Looking to take advantage of converging trends, such as a booming domestic Chinese film market and an appetite for more imported movies (currently stymied by Beijing's film quotas), this week the Chinese private equity firms Harvest Alternative Investment Group and Sun Redrock Investment Group announced that they have teamed up to form a new US$800 million fund aimed at studio and English-language movies. As Variety notes today, the new "Harvest Seven Stars Media Fund" plans to invest in three main areas: M&A for "niche" private companies that can grow in Chinese and Asian markets, operations (building a media distribution and marketing platform across Asia), and film content.
According to Sun Redrock founder and husband of Chinese television host Yang Lan, Bruno Wu, the new fund expects its M&A focus to center on partnering with overseas media companies, then bringing them to China to have them "take full advantage of the growth opportunity that is out here."
Despite the restrictions on film imports, and notoriously heavy-handed censorship on the part of Beijing authorities, the opportunity is clearly there in China's fast-expanding film market. Last year, the Motion Picture Association of America said that the number of cinema screens in China are expected to grow from around 6,200 in 2011 to over 16,000 in 2015, and forecasts box-office receipts in China to swell from US$1.5 billion in 2011 to around $5 billion in 2015. Looking to cash in on the country's expanding market and sidestep film quotas, we've seen several co-production companies form in recent years, both from the US as well as Australia. Last August, the Hollywood production house Legendary Entertainment announced plans to create a US$220.5 million production joint venture with the Chinese powerhouse Huayi Brothers Media Corp. aimed at making one to two “major, event-style” films per year for a global audience, starting in 2013. Though the deal remains on hold and will, presumably, fall through, the high-profile nature of the two companies involved indicates that both Hollywood and Beijing are keen to better tap Chinese and, in terms of Beijing's goals, international audiences.
As for the Harvest Seven Stars Media Fund, the venture's strategy will hinge on tapping local and global audiences equally. As Variety notes today:
Wu said the two-pronged focus -- operations and film content -- would be aimed at sourcing and distributing "global movies, primarily English-language films that are not just going to be released in China, but really produced by Hollywood and released on a global basis."
The fund, now one of China's largest media funds, is negotiating filmmaker deals, three of which are expected to be announced in the next month.
Wu added that HSSMF would also aim to invest in pics as a Chinese co-producer, which would serve as a way for Hollywood pics to be shown in China outside of the country's quota system (China has a cap on the number of non-Chinese pics released theatrically in the territory).
These Chinese co-productions, he said, would allow both parties to recoup a bigger slice of the Chinese box office as co-productions typically take 44% of the box office compared with 12%-17% for a non-Chinese pic.
As the New York Times adds, "Regarding markets, Mr. Wu said he and fellow investors are eager to ease the way in China for blockbuster-style films from abroad — one of the biggest hits there lately has been 'Mission: Impossible — Ghost Protocol' — by joining in substantial co-productions." As the Hollywood Reporter points out, "Mission: Impossible" has proven extremely popular in China, which has become the film's highest-grossing single market outside of the US, taking in a total of US$55.7 million after two weeks.
For his part, Bruno Wu seems confident that his fund will be able to establish itself as a real player in the global film market. As he said at today's teleconference, "This new partnership emphasizes our confidence in the strength and potential of the Chinese media industry, and the wealth of talent within it...We look forward to cultivating this new joint venture and seeing it grow into one of the world's leading media funds."