Viacom executives will be in the hot seat next week after jetting to China to help assuage the fears of a major film financing partner, Variety has learned.
Angry over losing tens of millions of dollars on a $1 billion slate-financing deal with Paramount Pictures, Chinese film company Huahua Media is looking for assurances that the studio’s upcoming movies will be more commercially successful. Viacom is Paramount’s corporate parent.
Executives from Viacom will travel to China next week to meet with their counterparts at Huahua and to try to reassure them that things will improve in coming months, a source close to Huahua tells Variety. The Chinese company is particularly disappointed with the reception of “Baywatch,” “Ghost in the Shell,” and “Transformers: The Last Knight,” and believes that Paramount’s creative team has not done a good job of making films that will play to international audiences.
“We have incurred losses for the first months of the current year,” the source said. “These are not trivial losses; they are huge losses.”
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The company was particularly incensed that the most recent “Transformers” did not perform better in China. The film made nearly $230 million in the Middle Kingdom, but that was a significant drop-off from the $320 million earned by its predecessor, “Transformers: Age of Extinction,” in 2014. Globally, the film earned $570.6 million — a weak result given its $217 million budget.
Spokespeople for both Huahua and Viacom declined to comment.
Some of the dissatisfaction stems from the fact that Huahua is under new ownership. Last month, Oriental Times Media Company paid $41.2 million in cash for a 51% stake in Huahua, a low valuation of the company that raised eyebrows in Hollywood. Paramount and Viacom had been expecting Huahua and its partner Shanghai Media Group to spend some $1 billion in slate financing. The deal was supposed to last for three years.
The deal with Huahua and Shanghai Media Group was forged by former Paramount chief Brad Grey but nearly collapsed last March as the Chinese government started to apply greater scrutiny to overseas investments. China is trying to rein in the outflow of capital in order to bolster its currency. In May, Viacom brass confirmed that Grey’s replacement, Jim Gianopulos, had revived the pact, with Viacom CFO Wade Davis telling analysts that the financing deal “remains on track and is in operation.”
Huahua believes it still has the ability to get out of the deal if Paramount films do not improve their financial performance in the next 12 to 24 months. The hope is that next week’s meeting, during which Viacom will present new proposals and preview upcoming releases, will better clarify Paramount’s long-term strategy.
“Viacom needs to explain a better plan for how it spends [our] investment money,” the Huahua source said.
In recent months, Viacom was approached by another Chinese company, Dalian Wanda, about partnering on future film and theme park projects, according to sources with knowledge of the discussions. However, nothing came of those talks because the Chinese government has imposed funding restrictions on the company.