Harvest, Sun Redrock launch $800 mil film fund

Focus will be on English-lingo Chinese co-pros

Westerners have been trying for years to make major inroads into China’s growing entertainment marketplace. On Monday, a group of Chinese investors grabbed Hollywood’s attention by outlining an ambitious plan to raise $800 million in equity financing and to seek partners to produce English-language pics.

Harvest Alternative Investment Group and Sun Redrock Investment Group group are banking on China’s large pool of untapped capital and the government mandate to expand its entertainment biz in creating the Harvest Seven Stars Media Fund, unveiled with much fanfare by Chinese entrepreneur Bruno Wu. Fund will focus on content, distribution and marketing along with partnerships with overseas companies that could eventually take advantage of a growing Chinese entertainment biz.

In October, China’s ruling Communist Party approved a program to push entertainment as a “pillar industry,” one that would help China compete internationally and improve its image abroad by boosting cultural exports.

“They want to create a media industry in China that can produce media that will succeed in China and also compete around the globe,” said Skip Paul, an investment banker with Centerview Partners who has been doing business with China for more than 30 years, referring China’s overall ambition in the entertainment arena.

Whether Chinese investors point funds toward the mainland or the outside world, they won’t just focus on the bottom line. Observers say that the Chinese want to learn from their overseas investments and partnerships to further the government-mandated entertainment expansion within China. And that includes growing its piracy-plagued DVD biz, which some note may improve once there’s incentive within China to do so.

As for filmed entertainment, Wu said the two-pronged focus – operations and film content – would be aimed at sourcing and distributing “global movies, primarily English-language films that are not just going to be released in China, but really produced by Hollywood and released on a global basis.”

The fund, now one of China’s largest media funds, is negotiating filmmaker deals, three of which are expected to be announced in the next month.

Wu added that Harvest Seven Stars would also aim to invest in pics as a Chinese co-producer, which would serve as a way for Hollywood pics to be shown in China outside of the country’s quota system. (China has a cap on the number of non-Chinese pics released theatrically in the territory.)

These Chinese co-productions, he said, would allow both parties to take a bigger slice of the Chinese box office, as co-productions typically take 44% of the box office compared with 12%-17% for a non-Chinese pic.

Harvest Seven Stars Media is being advised by CAA’s Beijing office.

Harvest Alternative Investment Group’s investors include Deutsche Asset Management, a subsidiary of Deutsche Bank, as well as China Credit Trust and Lixin Investments.

The executives who will work with the fund are expected to be announced within the next few weeks.

“This new partnership emphasizes our confidence in the strength and potential of the Chinese media industry, and the wealth of talent within it,” Wu said. “We look forward to cultivating this new joint venture and seeing it grow into one of the world’s leading media funds.”