Recently, Hong Kong taxpayers, the majority owners and biggest investors in Hong Kong Disneyland, were told that the park's losses had narrowed to HK$237 million. But, as ever, they were denied all information about how the minority owner, the Walt Disney Company, has continued to profit from its very modest investment in this venture.
Memories are short when it comes to recalling the terms of the extraordinary deal under which Disney secured an initial 43 per cent of the park's equity (it now owns 47 per cent) after investing a modest HK$2.45 billion in the joint venture. At the time the government proclaimed that public investment in the company was HK$3.25 billion, so the ownership split seemed fair.
But the reality was that all-in investment amounted to HK$27.7 billion when value of the land, land reclamation and associated costs were taken into account. In other words Disney ended up gaining a 43 per cent stake for an investment totalling less than 10 per cent of the total cost.
But the good deal for the American company did not end there. It was also guaranteed 5 per cent royalty payments for all food and merchandise sold in the park and a 10 per cent royalty on admission charges. On top of this, it is paid 2 per cent of revenues as a management fee and receives incentive payments ranging from 2 per cent to 8 per cent of the operating (not the net) profit.
The deteriorating performance reached such a dire level in 2007 that Disney was forced to waive its management and royalty fees for two years. As there has been no announcement of a continuation of this waiver, it can only be assumed that payment resumed in 2009.
It is little wonder the government is so anxious to conceal the true picture of Disneyland's financial status. What is surprising is that it has been under so little pressure to reveal more.