Wanda-lust: Chinese investment in the US movie industry
Jianlin Wang, chairman of Dalian Wanda Group, has set his sights on buying one of Hollywood's six major studios. The rationale is sound but a strategy of incremental acquisitions might work better
Cinema chain AMC Entertainment was the first piece in Jianlin Wang's aspiring US movie empire. It was joined last year by film financier and production house Legendary Entertainment. Wang, who is chairman of Dalian Wanda Group and China's richest man, has made it clear the acquisition spree is not finished. The next target: Hollywood's six major studios, with Paramount Pictures, Warner Brothers, Walt Disney and Universal Studios all possible targets.
"My goal is to buy Hollywood companies and bring their technology and capability in China," Wang told Reuters. An acquisition of this nature would bring to Wang's portfolio a significant portion of the global media value chain and catapult Wanda to the front line of movie production and distribution. It also has a relevance that goes beyond movies.
Wanda opened Wanda City, the first of 15 theme parks planned over the next 10-15 years, earlier this year with a view to proving that Disneyland's "one tiger is not a match for a pack of wolves." Strong and recognizable intellectual property - i.e. rides and attractions tied to popular movie franchises - is required to make these projects work, and it would take years to create from this from scratch. Buying a major Hollywood studio therefore represents a shortcut.
However, obtaining a controlling position one of these six studios is likely to be difficult, especially for Wanda. Such assets rarely become available. Even Wang's recent discussions with Paramount - now dead after the CEO of parent company Viacom lost his power struggle with the majority owner the Redstone family - involved the purchase of a 49% minority stake.
A full acquisition may also run into difficulty with US regulators. It took years of antitrust wrangling to break the stranglehold these studios had over the industry, resulting in the 1948 "Paramount decision" that meant production houses could no longer operate movie theater chains. Wanda might risk violating this law.
With China's film market growing so fast it is expected to surpass North America as the world's largest next year, a host of domestic companies are looking to tap into this demand - from internet giants like Baidu, Alibaba Group and Tencent Holdings, to strategic players Hunan TV and Huayi Brothers, to financial investors such as CMC Capital Partners. This typically involves striking movie financing deals and buying into studios. For internet companies, it is a source of content with which to engage a younger, digitally-enabled demographic; for traditional media players, it is an opportunity to share in the global box office and learn industry practices.
Media-focused CMC has a similar strategy to Wanda, seeking to leverage Hollywood intellectual property for deployment in domestic properties such as entertainment complexes and theme parks. But where Wang is bold, CMC is relatively prudent. Having secured agreements to develop projects including Shanghai's DreamCentre, it took a minority stake in boutique studio Imagine Entertainment and backed Tang Tang Media Partners in its acquisition of Hollywood film and TV studio IM Global.
Smaller spin-offs from the Big Six are therefore realistic targets. Fosun International has invested in Studio 8, a production house started by former Warner Brothers' executive Jeff Robinov. STX Entertainment, a studio founded by Hollywood producer Robert Simonds in conjunction with TPG Growth, has hired several veterans from Universal and Fox and is looking to cover the full value chain from film and TV production to distribution. Tencent and Hong Kong's PCCW are the company's latest backers.
The fervor is unlikely to dissipate over the next two years. Wang is correct in describing much of the competition within China to buy into Hollywood as "silly money," and his track record - he claims two more US film-related deals worth $2 billion are the pipeline - means he is taken seriously. Wang is certainly no Guangbiao Chen, the recycling tycoon whose dreams of buying The New York Times attracted ridicule, but step-by-step encroachment rather than landmark buyouts might be the best way of realizing this particular ambition.
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