During my last trip to Japan, I visited Tokyo DisneySea. Nice place. Very fun.
While walking the park and enjoying the strange food, I learned something interesting.
Did you know that Tokyo Disneyland (東京ディズニーランド) and DisneySea are the
only Disney theme parks that the Walt Disney Company doesn’t own any share in?
The parks are 100% owned and operated by the Oriental Land Company. Oriental Land
runs some other stuff, but their business is mostly the resorts - over 80% of income.
As of this writing in October 2023, Oriental Land is Japan’s 14th largest company by market
cap - beating more famous companies like 7-Eleven, Honda, Nintendo, and Itochu!
And yet how many people have heard of this company with its vaguely offensive
name? In today's video, we talk about the Japanese giant behind Tokyo Disneyland.
## Beginnings
In July 1955, the Walt Disney Company opened its first park - Disneyland - in Anaheim, California.
Founder Walt Disney envisioned Disneyland as a celebration of both the past and the future.
Adults can savor nostalgia of their childhoods, while children can fuel
their imaginations with depictions of the exciting futures ahead of them.
The park quickly expanded beyond what Anaheim had available for Disney. So
they then crossed the continent to what is now Walt Disney World in Orlando, Florida.
Unfortunately Walt did not get to see the Florida facility open. He unexpectedly
passed away in 1966 from lung cancer. His brother Roy O. Disney postponed his
retirement to oversee the completion of Walt Disney World - which opened in 1971.
After the opening, Roy retired. He soon then passed away from a stroke at the age of 78. A team
of executives including Card Walker, Donn Tatum, and Ron Miller took over managing the company.
## Oriental Land
The Oriental Land Company started off with a railroad.
In 1960, the Keisei Electric Railway company started reclaiming land from Tokyo Bay off
the coast of Urayasu City in the Chiba Prefecture. A very large plot of land.
Keisei operates trains in Tokyo and the Chiba Prefecture. They wanted to
develop this area and pondered possible commercial and residential uses for it.
Unable to secure money for the venture on its own,
Keisei struck a joint venture deal with a real estate developer - Mitsui Fudosan,
a member of the massive Mitsui Group. They eventually took a 20% minority equity stake.
Keisei Railway's president Chiharu Kawasaki (川崎千春) became Oriental Land's first president.
## Difficulties Kawasaki was very hands-on.
He took the lead in negotiating face to face with a pair of fishermen cooperatives.
Oriental Land's plans required that the fishermen give up their fishing rights in
the area - and thus lose their livelihoods. The process was expected to take years,
but Kawasaki's direct involvement helped accelerate the process.
But things didn't get easier after landfill began in 1962. The company suffered a couple
of major political scandals. One involved bribery and another,
improper land reclamation without permits from the Ministry of Construction. These
scandals caused turmoil in the upper management ranks and delays.
The permitting issue in particular delayed the third and final plot of the landfill
work. And then in 1969 when the Ministry finally approved the work to go forward,
they cut 77 hectares off said plot.
Oriental Land spent another five years lobbying for those last 77 hectares. The
company's efforts to secure this extra land ahead of time reflects Disney's experience
after opening Disneyland. When Disney wanted to build hotels to complement their park,
they found the land had already been acquired.
## A Theme Park The Chiba government approved the joint venture's
plan on the condition that the land be used for a recreation facility.
So Oriental Land planned for a leisure facility named ... Oriental Land. Ergo the name. Oriental
Land would have had four areas - a hall area, a play land, auditorium, and fashion square.
Originally President Chiharu Kawasaki wanted a rose garden in this park. This rose garden
was eventually built and is now the Yatsu Rose Garden in Narashino City.
While scouting for roses to put into the rose garden,
an Oriental Land executive went to the United States and saw Disneyland.
He came up with the idea of inviting Disney to build a theme park in Japan.
## Disney and Japan - Part 1 Now Disney has some history in Japan.
A decade earlier, Walt Disney himself had worked with a businessman named
Kunizo Matsuo on a Japanese version of Disneyland.
Development went well, but then negotiations fell through over contract fees and the use
of the Disney name. And thus, in 1961 Nara Dreamland opened. It definitely reminds you
of Disneyland. Except that it isn't, and it probably violates a few trademarks.
Future President and Chairman of Oriental Land Toshio Kagami relates in his memoirs
a story that Walt Disney saw a photo of Dreamland and exclaimed "I will
never work with the Japanese again! I absolutely cannot trust them!". This
distrust is said to have caused issues for Oriental Land at the beginning.
I was unable to find a corresponding American source for this anecdote. While it is true that
the Disney company did not seriously engage with Oriental Land until 1974, it seems more likely
that this was due to the company being busy completing Walt Disney World out in Florida.
## Disney in the 1970s
Heading into the mid-1970s, the Walt Disney Company had seen better times,
both creatively and financially.
While some of their animated films like 1973's Robin Hood and 1977's Rescuers did well,
their live-action stuff - movies like "One
of our Dinosaurs is Missing" - didn't quite become classics.
