China Goes to Hollywood

By James Hirsen

Hollywood is in the midst of a major investor makeover.

In a way that has never really been seen before, cash from China is flowing into the Entertainment Capital of the World, and coming along with it are influence on industry content, power over project production, and control of media messaging.

Start-up entertainment companies have been popping up with seasoned chief executives at their helms, particularly heads that were formerly in charge of prominent Hollywood studios.  Additionally, some high-profile entertainment companies have been increasingly looking to overseas business entities for financial assistance and greater access to foreign markets.

Business arrangements such as these typically involve huge amounts of investor money. The problem with the Hollywood-China connection is that, regardless of the way in which things appear, Chinese companies may end up being beholden to the Chinese government.

“Southpaw,” a film that opened in theaters this past weekend and stars Jake Gyllenhaal, was financed by a Chinese company that is led and controlled by China’s wealthiest individual, Wang Jianlin.

Gyllenhaal’s performance is already being heralded by critics and Academy Awards prognosticators as Oscar worthy. An Academy Award would undoubtedly be a major coup for Wang’s Wanda Pictures, since this is the first American movie in which Wanda has invested.

Wang is not your typical Hollywood mogul. He spent sixteen years in the People’s Liberation Army, where he was able to rise in rank from border guard to regimental commander. He is chairman of Wanda Pictures’ parent company, Dalian Wanda Group Co., which owns the second largest U.S. theater chain, AMC Entertainment Holdings Inc., and has purchased land in Beverly Hills and will purportedly construct a $1.2 billion American headquarters for Wang’s entertainment company.

Wanda Pictures provided the budget of approximately $30 million for “Southpaw.” The Weinstein Co., which produced and released the film, will reportedly cover the marketing costs and split the profits with Wanda.

Hollywood executives are well aware that China’s movie market is the fastest growing in the world and is experiencing an increase of 40% annually. It is expected to overtake the American box office by 2020.

Despite the fact that China is now the second-largest movie market in the world, the country has not produced an international hit, at least not the kind of blockbuster for which Hollywood is famous.

The Weinstein Co. is seeking to have its movie distributed in China (a place where the government imposes quotas on foreign films, currently at 34 films per year) and is looking to Wanda to assist in dealing with the Chinese authorities.

Meanwhile Wanda Pictures is viewing the transaction as a way to educate itself in the movie business.

“They were on the set and involved in production, postproduction, marketing, everything,” Weinstein president David Glasser told the Wall Street Journal. “They wanted to learn how we do what we do.”

Chinese entertainment firms are engaged in a great deal of so-called learning these days, as illustrated below:

-Lions Gate recently put together a film-financing deal with Hunan TV & Broadcast Intermediary Co., which is estimated to be in the range of $350 million;

-Universal’s hit movie “Furious 7” received financial assistance from the government-backed China Film Group;

-Former Warner Bros. top executive Jeff Robinov formed Studio 8 (distributed by Sony), which last year raised $200 million from China’s Fosun Group;

-Former Universal Pictures chairman Adam Fogelson’s STX Entertainment is putting together a financing arrangement with Chinese private-equity firm Hony Capital. Fogelson’s company also has a financing deal with China’s Huayi Bros;

-James Schamus, the former head of Focus Features, has partnered up with China’s Meridian Entertainment for his Symbolic Exchange production firm.

The Hollywood-Sino connection is expected to grow even larger in the future, as evidenced by the fact that over the weekend the main competitor for “Southpaw” was Sony Corp.’s “Pixels,” which stars Adam Sandler and was financed in part by China’s largest film producer and distributor, the state-owned China Film Group.

Paramount Pictures’ soon-to-be released “Mission: Impossible – Rogue Nation” was financed by the Alibaba Group, a company headed by Jack Ma, the person who ranks as China’s second-richest individual.

The fifth installment in the Tom Cruise “Mission: Impossible” series is the Chinese company’s first U.S. film investment, and with the way things look there are likely to be many more Chinese backed coming attractions.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.
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