is not involved.