CMC, Warner Bros agree Chinese language movie JV

The new venture - Flagship Entertainment Group - will develop, fund, acquire and produce a wide range of films for distribution in China and around the world, according to a statement. CMC will lead a consortium - which includes Hong Kong free-to-air broadcaster TVB - that holds a 51% stake in the JV, while Warner Bros. will own the remainder.

"This partnership with Hollywood's most iconic studio will bring Warner Bros' deep experience in creative storytelling and unparalleled expertise in producing global titles to China's film industry," said Ruigang Li, founding chairman of CMC. "It will also further CMC's commitment to building a premier platform for making films that resonate with both Chinese and worldwide audiences, helping to enhance the cultural exchange between China and the rest of the world."

Headquartered in Hong Kong with offices in both Beijing and Los Angeles, Flagship is expected to launch the first movie as early as next year. "We look forward to working with CMC in this exciting new venture, as we gain additional insight into the Chinese film industry," added Kevin Tsujihara, Warner Bros' chairman and CEO.

Chinese box office revenues increased 34% year-on-year to reach $4.8 billion in 2014, becoming the second largest movie market outside North America, according to the Motion Picture Association of America. However, only 34 foreign films are allowed to China each year, with domestic distributors keeping around 50% of the takings. Movies produced as Sino-foreign joint ventures, with a certain amount of domestically-produced content, aren't subject to this annual quota.

CMC was set up in 2010 and claims to be China's first media and entertainment-focused private equity fund approved by the National Development and Reform Commission (NDRC). Sponsors include China Development Bank, Wenhui-Xinmin United Press Group and Shanghai Media Group (SMG). Li is the former chairman of Shanghai Broadcasting and president of SMG.

Last year, CMC and FountainVest Partners paid $80 million for a 20% stake in IMAX Corporation's China subsidiary, which is now moving forward with a Hong Kong IPO. IMAX also launched a fund with CMC, which will bankroll at least 10 Chinese-language movie productions.

In April, CMC acquired a stakes in the consortium that controls Hong Kong's TVB. The PE firm previously established TVB China through a JV with TVB in 2012. Other investments from the GP include the purchase of New Corporation's China portfolio, separate joint ventures with Dreamworks Animation and FremantleMedia, and the acquisition of a stake in OCJ, a Chinese TV shopping business.

A range of PE firms and strategic groups are tapping into China's media and entertainment industry. Hony Capital and TPG Capital backed start-up Hollywood studio STX Entertainment, which this year secured a financing deal with China's Huayi Brothers Media Corp. to release 12-15 movies a year by 2016. Meanwhile, Chinese conglomerate Fosun International said it will invest in Studio 8, a Hollywood film studio, to develop film and TV series for distribution in China.

In addition, Singapore-based Tembusu Partners and local media entrepreneur Calvin Cheng joined forces with Yu Dong, CEO of China's Bona Film Group, to launch a media-focused fund. Taiwan's Fubon Group, Hong Kong's Media Asia and South Korean music giant SM Entertainment have a similar venture.

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• Topics
• Greater China
• Media
• Expansion
• China
• Media
• Joint Venture
• China Media Capital