China Buys A Piece Of Hollywood – Content And Studio Included
The giant Chinese real estate and investment conglomerate, Dalian Wanda Group, acquired Legendary Entertainment – a Hollywood studio run by Thomas Tull that is famous for its blockbuster hits such as Jurassic World, Godzilla and Pacific Rim – for $3.5 billion. This acquisition has reportedly made Wanda the highest revenue-generating film company in the world.
In this blog post we look at why a Chinese investment firm would want to purchase a Hollywood production studio, and what it means for the future of Hollywood.
Wanda and Legendary
Wanda has purchased 100% of Legendary’s equity and is reincorporating the production studio to align with both Chinese and U.S. tax structure requirements. This is not an easy feat to do in China, where corporations must have government banking sign off for dollars that leave the country.
With the film box office in China expected to outperform those in the U.S. by the end of 2017, it makes sense for Wanda to seek a partnership with a production studio whose content already performs well in China. Legendary’s productions have been doing extremely well within the Chinese market; Godzilla grossed more than $77 million in China, while Pacific Rim made almost $112 million ($10 millon MORE than it earned in the US), as reported by Hollywood Reporter.
Who Is Wanda
Chairman Wang Jianlin of Wanda has said that he seeks to “make Wanda a brand like Wal-Mart or IBM or Google, a brand known by everyone in the world.”
Here’s a snapshot of what Wanda has done in the past:
- 1988 - Wanda was developed as a residential real estate company.
- 1992 - Became one of the first shareholding companies in China.
- 2012 - Acquired the U.S. based second-largest cinema chain AMC Theatres for $2.6 billion.
- 2013 - Purchased Sunseeker International, a UK-based maker of luxury yachts, for $500 million.
- Built theme parks across China
- Created a joint venture with Tencent and Baidu for an ecommerce platform
- 2015 - Paid over $600 million for Hoyts, Australia’s second-largest multiplex theater chain.
- Is famous for its sports assets, initial public offering and hospitality groups.
An Important Loophole To Making Money In China For Movies
China’s theatrical market is expected to surpass North America as the world’s largest by 2017. This is serious money – as no other country currently comes close to the US Box Office. That means that films produced in the US that are distributed in China have the chance to MASSIVELY impact box office. But wait – there is more!
China ONLY ALLOWS 34 “foreign” films to be shown at theaters every year. And the government closely chooses which films meet their criteria – or don’t. That has studios clamouring for ‘ins’ so that they can get the added coveted Chinese box office movie figures.
But there is a BIG loophole.
A film is not considered a “foreign” film if it is in fact ALSO co-produced by a Chinese production company. The government allows the film in to the country, collects its taxes and everyone makes money on both sides of the ocean.
Benefits of Purchasing Legendary Entertainment
Legendary is considered a good fit by Wanda as they already produce film content that is world-renown, and more importantly, popular in China. They will be able to continue to produce movies designed for the global stage.
Other benefits for the two now include:
- Becoming a big-budget global media company, with a completely new international entertainment company
- Owning China’s biggest chain of cinemas as well as cinemas in the U.S.
- Become the highest revenue-generating film company in the world.
- Enhancing Wanda’s core competitiveness and amplifying their voice in the global film market
Legendary Entertainment & Their History In China Deals
- Legendary has been eyeing the Chinese market for some time, and has made previous inroads to setting up an international division there.
- Hong Kong-based exhibition chain Golden Harvest acquired its stake in 2010 for only $25 million and sold the stake a year later for $30 million.
- Another Hong Kong construction firm PY Engineering, the main Chinese financier of Legendary East, invested $150 million for the “The Great Wall” helmed by Zhang Yimou.
- In 2011, Legendary East worked with Huayi Brothers, a Chinese famous studio, to co-produce English-language films in China to explore the Chinese Market. However, the deal failed because of insufficient continued financing.
- Last year, Tencent Picture announced to take an equity stake in Legendary’s “Warcraft”, a film based on the video game “World of Warcraft”.
The Future for Wanda and Legendary
We will all see what the future holds for the two companies as they work through their reorganizations. But in the near term, Legendary already has films in the works that are sure to benefit from this partnership, including:
- Warcraft (2016)
- The Great Wall (2016)
- Spectral (2016)
- Kong: Skull Island (2017)
- Jurassic World Sequel (2018)
- Godzilla 2 (2018)
- Godzilla vs. Kong (2020)
- Pacific Rim: Maelstrom
Partnerships That Extend From Hollywood To China
Today, more and more brands (in China especially) and global brands are looking for ways to engage audiences through Hollywood to create integrated branding in content that transcends location and language, like The Simpsons recently being added to Sohu Video, China's top SVOD service. Product Placement is one of the best ways to become front and center and directly engage those consumers.
Is Product Placement right for your brand? Watch this video to learn more about how this marketing practice works, what brand categories it works for, and the results brand marketers see!