In 2014, the Dalian Wanda Group bought eight acres of prime Beverly Hills real estate for $420 million. Then riding high, the Chinese conglomerate planned to plant its flag in the heart of Los Angeles with a luxury hotel and condo development.
Four years later, the parcel sits vacant. It’s for sale, but bids have come in well below asking price. According to a source familiar with the negotiations, the company might hope to get $450 million — which, after carrying costs and development expenses are accounted for, would represent a significant loss.
The Beverly Hills property is a highly visible sign of Wanda’s broader retreat. Under pressure from the Chinese government to reduce its debt, the company has sold off assets in China and around the world, including a stake in its massive new Qingdao studio complex and in soccer squad Atlético Madrid. Its overseas acquisitions drive has sputtered to a halt. Revenue was down 11% in 2017; net profits were flat. Chinese internet giants Alibaba and Tencent have been called in to shore up Wanda’s film and property divisions.
It all adds up to an embarrassing comedown for a company once synonymous with China’s rising power and influence in the entertainment industry. Wanda remains the world’s largest exhibitor, through its ownership of AMC Theatres and its market-leading multiplex circuit in China. And it still owns L.A.-based Legendary Entertainment. But its lofty visions have faded, leaving observers unsure of its next steps.
“With Wanda we never know which way the wind is blowing from one week to the next,” said one Hong Kong financier at the recent FilMart convention.
Take Legendary. Wanda bought Thomas Tull’s loss-making company for an exorbitant $3.5 billion in 2016. Last year, interim CEO Jack Gao announced plans to turn it into a “top five global studio” by 2020. But a few months later, Gao left both Legendary and Wanda, and the chest-thumping rhetoric went with him.
In December, the company appointed attorney Josh Grode to take the helm alongside Mary Parent, who has been head of production since 2016. Grode’s mandate was less grandiose: Stop the bleeding and put the company on a path to growth. Many assume his is a caretaker role until a possible sale.
Last week, Legendary released “Pacific Rim Uprising,” its first outing since “Kong: Skull Island.” The sequel to the 2013 original was the sort of film Legendary seemed built to make — a tentpole with Chinese elements, geared to a rapidly converging global market. Yet in the face of Wanda’s pullback, those ambitions feel out of date. The movie met only modest expectations, grossing $28 million in North America in its opening weekend and $122.5 million overseas through March 29. That includes $78 million from China. There are no plans for a third installment.
Other films in the pipeline include this summer’s “Skyscraper,” a Hong Kong-set action film starring Dwayne Johnson. Legendary won the bidding for another Johnson project, “Red Notice,” and is in production on “Detective Pikachu,” starring Ryan Reynolds, due out in 2019. Some insiders say Parent is executing on a clear, if pared-down, vision.
“Her movies don’t go crazy over budget. They always have a point to them,” says a top-level Hollywood exec. “She’s an outstanding executive. Is [Legendary] going to be the next studio? No. But being a production company with capital, which they clearly still have, is not a bad thing.”
Nonetheless, the company faces questions about Wanda’s commitment to it in the long term. A former Wanda executive told Variety that the conglomerate would like to end its problems with Legendary, and that the performance of “Pacific Rim Uprising,” “Skyscraper” and “Godzilla: King of the Monsters,” set for 2019, would determine the company’s fate.
For all its military-like organization, Wanda continues to experience high executive turnover. On March 9, Jiang Defu, general manager of Wanda Pictures, and Que Wenxiong, general manager of Wanda-owned Wuzhou Film Distribution, left their posts. Three days later, AMC chairman Lincoln Zhang also stepped aside, to be replaced by John Zeng, the president of Wanda’s China-based cinema business. AMC’s stock has taken a beating over the past year, but sources say Zhang’s departure had more to do with refocusing his attention on Wanda’s sports business than with any displeasure over the company’s performance.
“They don’t try to run AMC out of China,” says analyst James Goss of Barrington Research Associates. “It’s run out of Kansas.”
One major bright spot for Wanda is the performance of “Detective Chinatown 2,” which has grossed $500 million — the third-highest total in Chinese history — since its release over Chinese New Year. That’s no doubt a relief for a company that once prowled the globe but now has to hunt for success closer to home.