Bob Iger tells us about Disney's $5.5 billion bet on China

Bob Iger: China park is ‘booster rocket’ for Disney

Walt Disney opened its first Disneyland in mainland China Wednesday, with the theme park being described as "authentically Disney and distinctly Chinese."

CEO Bob Iger spoke with CNBC's Eunice Yoon about the event, which Iger called the "biggest step" the company has taken in an overseas market. Read the full exchange below.

CNBC: Why is the park so important for Disney's ambitions in China?
Iger: Well, China represents a great market for the Walt Disney because our stories are not only known here but they are universal in appeal, they touch people's hearts all over the world, no matter what country, no matter what culture. So this is, I think, a great market for Disney and a growth market as well. Obviously the size of the market, the number of people, is another reason, but , and this is an extremely [big] step —or the biggest step, actually — that we've ever taken anywhere to grow in a market.

CNBC: What is the next step for Disney in this market?
Iger: Well, I don't know that there is a next step; there are a number of steps. We continue to grow our motion picture business. So far, most of that has been exporting films that we make in other parts of the world into China; that's delivered great growth. China is now the No. 2 movie market in the world. We also plan to make Disney movies here; we've actually started that process. With the strength of the Disney brand and the knowledge of Disney characters, there's a growing retail business here. And, in part because of digital technology but in part just because of the growth of the market, there are all sorts of opportunities in television, although there we continue to face regulation that makes it a little more difficult.

CNBC: So, how does this park help with the other parts of the business in this market?
Iger: Well, it clearly will serve as sort of a booster rocket for people's appreciation of Disney, the knowledge that Disney is universal in appeal to people, appreciation and knowledge of characters and stories. An immersive park experience the Disney way is something that people will remember for the rest of their lives, and that goes a long way in terms of not just creating word of mouth, but in terms of creating people's interest in passion for our brand and everything that it stands for and everything that bears its name, as a for instance. So it becomes very, very important, not just in terms of awareness but appreciation.

Bob Iger: How we tailored Shanghai Disneyland to China

CNBC: How are Chinese consumers different from others?
Iger: Well, in many respects as it relates to Disney, they're not different at all. In fact, they've confirmed to us what our founder Walt Disney believed all the way back in his day, and that is that our stories are designed not just for one age group —children or parents or grandparents—not just one nationality, not just for one religion, nor generation; they're designed for everybody, and he was right. And because of that, the consumer we're seeing now is really behaving as it relates to interest in Disney the same way consumers behave when interest in Disney is ignited all over the world.

Bob Iger, chairman and CEO of The Walt Disney Company.
Katie Kramer | CNBC

CNBC: What are you doing in this park then, differently for the Chinese, compared to other parks?
Iger: Well, that's something that is extremely important to us and does differentiate this from all other parks. We believe that in entering China we needed to bring a park to China that very much felt like China's Disneyland and not just, Disneyland in China. We wanted to do that because we thought showing a respect and appreciation for the culture here would be very important, and we also wanted people to have a sense of pride and ownership toward this park, feeling that this park was their park. And there was only one way to do that. We knew we had to be authentically Disney because that is what Disneyland is and what was desired, but we also knew we had to be distinctly Chinese and that because the design and construction mandate from the very beginning, let's build something that is authentically Disney, distinctly Chinese, and that is evidenced throughout this park in many, many different ways.

CNBC: So, how did you tailor this park for the Chinese?
Iger: Well, many ways. To begin with, we eliminated Main Street. Main Street exists in our five other locations around the world. It was the inspiration of Walt Disney; it was inspired by the town in the Midwest United States that he grew up in, Marceline. I felt strongly that bringing Main Street Marceline, or Main Street USA, to China, wouldn't necessarily feel relevant, wouldn't be of that much interest … kind of nice, but we thought we could do something better. And so, we eliminated that but we turned the entry sequence of sorts into Mickey Avenue, so, it's more based on Disney than on any one place in the world for instance. All the iconography. Obviously [offering] Mandarin first very, very important, save for a few places. Even our storytelling here started in Mandarin and was translated to English so that we could rework it and understand it instead of the other way around, starting in English and then translating into Mandarin. That way it's much more authentic in terms of the language, and the storytelling [is so] much more distinctive in that sense, to use those words. The food was obvious, about 70 percent of the food here is Chinese in nature.

Also, the entertainment, there's a lot of entertainment in this park; there are about 1,000 Chinese performers from all over China. But the people behind the scenes, directors and costume designers, the director of the 'Tarzan' show, who envisioned the storytelling of Tarzan to be in Chinese acrobatic form with Chinese performers, for instance, distinctly Chinese…. The architecture, putting a Chinese teahouse right in the center of this park in grand form, the Teahouse of the Wandering Moon. Disneytown using architecture that is sort of old Shanghai architecture, and people see it, and 'Ah, I recognize that,' I like that. So, there's a tremendous amount here that is very distinctly Chinese, and we're not expecting people to come in and say, 'That's very Chinese.' We're expecting people to leave with a sense that they experienced something that was very much Disney but very much felt like theirs, very much felt like home.

