Tokyo Disneyland: Licensing vs. Joint Venture

Tokyo Disneyland was started as a result of a licensing agreement between Walt Disney (WD) of the United States and Oriental Land Corp. (OL) of Japan. The agreement states that WD will receive a license fee of 7% of sales in exchange for providing OL with managerial and technological know-how and assuming small risks in the venture. When WD proposed a second project with OL, OL's senior executives wanted to find a way to make WD a risk-taking partner through investment in the business as a precondition to venturing into the new project. To prepare for the negotiations, OL's executives needed calculations of the project's net present value as seen from WD's standpoint--both in terms of the existing licensing method and one in which WD would share appropriate risks.