Lionsgate Signs 200-Title China Online Distribution Deal With Youku

Pact To Give Youku Access To 200 Lionsgate Titles For Youku Movies Channel

Under the new deal, Lionsgate films like Hotel Rwanda will be made legally available via Youku's Movies Channel

Under the new deal, Lionsgate films like Hotel Rwanda will be made available via Youku's Movies Channel

With analysts projecting that the Chinese box office could grow to US$5 billion by 2015, and coming off a record $2.1 billion year in 2011, calls from Hollywood (and Washington) for China to loosen its film import quotas have taken on greater urgency without — after years of wrangling — falling on deaf ears. After months of ratcheting up pressure and 11th-hour negotiations in February between Chinese VP Xi Jinping and American VP Joe Biden, China finally agreed to allow the importation of 14 more 3D or large-format films per year, while increasing profit-sharing with foreign film companies from 13 percent to 25 percent. Though limiting the quota increase to 3D and Imax movies will mean little for most filmmakers, and Hollywood and other foreign film markets will likely continue to lobby China to liberalize even further, observers say that even sending 10 more films to China per year could add up to an additional half billion dollars per year for American producers at least.

Over the past few years, in an attempt to get around China’s film import quotas, American and Australian film production companies have sought to work with Chinese companies to co-produce films both for the Chinese and international markets. Though some fell through — such as Legendary Pictures’ “Legendary East” joint venture, which crumbled after partner Paul Y Engineering put its $220.5 million investment on hold last year — others, like DreamWorks Animation’s new deal with Shanghai Media Group and China Media Capital, are expected to encounter smoother sailing.

Though the deal in February between Biden and Xi was widely perceived to benefit massive Hollywood studios, the Independent Film & Television Alliance said it may actually benefit independently produced films as well. As Alliance CEO Jean Prewitt told Variety, “For the first time, through this agreement, there is a promise of creating a commercial foundation that will allow independent producers to participate more fully in the Chinese marketplace.” Already, two weeks after the agreement between China and the US, we’re seeing signs that this may be playing out. This week, Lionsgate — arguably the most successful independent film and television distribution company in North America — announced a landmark deal with the Chinese online video-watching site Youku to make 200 Lionsgate titles, including Hotel Rwanda, Monster’s Ball, and Mr. Magorium’s Wonder Emporium legally available to users on an ad-supported basis through Youku’s Movies Channel.

According to a company release, Youku’s Movies Channel is a “curated front-end to Youku’s free and premium film content,” and gives content owners several options for making Disney, Paramount, Dreamworks, Warner Bros, and 20th Century Fox. Currently, 11 of the 18 films that achieved Chinese box office revenue of over 100 million yuan (US$15.8 million) in 2011 are viewable on Youku’s Movies Channel.

Lionsgate’s content will be made available on the dedicated Youku channel on an ad-supported basis. As Zhu Huilong, VP of Movie Operations and Corporate Development for Youku said this week, “This agreement is a chance for Youku to deepen our industry-leading portfolio of international titles, and to broaden our partnerships with studios as we lead the way in offering legally licensed content online in China through a range of free and paid models.” Aside from the ad-supported option, Home Media Magazine notes today that content holders can also make titles available through Youku Premium, which offers transactional VOD, electronic sellthrough and subscription-based VOD.

Since debuting in beta back in October 2010, Youku Premium has processed more than 1 million orders, with an average of 60,000 paid views for each of the top 10 titles on the platform.


Market Analysis