Producer/financier starts new Beijing-based shingle
There’s nothing lost in translation with Thomas Tull’s latest move.
Working to tap into China’s booming box office, the Legendary Entertainment chief has found a way around the quotas the Chinese government imposes on foreign films entering the country each year, creating what is essentially a homegrown Chinese company funded by local investors.
The film financier and producer flew to Beijing this week to announce Legendary East, a new shingle through which he will produce a slate of films developed for Chinese moviegoers but which also have appeal for overseas audiences. Aim is to make two tentpoles per year, starting in 2013, through the Hong Kong-based venture, which will be run by Chinese-born media exec Kelvin Wu.
Wu most recently was co-CEO of Orange Sky Golden Harvest Entertainment, which made an investment in Legendary last year.
Legendary East’s films will be co-developed and produced by China’s largest independent film studio and entertainment conglom, Huayi Brothers Media Corp. (run by Wang Zhongjun and Wang Zhonglei), which will distribute the pics in the territory.
Company will also serve as a strategic shareholder in Legendary East.
Films released by the Beijing-based Huayi Brothers, including the disaster pic “Aftershock,” generated 17% of the domestic Chinese B.O. in China last year.
Warner Bros., which already releases Legendary’s films, will distribute Legendary East’s pics around the rest of the world.
Hollywood has been eager to get more of its films into China, given the growing number of the country’s 1.3 billion population flocking to theaters there.
China currently has about 6,200 screens, up from about 1,500 three years ago, and 20,000 are expected to be built by 2015. As many as three new multiplex screens are being added each day.
The Chinese box office surged 40% to $900 million in 2009. Last year, B.O. grew 64% to $1.5 billion. But studios have been held back by the government quota that limits Hollywood fare to just 20 foreign films per year. (The Motion Picture Assn. of America and U.S. trade officials are negotiating to increase that figure.)
As a result, companies have been forced to get more creative. Sony partnered with China Film Group, the largest government-run film producer and importer of pics to the country, to help finance and produce the reboot of “The Karate Kid” in 2010. That relationship guaranteed the pic considerably more play than it would have gotten with only a U.S. company involved.
“Chinese government guidelines can change depending on who you’re dealing with,” Wu said last year at a UNIJAPAN Entertainment Forum.
With Legendary East, Tull has essentially created a native Chinese company, one that will have homegrown financing and which abides by the country’s cultural rules limiting scenes of sex and violence.
The structure will enable any films the company makes to unspool on the largest number of screens available, considering Hong Kong-China co-productions get favorable distribution terms due to a Closer Economic Relationship Agreement.
Legendary declined to disclose specific investors behind Legendary East, but backers include Orange Sky Golden Harvest, which bought a 3.3% stake in Legendary last year for $25 million (becoming the first Chinese company to take a stake in a Hollywood firm), and New World Development, which ponied up $45 million.
“China is one of the most important economic and culturally significant areas in the world, and we are deeply honored to establish a base in this region to create entertainment that is globally appealing in quality, scale and impact,” Tull said.
Tull will serve as Legendary East’s executive chairman, while Wu will serve as CEO and Joel Chang will be its chief financial officer.
After backing a slate of Warner Bros.-based hits that include the reboot of the Batman and Superman franchises, “The Hangover” pics, “300,” “Inception” and “Clash of the Titans,” Tull has larger ambitions to turn Legendary into standalone company that can fund its own slate of films and TV shows as well as publish comicbooks and videogames and exploit digital platforms.
Tull has been taking back control of the company by buying out its original investors. In April, Tull began raising a $700 million line of credit, which could grow to as much as $900 million. Legendary’s current credit line expires in 2013, the same year that its seven-year co-financing and distribution deal with Warner Bros. ends.
Goldman Sachs advised Legendary Entertainment on the formation of Legendary East, while Centerview Partners is advising the new venture.