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China Eyes Hollywood
China is also eyeing Hollywood to bolster its entertainment holdings and forge creative collaborations. “Many Chinese entertainment companies have a lot of capital; they may feel short of opportunities to deploy this capital in China and see easier opportunities to do so internationally,” notes Orr.
But China looks beyond financial reasons in inking deals. “There’s a concerted effort in China to move into the global entertainment and media industry to build China’s soft power,” adds Zhang. The cultural sector is one of the pillars of China’s Five-Year Plan, meaning the government makes an effort to support Chinese investment in entertainment. “Aside from being good business, it is a way to protect China’s influence in the world.”
This week, China’s Perfect World Pictures completed a $500 million debt-and-equity deal with Comcast’s Universal Pictures that will last five years or cover the co-financing of 50 films, according to Variety. Perfect World is expected to receive a 25% share of most films released by Universal. It is the first time that a Chinese company invests in a multi-year slate deal.
Recently, the Dalian Wanda Group, a Chinese conglomerate led by China’s richest man Wang Jianlan, paid $3.5 billion for Legendary Entertainment, a major Hollywood studio responsible for the Batman and Jurassic World franchises. It is the first Chinese company to buy a big U.S. studio; it is also Wanda’s largest foreign acquisition. According to Variety, Wang hasn’t ruled out more forays into entertainment, saying “we want to have a bigger position in the global movie industry.”
Wanda, the largest commercial real-estate developer in China, has become the largest movie theater operator in the world after acquiring AMC Entertainment Holdings in 2012 for $2.6 billion. Orr adds, “Chinese business leaders recognize that many elements of the entertainment business are fully global and if they are to maximize their revenues they need to be able to seamlessly access global markets. Making international acquisitions can accelerate their ability to do so.”
Wang is also developing one of the world’s largest movie-production facilities in Qingdao, China, which includes 30 soundstages, a permanent set featuring a New York City street, as well as a theme park and resort hotel to accommodate families and staff of cast and crew. The public announcement of the studio included appearances from actors Leonardo DiCaprio and Nicole Kidman as well as movie studio executive Harvey Weinstein.
Zhang believes more deals will come. Orr concurs: “Early Chinese moves into investing in foreign entertainment are seen to be successful in China, encouraging more to follow.”
Getting Around the Film Quota
Hollywood can enter the Chinese market in three ways: through revenue-sharing films, flat-fee movies and co-producing a movie with a Chinese company. The quota of 34 films applies to revenue-sharing films, which lets foreign studios take 25% of the box office receipts or about half the norm for other parts of the world. Flat-fee films, which have a different quota, are not a popular vehicle because Hollywood sells movies for a fraction of their worth, according to the U.S. commission’s report. With co-productions, Hollywood can bypass quotas and receive about half of ticket sales.
ref: http://knowledge.wharton.upenn.edu/article/li...-business/
China Eyes Hollywood
China is also eyeing Hollywood to bolster its entertainment holdings and forge creative collaborations. “Many Chinese entertainment companies have a lot of capital; they may feel short of opportunities to deploy this capital in China and see easier opportunities to do so internationally,” notes Orr.
But China looks beyond financial reasons in inking deals. “There’s a concerted effort in China to move into the global entertainment and media industry to build China’s soft power,” adds Zhang. The cultural sector is one of the pillars of China’s Five-Year Plan, meaning the government makes an effort to support Chinese investment in entertainment. “Aside from being good business, it is a way to protect China’s influence in the world.”
This week, China’s Perfect World Pictures completed a $500 million debt-and-equity deal with Comcast’s Universal Pictures that will last five years or cover the co-financing of 50 films, according to Variety. Perfect World is expected to receive a 25% share of most films released by Universal. It is the first time that a Chinese company invests in a multi-year slate deal.
Recently, the Dalian Wanda Group, a Chinese conglomerate led by China’s richest man Wang Jianlan, paid $3.5 billion for Legendary Entertainment, a major Hollywood studio responsible for the Batman and Jurassic World franchises. It is the first Chinese company to buy a big U.S. studio; it is also Wanda’s largest foreign acquisition. According to Variety, Wang hasn’t ruled out more forays into entertainment, saying “we want to have a bigger position in the global movie industry.”
Wanda, the largest commercial real-estate developer in China, has become the largest movie theater operator in the world after acquiring AMC Entertainment Holdings in 2012 for $2.6 billion. Orr adds, “Chinese business leaders recognize that many elements of the entertainment business are fully global and if they are to maximize their revenues they need to be able to seamlessly access global markets. Making international acquisitions can accelerate their ability to do so.”
Wang is also developing one of the world’s largest movie-production facilities in Qingdao, China, which includes 30 soundstages, a permanent set featuring a New York City street, as well as a theme park and resort hotel to accommodate families and staff of cast and crew. The public announcement of the studio included appearances from actors Leonardo DiCaprio and Nicole Kidman as well as movie studio executive Harvey Weinstein.
Zhang believes more deals will come. Orr concurs: “Early Chinese moves into investing in foreign entertainment are seen to be successful in China, encouraging more to follow.”
Getting Around the Film Quota
Hollywood can enter the Chinese market in three ways: through revenue-sharing films, flat-fee movies and co-producing a movie with a Chinese company. The quota of 34 films applies to revenue-sharing films, which lets foreign studios take 25% of the box office receipts or about half the norm for other parts of the world. Flat-fee films, which have a different quota, are not a popular vehicle because Hollywood sells movies for a fraction of their worth, according to the U.S. commission’s report. With co-productions, Hollywood can bypass quotas and receive about half of ticket sales.
ref: http://knowledge.wharton.upenn.edu/article/li...-business/
