Warner Bros., China Media Capital Confirm Film Production Talks

Warner Brothers is holding talks with state-backed China Media Capital with a view to Chinese-language movie production.

The talks may lead to the establishment of a joint venture company that invests in or produces films for the local Chinese audience.

“We confirm that CMC is now in talks with WB to create a JV. The talks have been going well, but we cannot disclose more details at this stage,” a spokesman for China Media Capital told Variety on Tuesday. Sources close to Warner Bros. in Los Angeles also confirmed the talks.

If the talks are successful, the move would be Warner’s second venture into the Chinese film production sector. It was previously involved in production and distribution in a joint venture with China Film Group.

The Chinese film market has boomed in recent years driven by a massive expansion of the multiplex circuits and a growing middle class with greater disposable income. Theatrical box office in 2014 hit RMB29.6 billion ($4.63 billion at current exchange rates), making China the second largest theatrical territory after North America.

Growth has continued this year. Box office takings were up by 49% by the end of June.

Involvement in local films is an increasingly attractive proposition as local Chinese and Hong Kong film makers have found new ways to reach the country’s 1.3 billion population. For the past two years many have explored commercial genres such as romance, comedy and horror, with Chinese animation also gaining ground. Backed by Internet-powered conglomerates including Alibaba, Tencent, and LeVision producers have had access to plentiful cash for big budgets. The Internet has also generated popular new stars and acted as a creative development hub and testing ground.

China Media Capital has proved itself one of the most far-sighted of the new local players.  A media-focussed private equity fund, the company has acquired Star China Media with former News Corp. TV channels including Xing Kong China Channel, Xing Kong International Channel and Channel [V] that span mainland China, Hong Kong/Macau, Taiwan and SE Asia. The company is also an investor in Oriental DreamWorks, the animation joint venture with DreamWorks Animation that is currently producing “Kung Fu Panda 3”.

Headed by Li Ruigang, a former head of Shanghai Media Group, CMC has attracted leading global investors including Time Warner, advertising agency giant WPP and Ratpac Entertainment as investors in its Renminbi and US Dollar funding rounds. Last week it emerged that both Alibaba and Tencent had agreed to invest in Whaley Technology, a CMC subsidiary planning to enter the smart TV market.

Although the road to co-operation so far has been plagued with regulatory hurdles and cultural mismatches, a number of other foreign companies have begun to make inroads into local language film-making in China.

They include ODW, Village Roadshow Asia and Legendary Pictures, which is now in post-production on Zhang Yimou’s “The Great Wall,” a China-set, English-language fiction with a budget in excess of $100 million.

More recent Hollywood-China ventures include an alliance between Hunan TV and Lionsgate, Chinese investment conglomerate Fosun International’s investment in Jeff Robinov’s Studio 8, and Huayi Brothers Media’s commitment to fund at least 18 Hollywood movies emerging from STX Entertainment.

Warner Bros was one of the first Hollywood firms to venture into the modern era of Chinese film-making. Its Warner Theaters unit opened some of the first multiplexes in China, but the company pulled out of the sector when it emerged that the foreign investment would remain capped at 49%.

Similarly, for several years Warner was a joint venture partner with state owned giant China Film Group, in Warner China Film HG. The production and distribution firm operated between 2006 and 2009 before shuttering. It had credits including “The 601st Phone Call,” “Crazy Stone” and Ed Norton-starring “The Painted Veil.”

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