Disney-Tencent Talks: China Looking Animated 迪士尼与腾讯沟通动漫合作

By newsdoug on April 5, 2012

Disney explores China animation China may finally be opening up its animation market to foreign investment, with the latest word that none other than Disney (NYSE: DIS), arguably the world’s most famous brand in the field, is in talks with Internet leader Tencent (HKEx: 700) for a tie-up in the lucrative but largely undeveloped space. The media reports are rather vague, saying only that Tencent, China’s largest Internet company, is “communicating” with Disney about a potential animation development tie-up. (Chinese article) But any such partnership would look extremely interesting, especially as Tencent is looking to build up its online video business (previous post) in a bid to compete with industry leaders Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO), which are in the process of merging. (previous post) From Disney’s perspective, any such deal would mark a major breakthrough, following its last big advance a couple of years ago when it finally reached an agreement to build its first mainland Chinese Disneyland in Shanghai. The Shanghai Disneyland agreement was a long and torturous process, marked by nearly a decade of on-again-off-again talks that finally resulted in the big deal. Disney has a number of other smaller China initiatives, including its Disney-branded English language schools and numerous merchandise licensing agreements. But the big piece missing from Disney’s China picture to date is filmed entertainment, with the company lacking any major presence on Chinese TV and in its movie theaters apart from products imported under a strict quota system. An animation tie-up with Tencent — or any other video channel — could quickly change that situation, allowing Disney to set up a China-based animation studio that could distribute programs through its own Disney-branded TV or Internet channel, or sell content to other channel operators. DreamWorks Animation (NYSE: DWA), creator of the popular “Shrek” animated franchise, scored a major breakthrough on the China animation front early this year when it formally signed a deal to create a Chinese animation joint venture with Shanghai Media Group (SMG), China’s second largest media company. (previous post) I said at the time that the DreamWorks deal, along with a number of other smaller signals from Beijing, indicated that China might be preparing to open up its animation market to western investment, after a previous attempt to open the market about 5 years ago failed. I have to assume that Disney would only enter into talks with Tencent or any other potential partner after receiving a nod from Beijing that any eventual new venture in the sensitive media space would receive government approval. Given the current climate of opening up the media space and the recent DreamWorks deal, I would have to believe that Disney is definitely looking around for an animation partner, and is probably talking to Tencent as well as others at this early stage. If that’s the case, look for Disney to sign its own China animation joint venture in the not-too-distant future, probably by the end of this year.

Bottom line: Reports that Disney is talking to Tencent for a Chinese animation joint venture could very well be true, with Disney likely to form such a venture by the end of this year.

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