Hollywood could be saying hooray for more Chinese capital

Updated: 2014-12-03 12:12

By Niu Yue in New York for China Daily(China Daily USA)

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Chinese capital flow into to the US movie industry could be coming along at just the right time for Tinsel Town, and for Chinese investors.

Chinese real estate mogul Wang Jianlin, chairman of Dalian Wanda Group, confirmed with Bloomberg on Monday that he has been in talks with both Lions Gate Entertainment Corp, producer of The Hunger Games, and Metro-Goldwyn-Mayer, maker of the James Bond series.

Talks do not necessarily lead to a deal, he added.

Hollywood "studios and producers are always searching for new capital, as making movies is a risky business", said Kathryn Arnold, a Los Angeles-based producer and entertainment consultant. There's "only a 10-to-12 percent chance of having a film hit it out of the park at the box office", she added.

Amid the huge risks and rising costs of production, distribution and marketing, Chinese capital "is providing and will continue to provide much needed operating financing to the US film business", said Jack Binder, founder of Film Budget Inc, a Los Angeles-based consultancy that helps moviemakers plan their budgets.

Lions Gate has missed analysts' expectations two of three quarters so far this year. Although Lions Gate's revenues were up 10.9 percent in the third quarter, its revenues dropped 8.1 percent in the first quarter, and 21.1 percent in the second.

Wanda is not the only Chinese conglomerate shopping in the US film industry.

In June, Shanghai-based Fosun Group International Ltd, the largest private conglomerate on the Chinese mainland, invested $200 million in Studio 8, a Hollywood film studio owned by Jeff Robinov, a former Warner Bros executive, according to the Wall Street Journal.

Alibaba's executive chairman Jack Ma paid a visit to Hollywood in late October and held talks with several major studios, including Lions Gate, Paramount Pictures and Warner Bros.

Chinese money "also provides access to the Chinese market for US firms, which is highly sought after", said Binder. Wanda's cinemas account for nearly one sixth of China's box offices, according to Xinhua News Agency.

Alibaba, apart from its cloud-based smart TV services and Hong Kong-based production company Alibaba Pictures, has an 18.5 percent stake in Youku Tudou, China's largest online video streaming service with around 500 million users.

Fosun has also vowed to "exercise significant influence over the distribution arrangements" for Studio 8's movies on the Chinese mainland, Hong Kong, Macao and Taiwan, according to a statement.

The Chinese movie industry was a $4.5 billion business in 2013, up 32.1 percent from the previous year. It is expected to reach $6 billion in 2014, according to EntGroup, a Beijing-based entertainment consultancy.

Meanwhile, growth in the North American box office has been flattening out, increasing only from $10.8 billion in 2012 to $10.9 billion in 2013.

The boom in the Chinese movie industry not only means profits for US filmmakers, but also opportunities for Chinese investors.

Their capital "will enhance their power and influence as a major player in the entertainment arena on a global scale", said Arnold, "and give them an opportunity to exploit the content in other markets such as licensing of toys, music and other ancillary products."

Amid the current real estate industry cool down, Wang said his group is shifting toward culture, entertainment and e-commerce.

Alibaba, which already controls around 80 percent of China's e-commerce, will soon face a bottleneck, as predicted by Enfodesk, a Beijing-based Internet consultancy, which added that entertainment would be a new horizon for Alibaba's future development, due to users' long usage hours and high loyalty.

Fosun also said in the statement that its investment in Studio 8 is a "significant strategic footprint" and meets "the trend of integrating the global culture and entertainment markets".

Lu Huiquan in New York contributed to this story.

(China Daily USA 12/03/2014 page1)