Alibaba Pictures Group, the film business arm of Chinese e-commerce giant Alibaba, has struck a strategic cooperation deal with leading film studio Huayi Bros. The deal includes a $103 million (RMB700 million) loan to Huayi.
Alibaba Pictures said the agreement was part of its recently announced strategy to be involved in major movies aimed for release during China’s four yearly holiday periods: Chinese New Year (around January-February), the summer, National Day celebrations in October, and end of the year. The strategy, dubbed the Jin Cheng Co-Production Project, runs for five years. (“Jin Cheng” translates roughly into English as “Golden Orange.”)
The deal further expands the power and influence of deep-pocketed Internet platforms, such as Alibaba and Tencent, over the Chinese film industry. Alibaba and companies owned by founder Jack Ma have been significant minority shareholders in Huayi since 2014, and increased their positions again in 2015.
The new deal with Huayi runs for five years and commits the studio to delivering 10 films in which Asian Union, a subsidiary of Alibaba Pictures, can be a co-investor and co-distributor. The two companies also agreed to work together on talent development, film marketing and merchandising through Alibaba’s Tao Piaopiao and Beacon platforms.
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The five-year loan, provided at China’s five-year base rate, will be used by Huayi as working capital and for company operations. As security for the loan, Huayi is providing share pledges, rights to returns from a film fund, and “unlimited joint and several guarantees provided by two major shareholders.” That appears to be a reference to Huayi founders and principals Dennis and James Wang.
Last week, Alibaba cited its Jin Cheng film investment plan as the reason behind its move to take a 13% stake in the Tingdong Film company controlled by celebrity race car driver-turned-blogger and filmmaker Han Han (“The Continent,” “Duckweed”). His new movie, “Pegasus,” is one of the most anticipated of the upcoming Chinese New Year season. Alibaba also recently invested in “Green Book” and “A Dog’s Journey,” the sequel to hit “A Dog’s Purpose.”
Huayi, in business as a private sector leader for over 20 years, has been behind hit films including the “Detective Dee” fantasy-action franchise and a string of movies by Feng Xiaogang (“Youth,” “I Am Not Madame Bovary”). It was also the Chinese partner of Hollywood independent STX Entertainment until the deal ran out at the end of December.
On Thursday morning, Huayi Bros shares climbed 6.6% to RMB4.85 on the news of the deal with Alibaba Pictures, whose own shares were little changed at HK$1.29 apiece.