Visitors tour Disneyland's Tomorrowland on June 5, 2016 in Shanghai, China.
Visual China Group | Getty Images

CNBC: Do you find that Chinese visitors spend time differently in the parks? And, if so, how do you make sure that you're accommodating them properly?
Iger: Well, this is all still very new. We've had over half a million people come through this park and over a million people actually visit the overall property, so, reaching firm conclusions at this point would be premature. We've certainly learned a lot already. Interesting, one thing that we anticipated and it was reflected in the design, if you look at China today, especially its most urban parts, there aren't many places that people can go to get shade, to relax, to be in what I will call a bucolic setting. So, the design of Gardens of Imagination, which is this seven-acre garden that sits in front of the castle, serves as our hub but has water features, and is tree lined and had plants and is generally a great place to sit and relax. [It] was very much the results of research that we did, where we believe that we were actually answering a need that people had. The lake that we built, Wishing Star Lake, was another example of that: let's build a beautiful place that people can walk around and sit and enjoy. As a for instance, we actually have property within the confines of the theme park itself that's just grassy stretches for people to sit out on a nice sunny day and sit on grass, and I noticed the other day people throwing Frisbees around and people sitting and having lunch. So they clearly are enjoying that. In terms of other forms of behavior they are getting used to we're offering, which is Disney, a lot of people in one place, generally having a good time, but it's a different, unique experience for people. We're learning how they're learning from us.

CNBC: We've already seen evidence there that the economic slowdown has effected consumer behavior and the consumer market, is this something that you're worried about at all?
Iger: No, because we're building something to last forever and when we make a decision to invest at this level we don't pin that decision on one time economically, we think long term about a market; we really take a long view. So, whether it's here or in other parts of the world, current or near-term economic circumstances or political circumstances or whatever typically don't cause much anxiety with us.

CNBC: Does it affect your pricing at all?
Iger: Our approach to pricing in this marketplace took into [account] a number of circumstances and conditions; none were really specifically tied what's going on in the economy today, but they took into account the overall Chinese economy, the Chinese consumer, spendable income, price-to-value relationship, the fact that we were building something [of that] scale, something that was very high in quality, something that was unique, something that many people aspire to, having heard about, read about Disneyland and that experience. So, it was all, a lot of things factored into the decision.

CNBC: Who do you think your target Chinese consumer is.. is there one?
Iger: The great new [approach] about Disney is everyone is our target consumer. What I've loved [about] actually about watching people enjoy this park the last few weeks is the multigenerations that come together. We assumed that would be the case, but the number of groups that include grandparents and parents and a grandchild is just extraordinary to me. We thought that would be the case, but it's very evident here when you walk around on a full day. It's for everyone. I've seen single people. You go at night, it's very different; they don't have kids, in some cases they're not married, people on dates. That's always nice to see. I've seen grandparents alone; I've seen parents with kids; I've seen mothers with their children. It's sort of, again, the great thing about Disney, that universal appeal, and certainly that's true with this park.

CNBC: Some of your Chinese competitors have been saying negative things about you guys and saying that Disney won't necessarily having a long-term future here. Where do you see Disney fitting into the overall theme park industry?
Iger: Well, I think the theme park industry in China is growing and will continue to grow. We were aware that there was significant competition when we entered this market; we fully anticipated there would be more competition. What we knew and what we would concluded and what we already know to be the case is we're bringing a product that is unlike any other in this market. Obviously, it starts with the fact that it's Disney, and with that comes Disney stories, characters and our intellectual property. In addition to that, the level of the investment here basically creates something that is unique in terms of quality. In order to build something that is this great, all of the detail, all of the beautiful artwork, all of the great attractions, the technology that we put into the experience that takes significant investment and our competitors don't come close in terms of either being able to or wanting to put that kind of investment into their parks. In addition, we have 60 years of operating experience. That's a lot of experience; we do this really well. And we've learned along the way, that's only enabled us to get better. No one comes close to that. The quality of the experience that you get here, whether it's what you're eating, what you're riding, what show you're seeing, how you're being treated by the person who's taking your ticket, the person that's serving your meal, the person that's making sure you're in your seat and ready for the ride to start, is vastly different than what anyone else has to offer. So, to those that are criticizing us, they clearly do not know our product, or they suffer from significant envy for that product, and frankly, what they've said is completely immaterial to us.

CNBC: So, you wouldn't say, when they say, 'Oh, the pricing is too high or you guys don't understand China very well,' what do you….?
Iger: The pricing of this park reflects the quality of what we have built and the experience that we deliver. The pricing of the parks of those that are criticizing us are offering reflects exactly what they're offering to their people.

