A Western media company offers a product the Chinese can’t resist: education

Middle Kingdom meets Magic Kingdom

Disney's schools in China - Middle Kingdom meets Magic Kingdom | Business | The Economist

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ON A Tuesday at 6pm, children begin arriving at a bland commercial building just as the office workers are leaving. A small storefront leads to an English-language school run by Disney. It is not much of an entrance, squashed between a dusty drugstore and a fast-food joint. This being China, many passers-by assume it is a fake. But word is spreading through the pushy-parent network: this is the real thing. 

Children as young as two toddle in and climb the stairs. At first glance, their classrooms look like dreary boxes, but two of the four walls are interactive video monitors. Each lesson is assisted by virtual mermaids, ducks, mice and other Disney icons. Touch the answer to a question (a fried egg, for example) on one screen, and it plops out of the sky on the other. While teachers instruct, the classroom seems to move. 

Most students seem happy and engaged. As they ask each other questions, their English sounds no less articulate than that of similarly-aged Americans. Thousands of Chinese children have signed up for Disney's schools since the first one was opened in October 2008. 

Tuition is $1,800 a year: a big sum in China. But Disney claims that its results are impressive. It has ten schools in Shanghai, five in Beijing and plans to double that number in the next year, slowly extending from China's two largest cities to surrounding areas. The main constraint is not customers—the older schools already have waiting lists—but training and staff. New schools must therefore be in places where they can easily be supervised.

Each classroom has a local and a Western instructor. Images have been Sinified: rice, for example, comes in a bowl, not heaped on a plate. More than 300 songs, all tied to animations, provide mnemonic help. Some 60 books augment the course materials. Everything has been checked with China's wary censors.

The initial development costs, which Disney has not disclosed, must have been huge. Within a decade the programme will have a material impact on Disney's results, predicts Andrew Sugerman, who runs it. Disney hopes to keep doubling the number of Chinese students it teaches every year for a while. This is a risky venture—long-term, complex and in an area China considers sensitive: education. Yet the potential rewards are huge. 

The very complexity of education means that it is less vulnerable to the piracy that usually stops Western media firms from making money in China. A bootleg copy of “Mulan” is much cheaper than the real thing and possibly just as good, other than the fact that it is stolen. It is harder to fake a good education. 

Disney's focus groups find that for Chinese parents, “education means everything”. English, in particular, is viewed as a ticket to the wider world, says Mr Sugerman. Studies commissioned by Disney estimate that the market for children's English-language education in China is growing by 12% annually and will reach $3.7 billion by 2012. That may be too modest. Adele Mao, an analyst at OLP Global, a research and consulting firm, reckons the market is already nearly $6 billion a year and is growing by 20%. 

There is an equally dynamic market for adult education. One Chinese company which caters to all ages, New York-listed New Oriental Education, has a market valuation of $3.8 billion. Dozens of others have entered the business. 

Chinese parents, whose hopes are often invested in a single child, are understandably picky about schools. For the company that can learn how to help little emperors learn, the rewards will be immense. And for Disney, the business has an added bonus: Chinese children weaned on Mickey and Goofy may one day demand to be taken to a theme park. 

Disney's schools in China

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Middle Kingdom meets Magic Kingdom

A Western media company offers a product the Chinese can’t resist: education

Business August 28th 2010

From the August 28th 2010 edition

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