Will China Buy a Hollywood Studio? (Analysis)
China to Create Entertainment, Culture Hub in Beijing
This story first appeared in the Feb. 1 issue of The Hollywood Reporter magazine.
Why is Chinese TV manufacturer TCL suddenly so interested in Hollywood? The Huizhou-based company has made headlines with two recent forays into the U.S. entertainment business. First came a $5 million naming rights pact with Grauman's Chinese Theatre on Jan. 11 that will transform the Hollywood landmark into the TCL Chinese Theatre for the next decade.
Less than a week later, the company -- the fourth-largest LCD television manufacturer in the world -- announced a product-placement deal with Disney/Marvel's Iron Man 3 that will see the company's devices prominently featured in the newest outing of the blockbuster franchise.
TCL is the latest in a string of Chinese companies investing in U.S. film-related businesses during the past year. In September, billionaire Wang Jianlin's Dalian Wanda Group paid $2.6 billion for the AMC cinema chain. Later that month, Beijing's Galloping Horse launched a $30.2 million takeover (in a 70-30 deal with India's Reliance MediaWorks) of visual effects house Digital Domain.
All of this Hollywood investment raises the question: Is China positioning itself to buy a major studio? Here are three reasons why it will (and one why it won't):
1. Thanks to Japan, They Know What Not to Do
Thomas Plate, an expert in Asian and Pacific Studies at Loyola Marymount University and founder of the Beverly Hills-based Pacific Perspectives Media Center, says Chinese suitors would be well served by noting precedents from the late '80s and early '90s, when Sony and Matsushita bought Columbia and MCA, respectively.
"The Chinese need to understand there are a lot of potential problems inside the corporations that we can't see. That's what happened with the Japanese," says Plate, referring to how lavish spending generated huge losses for Sony (the company famously hired producers Peter Guber and Jon Peters to run the studio after buying them out of Warner Bros. for a reported $500 million).
But China's expansion into Hollywood is, in many respects, the opposite of Japan's. Sony and Matsushita ran Columbia and MCA according to their own business ethos and, in the case of Sony, hoped to generate content for its own products. What China needs from Hollywood is more than a return on investment; it needs expertise. By partnering with Hollywood, the Chinese film sector -- which saw box office jump from $144.2 million in 2002 to $2.69 billion last year, with the number of screens going from 1,400 to about 12,000 in the same period -- can continue its rapid expansion while avoiding growing pains. "We want to be a global film exhibitor, and to develop this infrastructure on our own would take a long time," Wang told THR in June. "Through the [AMC deal], we can achieve this very quickly."
2. Money Is Not an Issue
Kady Yang, an analyst at Beijing-based entertainment consultants EntGroup, says there are several suitors with enough capital to make such a purchase. After all, China has invested in everything from ailing Latin American petroleum companies to vast expanses of land in Iceland. A buyer could emerge from any of China's cash-rich industries -- and not just the film sector.