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DMG invests big in China theaters

Joins Korea's Volton in $230 million joint effort

L.A.- and Beijing-based DMG Entertainment has unveiled a $230 million theater chain investment with Korean hedge fund Volton for the booming China market that will dovetail with its new $300 million fund to bring co-production tentpoles to China.

China is the last frontier for Hollywood, an untapped market that is fiendishly difficult to access without a sharp knowledge of the local market and its regulations, plus an inside track to the government powers-that-be.

“The ultimate issue, whatever you call the box you package it in, is that studio films are making a lot of money here in China and are not able to collect. Access and relevancy are the two key issues,” DMG topper Dan Mintz told Variety.

DMG is a partnership set up 18 years ago by Mintz, chairman and finance expert Peter Xiao and former national gymnastics champion Wu Bing.

Mintz confirmed that DMG had set up the fund, news of which was leaked, to his irritation. It will involve co-productions, which do not come under China’s quota rules on imported films. However, co-prods require a significant Chinese input to qualify under rules.

“The film fund is $300,000, and the theater investment is $230 million … they are not small numbers,” he said. The theater investment was slightly different, but ultimately is a little bit of a different investment because it’s bricks and mortar.”

The Korean market is saturated, and investors have been looking at China for a long time, eager to get in. Under the terms of the deal, DMG will refit cinemas in shopping malls, all multiplexes of eight screens or more.

“It’s about content and distribution here for us … the fund’s got a lot of interest from the studios, and we’re in that process. If you add value and offer solutions, it’s not just about writing a check and hoping for the best; this is not what this is about,” Mintz said.

DMG has strong connections with government officials and the state film colossus, the China Film Group.

Future plans include importing “Priest,” while last year DMG managed to get “Resident Evil: Afterlife” past China’s tough censors, a sign of just how good its connections are, as horror movies are usually banned.

It recently wrapped principal photography on its co-production “Looper,” starring Joseph Gordon-Levitt, Bruce Willis, Emily Blunt and China’s Xu Qing. The shingle has also produced Chinese B.O. winners, including top-earning domestic production “The Founding of a Republic” in 2009 and “Go Lala Go!” and has also distributed numerous Hollywood blockbusters in China, such as the “Twilight” franchise.

Recent weeks have seen a number of tie-ins as Hollywood studios try to get a piece of China. As well as DMG’s $300 million fund, Relativity Media set up a Chinese production and distribution partnership and Legendary Entertainment, through its Legendary East unit, announced plans for a $220.5 million investment in a filmmaking venture aimed at producing pics for the Chinese market.

China keeps building more and more theaters, and cinema chain operators reckon that in five years, China will have 60,000 screens. The strong rise in Chinese B.O. last year to $1.5 billion was driven by the surge in the number of cinemas, many of them housed in the glittering shopping malls springing up in first-tier cities like Beijing and Shanghai but also in second- and third-tier cities.

Last year China added 313 movie theaters and 1,533 new screens for a total of just over 6,200 screens. The building of cinemas has combined with the boom in shopping mall construction in China to result in the construction of around three new 450-seat theaters every day — a whopping figure when you consider that around three-quarters of Chinese cities still don’t have decent theaters.

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