ENTERTAINMENT: Disney Pirates Fined as Shanghai Park Nears

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Bottom line: Shanghai’s clampdown on piracy of the Disney brand reflects the city’s desire to protect its huge investment in the soon-to-open Shanghai Disneyland, and also Disney’s growing clout in China.

Shanghai protects Disneyland investment

Disney (NYSE: DIS) pirates, beware. As the grand opening of mainland China’s first Disneyland draws near, the park’s home city of Shanghai is stepping up efforts to protect is multibillion-dollar investment by clamping down on piracy of the Disney brand. That crackdown is certainly long overdue, and has just netted 5 hotels that were illegally using the Disney name to dupe visitors into thinking they were affiliated with the US entertainment giant.

In an interesting aside to this clampdown story, the 5 properties busted in the new clampdown were owned by Shenzhen-based Vienna Hotels Group. That’s significant because in August Vienna was reportedly in talks to be acquired by Shanghai’s leading hotel group Jin Jiang (HKEx: 2006; Shanghai: 600754). (previous post) Thus this latest crackdown could signal the Jin Jiang-Vienna talks ultimately collapsed, since it’s unlikely Vienna would have been targeted in such a high-profile way if it was part of the locally well-connected Jin Jiang.

But let’s move the spotlight back to the main headlines, which revolve around Shanghai’s moves to protect its huge investment in the $5.5 billion Disneyland set to open in the first half of next year in the city’s Pudong New Area. The move against Vienna is part of a larger recently announced campaign by Shanghai to protect Disney from hundreds of Chinese companies that illegally use its brand on their products.

Disney has a very long history in China dating back to my time in Beijing in the 1980s, when the company was already well-known and Mickey Mouse was a regular feature on local TV. Accordingly, it’s one of the few western brands that truly has broad recognition in China, which is why its properties have become favorites of Chinese pirates on everything from clothes to hotels.

Modest Fine

The latest reports spotlight the move against Vienna, which was fined a relatively modest 100,000 yuan ($15,700) for using the Disney name on its website and signage without permission. (English article; Chinese article) Significantly, the story was widely broadcast in Chinese by the official Xinhua news agency, indicating this crackdown has support from Beijing and is likely to spread to other cities.

Such high-profile support testifies to Disney’s growing clout with Chinese authorities, since Beijing craves such famous global brands that can show off the country’s economic prowess. This particular Disneyland has taken quite a long time to become reality, with a history dating back more than a decade. Beijing initially lobbied strongly to host the park, but Disney insisted on Shanghai, which is within easy travel distance of far more potential visitors.

Not too surprisingly for a project of this magnitude, the park’s original opening set for this year has been pushed back to the first half of next year due to delays. That seems like a prudent move, since an opening right before winter could dampen enthusiasm from visitors due to Shanghai’s relatively cold winter weather. I do expect that Disney should meet the latest opening schedule, and that the park will experience the usual teething problems when millions of visitors try to be among the first to visit.

Shanghai is obviously taking big efforts to ensure the park is a success, which isn’t too surprising due to its own huge investment in Disneyland and related infrastructure. Accordingly, we can probably expect to see more similar crackdowns against Disney pirates and other supporting activities in the months ahead. At the end of the day the park should become a world-class attraction for a city that lacks many other such draws, putting Shanghai firmly on the China and global tourist maps.

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