China’s raid on Tinseltown
Chinese companies are ramping up their investments in Hollywood, with two recent deals worth a total of $200 million (Bt7 billion), as both the US and Chinese businesses look for ways to increase their presence in each other’s lucrative markets.
As I’ve discussed in other columns, these kinds of transactions highlight how China is expanding its global reach, increasingly supplementing its widespread use of “soft power” with more commercial investments.
The movie “Independence Day: Resurgence”, provides a good example of such developments. It features a scene where characters communicate using QQ, a popular messaging platform in China owned by tech giant Tencent, and is the first time the service has appeared in a Hollywood movie.
As a major backer of Tang Media Partners, which brokered the two deals worth $200 million, Tencent has set its sights much higher than product placement.
With the first deal, Tang, alongside Huayi Brothers, a Chinese film studio and media company, and CMC, a Chinese media investment fund, purchased IM Global, a Hollywood studio, from India’s Reliance Group. With the second deal, IM Global will partner with Reliance and Tencent to produce and distribute content for television.
Both deals signify how Chinese companies are becoming more sophisticated. Enterprises such as Tencent are increasingly focusing on producing content for their core businesses – in this case, China-focused instant messaging and social media platforms. These are of staggering proportions: Tencent’s WeChat and QQ messaging platforms have 500 million and 200 million users, respectively.
Another example of China’s Hollywood ambitions is the 2014 launch by Alibaba, an e-commerce company best described as China’s answer to Amazon, of production studio Alibaba Pictures. While the studio has yet to make its debut film, its efforts to partner with or purchase Hollywood businesses have been widely reported.
These developments are not only about China entering the US, they also provide opportunities for international businesses to access the world’s second-largest film market.
Ticket sales at Chinese cinemas totalled $6.8 billion last year, compared with $11 billion in North America, but they are soon expected to exceed US sales.
Historically, the ability of foreign companies to capitalise on China’s billion-plus potential moviegoers has been hampered by Beijing’s policy that heavily restricts both international investment in the local film industry and the distribution of foreign-made films, currently capped at fewer than 40 movies per year.
These restrictions, however, are scheduled to be eased towards the end of next year, offering great opportunities for Chinese companies and their foreign partners who are capable of rapidly increasing their production and distribution of both local and internationally-produced content.
Furthermore, there is plenty of money to be made outside the box office; online streaming is expected to become an increasingly significant market in China, providing opportunities for businesses such as Tencent and Alibaba which already have a digital presence.
China is already the planet’s largest producer of tinsel for Christmas decorations – the village of Yiwu accounts for more than 60 percent of global supply.
At current rates of Hollywood investment, it may not be too long before China’s influence outweighs that of Tinseltown in the world of cinema.