CNBC: Switching gears a bit, I wanted to ask you a little bit more about the American business community because there's been a feeling among the American business community that the working environment here has become more anti-foreign. Is this something that you're experiencing as well or is it something that enters your mind when you're planning for the future?
Iger: China has always presented a number of challenges to global business from a variety of directions, for a variety of reasons, none that I really want to get into very much. We're well aware of what those challenges are and what they have been, and yet, we continue to march forward and develop this property and ultimately build it. I think the fact that we have built this, that we have great Chinese partners, that we have the approval of the government to do this, suggests that this is a market that, while there have been challenges, that we've been able to enter, I think, quite successfully. And clearly we're appreciative of the kind of support that we received and was necessary from the government in order to do this.

CNBC: How do you know that you have that high level support within the government?
Iger: Well I've been working on this for 17 years, and I've engaged with three presidents and a few premiers and a number of vice-premiers and a number of party secretaries and five or six mayors of Shanghai. And I know from the engagement that I've had with numerous people over time, including President Xi Jinping, that they are very supportive of what we are doing here and what we have done here. This is, I think, a big shining example of the fact that an American company or any kind of global company can do something on a really grand scale here in China.

CNBC: Have any of them ever visited your parks?
Iger: President Xi has been to a few of our parks, yes. Actually, I think, to my knowledge, all those who I referenced, even though I didn't mention names, have visited various parks at various times.

CNBC: And what do they say their reactions are, especially President Xi?
Iger: Well, President Xi had said that he had visited Tokyo and California and Orlando, and I think that's one of the reasons why he was supportive of us doing [this]. He must have had a good experience. He didn't tell me specifically that he did, but I think [it] played a part in the approval of this.

Fireworks light up the Enchanted Storybook Castle at Shanghai Disneyland on May 25, 2016.
Visual China Group | Getty Images

CNBC: One other issue that a lot American companies have is, of course, intellectual property rights violations. What are you doing to contend with those issues, as well as others?
Iger: Well, I've always believed that the best way you combat intellectual property theft is making a product available that is well priced, well timed to market, whether it's movie product, TV product, music product, even theme-park product. So, we'll continue to do that. That said, we do need regulatory help and support to do that. We've actually gotten more of that in China; they've actually singled Disney intellectual property out as something is to be protected, and I'm fairly trusting that this government is going to continue to do more and do the right thing as it relates to intellectual property. Now, this is a good example, we have partners that are local here that will suffer with us if the product that we showcase here at our theme park is stolen by others. So, having a local partner that is as invested, that may consider themselves vulnerable to intellectual property theft, I think will go a long way.

CNBC: What's next for the theme-park business, Disney Mumbai? (laughing)
Iger: A lot of people have asked us about India. Great country, land of many colors and many flavors, as I've said. Rich country in terms of their culture. Certainly a lot of people. Not developing a theme park there right now.

[Shanghai] has been the priority of ours for quite a long time; we're incredibly excited about what we're about to show the world. We're going to make sure that this is right, that it's operationally smooth and we obviously have great expansion opportunities here in Shanghai. We'll certainly take those very seriously. We're also expanding in Hong Kong and expanding in Orlando and expanding in Tokyo and expanding in Anaheim, building new cruise ships. So, there's a lot going on at this company in terms of expansion.

CNBC: What would tell Chinese consumers that say, 'Oh there's already a Hong Kong park, I don't necessarily need to go to Shanghai'?
Iger: Well, there's a great Hong Kong park; I'd love them to go to Hong Kong as well. They should go there because it's different, it's very different and it's great. We hope, by the way, that people who have visited Hong Kong become interested in visiting Shanghai because their interest has in some form or another has been triggered by or been heightened by visiting Hong Kong and vice versa. What's great about this park is about 70 percent of it is original and so you can go here and you can go to Hong Kong and have a completely different experience and vice versa. And this is a big enough market, we have been asked this before about two parks in one country; by the way, we've had two in the United States for well over 40 years. China's certainly big enough to sustain more than one park — geographically, number of people, affordability and tourism is rising as well to China — and that's obviously going to help.

CNBC: You mentioned the movie business. Last year, you guys had a monstrous successful year; your year was just massive. Do you think that you'll be able to repeat that again in 2016?
Iger: Yes, 2016 — so far, so good. Off to a great start, probably will be our most successful year ever, given the fact that we've launched three fantastic movies in 'Zootopia,' 'Jungle Book' and 'Captain America Civil War.' 'Zootopia' and 'Captain America Civil War' are already over a billion dollars in global box office, 'Jungle Book' near it. Great movies to come, 'Finding Dory' coming out in a couple of weeks, for instance, and lots more to come this year . So, it's been a great year already for our company on the movie side, and what we have coming up is going to be great, too.

CNBC: How do plan to turn things around for ESPN and the cable business?
Iger: I'm here in Shanghai at Disneyland and while all of our businesses are always on my mind, I've kind of put everything else on my agenda off to the side temporarily so that we could focus on this.

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