That funky fossil frolic was nothing like my favorite - That Darn Cat.
The 1973 Oil Crisis had also left a significant impact on the company's theme parks business.
Americans were less able to travel all the way to California or Florida to visit a theme park.
When it came to Disneyland, the company can raise ticket prices,
introduce new types of tickets, and market to the large local population. But Walt Disney
World in Florida was meant to be driven to, and it suffered from the energy crises.
What this meant is that while Disney was open to the idea of overseas expansion,
they wanted to approach it in a very financially conservative manner.
## Approaching Disney
At Oriental Land’s invitation, Disney executives came to Japan in 1974.
They listened to Oriental Land's pitch and reviewed the land. They liked it.
The location was close to the Tokyo Metropolitan area. It was bordered by
rivers and the sea on three sides. And it looked quite pleasant from the air.
Oriental Land was not the only company in the bidding. Mitsubishi - Mitsui's arch
rival - invited Disney to build a park on 2,450
acres of land surrounding Mount Fuji. Disney executives visited,
but their strong demands as well as a lack of funds eventually caused Mitsubishi to drop out.
Disney worked on a series of feasibility studies and provided them to Mitsui at
cost. Tokyo Disneyland was designed to be a close replica of the original
Disneyland - copying several themed areas and featuring many of the same attractions.
After the concept was finalized, it was time to enter into negotiations.
These negotiations would drag on for a long time in a stop and start manner.
Walt Disney’s financial conservatism at the time - they were already investing
in building the Epcot theme park out in Florida - meant that they wanted a
reliable revenue stream without risking any of their own money.
Thus, Oriental Land was asked to shoulder all the cost of building
the park. But Disney would retain control over the park's design. They also wanted
10% royalty on the admission fees as well as food and drink sales.
Mitsubishi - Mitsui's arch rival who dropped out - had previously
grumbled that Disney "wanted the royalty but [wanted to] pay nothing". Mitsui and
the other members of Oriental Land's board of directors concurred, saying:
> We have never seen such a lopsided contract condition and high royalty
Mitsui also objected to Disney's demands about the length of the contract - 50 years.
Their president Azuma Tsuboi (坪井東) said:
> It is such a violently moving time that we have no way of knowing what is
going to happen 10 years ahead, how come we can have a contract for as long as 50
years. Doing so makes it something similar to the US-Japan Trade Agreement of the Edo
Period. We will never be able to accept such a servile agreement.
The US-Japan Trade Agreement reference is likely a callback to the Treaty of Kanagawa,
which ended Japan's centuries of seclusion and is
today considered an "unequal treaty". This is not to be brought up lightly.
## Negotiations Things hit their nadir in 1977.
Midway through the talks, Keisei began suffering the repercussions of the 1973
Oil Shock. In 1977 Kawasaki resigned and Keisei took a temporary step back from the negotiations.
This left Oriental Land's other equity partner Mitsui Fudosan to fill the void. This turned
out to be a disaster. Mitsui Chairman Hideo Edo grumbled in an interview:
> With ... the internal difficulties in Keisei - which was the initiating force
behind our negotiations with Disney - the ball landed in Mitsui's field ... We were
obliged to go on with it, although we lacked the will from the outset
Mitsui Fudosan was a traditional real estate company. Their speciality was in towers,
apartments and malls. They had little experience in building theme parks.
Real talk, they originally wanted to build houses on the reclaimed land.
The aforementioned Azuma Tsuboi - the
grumpy Mitsui president - had gone on the record as saying:
> Disneyland is a remnant of the previous century. The Japanese would soon be bored of it.
No surprise then that they were not the ideal partner to talk to Disney. One of Disney's
two negotiators - lawyer Ron Cayo - felt that Mitsui was just waiting for the deal to collapse.
There was also a money problem. The Tokyo Disneyland budget had blown up from 50
billion to 120 billion yen. Since Disney would not help with the construction cost,
Oriental Land had to find some way to come up with the money.
That means a loan. But the banks were cautious about doing business with
Oriental Land. The lead bank Industrial Bank of Japan thought it was weird that
Disney was so insistent on just taking a fee without an equity stake in the venture.
In the end, Oriental Land's new President Masatomo Takahashi (高橋政知) saved the day. He was all in on
the Tokyo Disneyland project - seeing it as his lasting legacy for Tokyo. A talented negotiator
and a very functional alcoholic, he earlier served as Oriental Land’s VP. Back then he wooed the
Urayasu fisherman by taking them to high-end restaurants and drinking them towards a deal.
Realizing that the project was at a critical point, Takahashi went straight to the Chiba
Prefecture Governor Yutaka Yunoki (柚木豊彦). He managed to get the land rezoned,
which allowed the banks to issue another $550 million in loans for the project.
With that done, Takahashi then used all of his
people and political skills to get the two sides back together. On the fees,
he asked Disney if they would accept 5% on admissions and 5% on all food and beverages.
