Businessweek, August 4, 1997 issue

Irked by a Tibet film, Beijing freezes the giant's new projects

It was the kind of publicity Walt Disney Co. never wanted. When the Hollywood giant decided last year to produce and distribute Kundun, a film on the Dalai Lama, the Tibetan spiritual leader, Beijing officials erupted, furious that foreigners were publicizing the cause of Tibet.

Yet Disney stuck with the project, which superagent Michael Ovitz acquired for the company in his short, disastrous tenure as Disney president. Now, the extent of the retribution is becoming clear: a ban on new Disney ventures in China, the world's biggest undeveloped media market. Disney ''has indicated a lack of respect for Chinese sovereignty,'' says Yang Buting, a vice-director of the Ministry of Radio, Film & Television. ''Because of this, we are thinking over our business with Disney.''

Chilling comments. The propaganda department of the Communist Party's Central Committee is so angry that Disney's main projects in China are ''frozen'', says an industry analyst. The company has a few ventures up and running. But Disney wants greater access for the Disney Channel through cable TV: China's fledgling TV market is already generating $4 billion a year in advertising revenues. Those efforts are going nowhere, industry sources say. Sources also say the Chinese are not releasing new Disney films and that the company has not landed a distribution deal for its videotapes.

Disney officials are playing it cool. ''We continue to do business in China,'' says spokesman John Dreyer. ''The Chinese government has expressed their concerns about Kundun,'' he adds. ''We continue to talk with them.'' The company also points out that 12 TV stations carry the China Disney Club, a family show launched in 1995. Disney says it is talking with provincial TV stations about signing on. But such efforts ''take time'', says Maria Miu, a Disney executive in Hong Kong.

The uproar could also affect Sony Corp.'s picture-making division. Sony is distributing another film, Seven Years in Tibet, starring Brad Pitt. ''The company is expecting some difficulties,'' says an industry analyst based in China. Sources say Sony is concerned but hopes the film's adventure theme will not be as controversial as Disney's Kundun.

TOO ''DEFIANT''? Even in the best of times, Western entertainment giants face major hurdles in China, from copyright infringement to resistance from the communist bureaucracy. It took Children's Television Workshop more than two years to negotiate its Shanghai-produced version of Sesame Street. And China's recent promotion of its ''spiritual civilization'' is partly aimed at protecting local industries from Hollywood and other Western influences.

But Disney appears to be in the hottest water of all. Disney ''should not have been so defiant'' on a film China considers ''taboo'', says one seasoned Asian TV executive, arguing that the company could have shown more sensitivity. ''They just don't know how to approach the Chinese''. For now, the exact release date for Kundun has not been set. And, informed sources say, Disney officials are not expecting a thaw until the film flap is over, which they figure will be in the first half of 1998 at the earliest. Even that scenario may be wishing on a star.

[By Joyce Barnathan in Hong Kong, with Matt Miller in Shanghai and Dexter Roberts in Beijing]