Will This Aggressive Rival Challenge Walt Disney Co's Chinese Ambitions?

Disney 's Shanghai Disney Resort hasn't even opened yet, but it's already attracted a very aggressive rival. Dalian Wanda Group, the privately held Chinese conglomerate which bought U.S. theater chain AMC Entertainment back in 2012, recently unveiled plans for 15 new theme park and entertainment projects across China to counter Disney's expansion into the mainland market.

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Wanda recently opened the first of those projects, Wanda Cultural Tourism City, in Nanchang in the southeastern province of Jiangxi. The company believes that the two square kilometer complex -- which includes a theme park, aquarium, theaters, hotels, and retail stores -- can attract 10 million visitors per year. By comparison, Chang Jiang securities analyst Li Jin estimatesthat Disney's Shanghai park, which is nearly double the size of Wanda City, will attract up to 50 million annual visitors.

Wanda Cultural Tourism City. Image source: Dalian Wanda

But looking ahead, Wanda chairman Wang Jianlin believes that the opening of additional parks will enable it to overtake Disney as the world's largest theme park and resorts operator. In a televised statement on CCTV in late May, Wang boldly claimed that "one tiger is no match for a pack of wolves" when comparing Shanghai Disney Resort to its planned national expansion.

Wang also claimed that Disney "should never have entered China"and suggested that its park could fail due to high costs and a lack of innovation. Disney responded by stating that it had "a good relationship with Wanda" and that it was "perplexed that Mr. Wang would choose to do public battle with us, or attempt to undermine our business in any way."

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Why Disney probably isn't worrying about Wanda

Wanda promotes its new entertainment complex as a "city size cultural and tourism project" which uses original and acquired intellectual property for its attractions, shows, and parades. Tickets cost 198 yuan ($30) on most days and 248 yuan ($38) on holidays and weekends. That's roughly half the price of Disney's Shanghai tickets, which cost 370 yuan ($56) for adults on regular days and 499 yuan ($76) during peak days.However, Wanda's new park is about 460 miles to the west of Shanghai Disney, placing it well beyond the "three hour" travel range of metropolitan area customers which the House of Mouse is courting.

When tickets to Shanghai Disney first went on sale in March, opening day tickets sold out within a few hoursthe first two weeks were taken. Those numbers indicate that Wanda City probably won't make much of dent in Disney's Shanghai operations, at least for the time being.

Shanghai Disney Resort. Image source: Disney

Wanda intends to open a lot of other parks, but they won't necessarily compete head-to-head against Disney, since they're mainly centered in areas with lower average incomes than urban centers like Shanghai and Beijing.

Therefore, Wanda's strategy closely resembles Six Flags'business model -- to expand in areas where the House of Mouse isn't. To compensate for its lack of brand power, Six Flags markets its parks as being "bigger than Disneyland and closer to home" with cheaper tickets. But just as most Disney investors aren't losing sleep over Six Flags' bigger and cheaper parks, they shouldn't worry about Wanda's ambitious expansion plans.

But Disney isn't invincible

But Wanda isn't the only company which is responding to Disney's Chinese expansion. Comcast's NBCUniversal has aggressively expanded its theme park business in recent years with popular new attractions like the Wizarding World of Harry Potter.

NBCUniversal also acquired the entirety of Universal Studios Japan, unveiled plans to expand with newparks in Beijing, Moscow, South Korea, and Dubai, and agreed to acquireDreamworks Animation to expand its IP portfolio. That acquisition unites titles likeFast and Furious, Minions, Shrek, and Kung Fu Panda all under a single banner, giving the company a lot of leverage to challenge Disney in the region.

Image source: Universal Studios.

If Universal Studios starts expanding near Disney's parks in China, as it did in Orlando and L.A., Disney might struggle to maintain the attention of theme park visitors. But then again, many visitors to those cities visit both Disney and Universal's parks, so there might be plenty of room for both companies to make money.

The key takeaway

Wang Jianlin talks tough, but I think that there's plenty of room in China with its population of 1.38 billionfor more than one theme park player to thrive. Disney will probably dominate more affluent urban centers like Hong Kong and Shanghai, while Wanda could still make plenty of money in other cities. There's probably even enough room for Universal Studios to open a few parks of its own. Therefore, all three companies can likely benefit from the growth of China's middle class without declaring open war against each other.

The article Will This Aggressive Rival Challenge Walt Disney Co's Chinese Ambitions?

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