Has something become lost in translation for this gaijin mouse?

In 1998, when the beleaguered Hong Kong government started talking to the Walt Disney Company for a theme park in the territory, it probably looked to Tokyo Disneyland as a model for emulation. Unfortunately it is the wrong model.

In the late 1990s, the Disneyland just outside Japan's capital was the envy of every theme park operator in the world. Huge crowds with lavish spending power drove the profits of Oriental Land Company, the owner, to a record high year after year. This would be remarkable in a country enjoying a healthy economy.

Japan was then in the midst of its longest and worst recession. Yet it did not deter 300 million people, twice the population of Japan, from visiting Tokyo Disneyland. To the Hong Kong planners, the idea that a Disney park would ward off an economic downturn must have seemed a no-brainer.

Unlike other Disney theme parks, Tokyo Disneyland is 100 per cent owned by Oriental Land, which is 23 per cent owned by Keisei Electric Railway Co. The Walt Disney Company holds no share in it, but collects a seven per cent royalty from Oriental Land’s unconsolidated sale. In the fiscal year ended March 31, 2005, Oriental Land had revenue of 271 billion yen, or $2.52 billion. Disney’s cut came to nearly $180 million.

To Disney, Oriental Land is the goose that lays the golden egg. To the Hong Kong planners, it is proof that paying royalties to Disney is a model that works, even if the royalty is skimmed off 'at the top'— at revenue level, regardless of whether a profit has been made.

This, perhaps, is why the Hong Kong government has agreed to pay a hefty royalty (undisclosed, but said to range from seven to 10 per cent) of revenue to Disney for its theme park. Disney is also the junior shareholder, owning 43 per cent of Hong Kong Disneyland, though its capital outlay is only 10 per cent that of the senior shareholder, the Hong Kong government.

In 1998, Tokyo Disneyland was at its peak. In 2005, it is in trouble. Just look at Oriental Land. Revenue for 2005 was down 2 per cent from the previous year. The number of visitors fell by 1.8 per cent, the first time since an adjacent theme park, Tokyo Disney Sea, was added in 2001. Average spending per visitor fell for the third straight year, and operating cost is soaring. The population is ageing and less inclined to spend their time and money in theme parks. Tokyo Disneyland, now in its 22nd year, is looking positively jaded. And it has run out of space for expansion. To most analysts, its good days are probably over.

To Hong Kong, this is bad news, as many of the problems besetting Tokyo Disneyland are those it will face in the future, especially in the lack of space for expansion and in the ageing of its target population. Where Oriental Land goes today, it may soon follow.

But worse is still to come. Eager to help Oriental Land keep up its royalty payment, Disney has offered to help it expand in other parts of Japan, and even outside of it. Nick Franklin, president of Walt Disney Attractions Japan, says there are many possibilities Disney and Oriental Land can pursue together. Does this cooperation extend to building a theme park near Hong Kong? It is anyone's guess.