Disney did not accept this. In January 1979,
Disney CEO Donn Tatum sent a paper email via post, saying:
> If you cannot accept the terms, we have to stop this project
Disney was confident that the park would be a success,
believing that Japanese would be amenable to American culture. Thus Takahashi conceded on
the original terms - agreeing to pay 10% of admissions and 5% on all food and beverages.
Disney's only concession was to shorten the contract term from
50 years to 45. That was nice of them, I guess.
## Technology Transfer
Building Tokyo Disneyland was a massive technology transfer project.
Construction began in December 1980. A hundred Oriental Land managers went to the
United States for training. 200 Disney employees traveled to Japan to provide on-site guidance.
Over three hundred technical manuals were provided,
laying out procedures. The manuals describe what is "Disney-like behavior"
including instructions on how to dress and act while on the job.
Not everything was transferred one-to-one. Some traditional Japanese behaviors were modified
to be in line with the "Disney Way". Famously, cast members are requested not to greet guests
with "irasshaimase" - which is traditional for businesses and means "Welcome to the store".
Tokyo Disneyland asks cast members to unlearn this, and instead say the friendlier "konnichiwa".
This is because accepted Japanese conduct is that the guest does not have to reply
to "irasshaimase", but they do need to reply to "konnichiwa", facilitating communication.
Jokes and puns for things like the Jungle Cruise attraction had to be completely
rewritten for language or sensitivities. Like, "keep your arms inside the boat,
these crocodiles are always looking for a hand-out!".
When changes were made, they were made in line with the spirit of the goals. For instance,
the Western River Railroad does not wind around the whole park like it does at Disneyland.
This is because if it did, guests would have been able to see the surrounding city of Chiba at
various points of the route - and that was judged to break the fantasy of being at Tokyo Disneyland.
Thanks to these mechanisms and considerations, Tokyo Disneyland opened without a hitch.
## Tokyo Disneyland Opens The park opened on April 15th, 1983
with six themed lands. About 46 hectares large, it was 50% larger than the original Disneyland.
It was an immediate hit. Just about a month after the opening,
over a million people had visited Tokyo Disneyland.
In its first year of operations, Tokyo Disneyland received over 10.3 million
visitors - smashing all expectations and even matching its forerunner in Anaheim.
All the money that Oriental Land borrowed for the project was paid back within three years. This was
despite the heavy royalties - about 6-7% on the whole - that Oriental Land had to pay to Disney.
In 1997, Oriental Land paid $60 million to Disney in fees. In 2016,
the latest number I can find, that had gone to an estimated $242 million. Very nice.
Japan fell into a long and protracted recession
in the 1990s. Yet Disneyland grew all the same. In 1988,
attendance had grown to 15 million visitors. 30 years later in 2019, nearly 18 million visitors.
Key for Oriental Land's growth has been its focus on growing visitor in-park spending.
Tokyo Disneyland is more adult-oriented - young couples especially like it. During the mid-1990s,
the average visitor spent over $74 in an average outing in food and merch.
## DisneySea
The plans for Tokyo DisneySea came a bit later afterwards.
Concepts for a second park - a Hollywood studio thing - started in 1988,
with construction start planned for 1993. However, that fell through due
to Oriental Land's concerns that the Japanese did not strongly resonate with movie culture.
So Disney transplanted a proposal for a new park that they had originally developed for Long Beach,
California. The $2.8 billion Disney Port project - centered on a boat called the RMS
Queen Mary - was dropped due to financial issues, environmental concerns and local NIMBY backlash.
The concept was instead brought to Japan for Tokyo DisneySea. It would
target adults who had been children back when Tokyo Disneyland opened. And since the Japanese
had a strong attachment to the sea, people felt that the DisneySea idea would resonate.
Oriental Land and Disney agreed to retain the licensing fee structure - with again
some bitterness. In April 1996, the two signed the
basic DisneySea agreement. The concept was announced on August 1997. Oriental
Land was left to raise the some $2.5 billion to build the thing themselves.
DisneySea opened on September 4th, 2001, and again it has been incredibly popular. It receives almost
as many visitors as Disneyland, making it the second most visited theme park in Japan in 2019.
## Conclusion
Disney got a guaranteed stream of income, which was their goal.
However, they could not participate in what turned out to be the world's
third and fourth leading amusement parks - as measured by pre-pandemic attendance numbers.
This left a little taste of bitterness, with later Disney president Eisner murmuring in the
1980s that Disney got the short end of the stick. FOMO only intensified after Oriental
Land went public on the Tokyo Stock Exchange in 1996, and seen great stock growth since.
Profits have since grown from $240 million in 1997 to over $700 million in 2019. After that,
we have attendance caps - you know the COVID and
everything - so things have been a bit weird since then.
Anyway, Disney has since changed their way of operations to have some equity ownership
of their foreign parks. Though as the company would soon learn with
Disneyland Paris and Shanghai Disneyland, that hasn't been the smoothest road.
Meanwhile in 2018, Disney and Oriental Land agreed to extend their current
licensing agreement until 2076. So far it is working out for everyone.