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China’s Oriental DreamWorks Looks Set to Restructure (EXCLUSIVE)

UPDATED: Oriental DreamWorks, the production joint venture between DreamWorks Animation and Chinese partners, may be restructured, according to well-placed sources in China.

The sources say that Comcast is in talks with Oriental DreamWorks’ Chinese backers, including China Media Capital and Shanghai Alliance Investment Ltd., about possibly giving up DWA’s 45% stake in the venture. If that happens, it would mark the end of one of the highest-profile linkups between Hollywood and China.

The potential restructuring comes as Oriental DreamWorks struggles to maintain a foothold in the competitive animated-feature marketplace. Its last outing, “Kung Fu Panda 3,” failed to perform as well as expected at the box office, and its only film currently slated for release, the Himalayan tale “Everest,” is not due out until September 2019. Last week, the company laid off some 40 animators at its Shanghai base.

At the same time, Glendale-based DWA has been re-evaluating the projects in its own pipeline, canceling “The Croods 2” and, most recently, “Larrikins,” which was to have starred the voices of Hugh Jackman and Naomi Watts.

With Universal maintaining its own presence in China, including a distribution operation, Oriental DreamWorks came to be viewed as superfluous. “It’s not because it’s not an important or successful business, it just duplicates what they already have in China,” said one individual close to the company.

Contacted by Variety, China Media Capital said it was not taking media inquiries at the present time. Efforts to reach DreamWorks Animation and Comcast have also not been successful. Universal Pictures, which oversees DreamWorks, declined to comment.

Established in 2012, Oriental DreamWorks brought together two of the biggest names in film and media on either side of the Pacific: Jeffrey Katzenberg and Li Ruigang, who heads China Media Capital.

But the company has consistently struggled, despite a tentative diversification from animation into live action. In animation circles it was sometimes said that DWA was the only Hollywood company to go to China and operate with higher costs than in the U.S. At its peak, in 2014, Oriental DreamWorks had a staff of 250.

That number is now below 100. “We’ve had a number of Oriental DreamWorks animators send us their resumes in the past few days,” said Gordon Chin, CEO of Shenzhen-based Puzzle Animation.

Oriental DreamWorks has been involved in four feature productions to date: “The Penguins of Madagascar,” “How to Train Your Dragon 2,” “Home” and “Kung Fu Panda 3.”

“Panda 3” was structured as a full co-production between China-based Oriental DreamWorks and U.S.-based DWA. That meant the film was treated as local in China, which allowed it to play longer in Chinese cinemas and gave it a larger proportion of the box office revenue than an imported movie. Its $154-million haul in China, in early 2016, was the film’s biggest territory gross – ahead of North America with $144 million – but was considered a modest disappointment at the time.

That performance may now look more respectable given the sharp slowdown of the Chinese box office in the second half of 2016. But it is notable that Oriental DreamWorks has not significantly expanded its slate of feature productions since “Kung Fu Panda 3.”

Only “Everest,” which tells the story of a girl who tries to bring a yeti from the Himalayas back to Shanghai, has been scheduled for release. Largely financed by Oriental DreamWorks, and involving both Oriental DreamWorks and DWA, the film was announced as being directed by Tim Johnson (“Home,” “Over The Hedge”) and Todd Wilderman (“Open Season 2”) and produced by Suzanne Buirgy (“Home,” “Kung Fu Panda 2”). The script was written by William Davies (“How to Train Your Dragon”).

Last October, the Chinese government announced a surprise antitrust investigation into Comcast-NBCUniversal’s acquisition of DWA. China’s anti-monopoly laws empower the government to investigate foreign deals even if no Chinese companies are involved. It is not clear if the probe has had any impact on Oriental DreamWorks.

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