You will be redirected back to your article in seconds

As China’s Economy Slips, Hollywood Looks More Enticing

A perfect storm of capital flight and an urge to merge is brewing over mainland China and Hollywood.

Wealthy Chinese investors are increasingly looking to park their money outside the country, amid evidence of a big slowdown on the horizon for China’s economy. They are finding a receptive audience in Hollywood at a time when disruption across the entertainment landscape has even the largest players looking at outside investment opportunities to bolster their businesses.

Viacom’s decision last week to sell off a minority stake in Paramount Pictures immediately triggered speculation that a Chinese company may soon own a piece of a major U.S. studio.

Alibaba, Dalian Wanda Group and Fosun Intl. Group are among the deep-pocketed Chinese investors kicking the tires on a deal. Their interest is understandable. Major studios don’t often go on the auction block, and Paramount, despite years of declining market share, remains a storied entertainment brand.

Paramount would not be the first studio courted by deep-pocketed Chinese players. In recent months, Wanda plunked down $3.5 billion for Legendary Entertainment, the producer of “Jurassic World” and “Godzilla.” Last month, Beijing-based Perfect World Pictures and Universal Pictures announced a five-year $500 million slate financing deal. At the same time, Chinese investors have provided the fuel for content startups including STX Entertainment and Studio 8.

The latest round of deal-making traces its origins back to Wanda’s $2.6 billion purchase of exhibitor AMC Entertainment in 2012, an ice-breaking moment that helped spur the current thaw.

“China and Hollywood finally have become comfortable working together.”
Attorney Lindsay Conner

“China and Hollywood finally have become comfortable working together,” said attorney Lindsay Conner, a partner at Manatt, Phelps & Phillips who arranged the Perfect World-Universal deal. “People on both sides of the Pacific needed to develop an understanding of each other’s cultures, and that finally has happened.”

The quaking in China’s economy over the past few months is expected to accelerate the matchmaking process.

After years of rapid economic growth, in 2015, the mainland saw its GDP rise at the slowest rate in 25 years, its stock market battered, and its export levels pinched. The nation is widely believed to be facing a looming debt crisis. The uncertainty over how the state will respond to a prolonged economic downturn is another concern for the new breed of Chinese moguls at a time when China is home to more billionaires than the U.S., according to Forbes.

“They recognize that China’s economy is slowing down, and they’re trying to look for ways to diversify their investments,” said Ann Lee, an adjunct professor at NYU and author of “What the U.S. Can Learn From China.”

Insiders say that Alibaba has teams of execs in place in Los Angeles, New York and Hong Kong, scouting for potential deals for the conglom, which boasts a market cap of $168 billion. Other big movers could include Shanghai Media Group, Hony Capital, Tencent Capital
and Huayi Brothers Media Corp.

“We are going to see more deals going forward,” predicted IM Global CEO Stuart Ford. “Despite the turbulence in the Chinese economy, there is still a lot of capital available there — and one thing the Chinese investment community understands is the power of content.”

Heavy Hitters
Wanda and other companies are swiftly moving into the Western entertainment biz.
$3.5b Price Wanda paid for Legendary
$500m Perfect World investment in Universal
$168b Alibaba’s market cap

Investments in media are particularly attractive because they represent the kind of “soft” goods that don’t draw as much scrutiny from regulators in the U.S. The movie business is eagerly courting Chinese coin because partnering with a China-based company has the potential to bolster profit margins on film exports. Having a significant Chinese partner can help guide movies through a byzantine approval process and sidestep the nation’s strict quota on film imports. Working with local film companies also can improve the B.O. split at multiplexes.

Viacom CEO Philippe Dauman’s emphasis on finding an equity partner that offers “strategic” benefits to Paramount has fueled the speculation about a Chinese investor coming through the studio’s iron gates. Paramount teamed with Alibaba Pictures on last summer’s “Mission: Impossible — Rogue Nation,” with the Chinese company also serving as the film’s official promotional partner in China. Moreover, Paramount powered “Transformers: Age of Extinction” to record-breaking results in China by filming parts of the movie on the mainland, and bringing on local promo partners.

The rush of activity, exemplified by the Legendary acquisition and Universal Pictures slate pact, has investors and executives abuzz about what’s been dubbed a “yuan gold rush” in Hollywood. But industry veterans with experience in China say it would be foolish to underestimate the business acumen of Chinese investors.

Tony Vinciquerra, senior adviser to TPG, has worked with Chinese investors through the private equity giant’s association with STX Entertainment and during his previous tenure as chairman-CEO of Fox Networks Group. “These are very savvy and very smart business people,” he said. “They look deep into the businesses they’re exploring, and have a very good understanding of the media landscape in the United States.”

More Biz

  • Discovery CEO David Zaslav Sees 2018

    Discovery CEO David Zaslav Sees 2018 Compensation Soar to $129.4 Million

    Discovery Inc. president-CEO David Zaslav is once again making headlines for an enormous compensation package. Zaslav’s 2018 compensation soared to $129.44 million in 2018, fueled by stock options and grants awarded as the longtime Discovery chief signed a new employment contract last July that takes him through 2023 at the cable programming group. Zaslav received [...]

  • Jonathan Lamy RIAA

    Jonathan Lamy Stepping Down From RIAA

    Jonathan Lamy, the Recording Industry Association of America’s longtime executive VP of communications and marketing, is stepping down from his post after 17 years, he announced today. As he put it in an email to Variety, “I started back in 2002, which means it’s been 17+ years, four different RIAA CEOs, three format changes and [...]

  • Fox Layoffs

    Disney-21st Fox Layoffs: TV Divisions Brace for Deep Cuts

    A second day of layoffs has begun on the Fox lot in the wake of Disney completing its acquisition of 21st Century Fox on Wednesday. Longtime 20th Century Fox Television Distribution president Mark Kaner is among the senior executives who were formally notified with severance details on Friday morning. 21st Century Fox’s international TV sales [...]

  • anthony pellicano

    Hollywood Fixer Anthony Pellicano Released From Federal Prison

    Anthony Pellicano, the Hollywood private eye whose wiretapping case riveted the industry a decade ago, was released from a federal prison on Friday, a prison spokeswoman confirmed. Pellicano was sentenced in 2008 to 15 years, following his conviction on 78 charges of wiretapping, racketeering, conspiracy and wire fraud. He had been in custody since 2003, [...]

  • This image taken from the Twitter

    HBO’s Reaction to Trump’s ‘Game of Thrones’ Campaign

    Everyone wants a piece of the “Game of Thrones” lemon cake. From Bud Light to Red Bull the world of Westeros is open to a lot of brand partnerships, unless you’re using that iconic typeface to push a political agenda. In November of 2018 President Donald Trump unveiled a “Thrones” inspired poster with the words [...]

  • Leaving Neverland HBO

    'Leaving Neverland' Lawsuit Proves to Be a Judicial Hot Potato

    The Michael Jackson estate sued HBO last month for airing the documentary “Leaving Neverland,” which accuses the late King of Pop of serial child sexual abuse. Since then, the case has had a difficult time finding a judge to handle it. Three federal judges have recused themselves in the last week, citing potential financial conflicts [...]

  • Members of the public mourn at

    Guy Oseary’s New Zealand Fundraiser Nears $150,000, Continues Raising Money

    In the wake of the horrific shootings at New Zealand mosques last week that killed some 49 people, Maverick chief Guy Oseary launched a GoFundMe campaign to “support those affected by this tragedy at this very difficult time,” and began it with an $18,000 donation. Boosted by donations from many celebrities — including Amy Schumer, [...]

More From Our Brands

Access exclusive content