Chi­nese firm, STX close film slate deal

Los Angeles Times - - BUSINESS - By Richard Ver­rier

Chi­nese film pro­duc­tion com­pany Huayi Bros. Me­dia Corp. has closed a ma­jor film slate deal with Robert Si­monds’ new movie and tele­vi­sion stu­dio, STX En­ter­tain­ment, high­light­ing the grow­ing busi­ness ties be­tween Hol­ly­wood and China.

Un­der the three-year deal, Bei­jing-based Huayi Bros., one of China’s largest film com­pa­nies, will co-pro­duce and co-dis­trib­ute 12 to 15 films an­nu­ally with Bur­bank-based STX En­ter­tain­ment. That rep­re­sents vir­tu­ally all of the stu­dio’s films through the end of 2017, ac­cord­ing to a state­ment from the com­pa­nies.

The pact in­creases Huayi Bros.’ grow­ing global foot­print in the en­ter­tain­ment in­dus­try and is one of the largest film slate deals to date be­tween a Hol­ly­wood com­pany and a Chi­nese film stu­dio.

“We knew that if you are go­ing to try and build a stu­dio in this day and age, China has to be part of your story,” said Si­monds, who has pro­duced films such as “The Wed­ding Singer” and “Happy Gil­more.” “That’s why we went to Huayi. It’s one of China’s largest providers of film.”

Ma­jor stu­dios have

signed deals with pro­duc­ers in China in re­cent years. Last month, China’s Hu­nan TV & Broad­cast In­ter­me­di­ary Co. an­nounced that it would give Santa Mon­ica film stu­dio Lion­s­gate as much as $375 mil­lion in pro­duc­tion fi­nanc­ing over the next three years.

Yet few Chi­nese com­pa­nies have in­vested di­rectly in Hol­ly­wood films or en­tire slates, mak­ing STX’s pact with Huayi Bros. un­usual.

“It’s one of the first ma­jor in­vest­ments by a Chi­nese com­pany in Hol­ly­wood films,” said Lind­say Con­ner, a part­ner in Manatt, Phelps & Phillips, which rep­re­sented Huayi Bros. in the ne­go­ti­a­tions.

“We’ve gone through a num­ber of years where there was a lot more talk than ac­tion,” Con­ner said. “Now we’ve reached the point where Hol­ly­wood and China are suf­fi­ciently com­fort­able with each other’s way of do­ing busi­ness and deals can close.”

The part­ner­ship is the lat­est in a se­ries of tie-ups be­tween Chi­nese com­pa­nies and the U.S. film busi­ness as China be­comes an in­creas­ingly im­por­tant source of rev­enue for Hol­ly­wood. The world’s most pop­u­lous na­tion saw its box-of­fice rev­enue jump 34% to $4.8 bil­lion last year, help­ing the in­dus­try set a global box-of­fice record in 2014, ac­cord­ing to the Mo­tion Pic­ture Assn. of Amer­ica.

At the same time, Chi­nese com­pa­nies such as Huayi Bros. are in­creas­ingly in­ter­ested in strength­en­ing ties in Hol­ly­wood as part of Bei­jing’s broader strat­egy to project so-called soft power by pro­mot­ing Chi­nese films and cul­ture around the world.

Last year a Shang­hai in­vest­ment com­pany, Fo­sun In­ter­na­tional, made a deal to in­vest in Stu­dio 8, a film com­pany started by for­mer Warner Bros. Pic­tures Group Pres­i­dent Jeff Robi­nov. In 2012, China’s Dalian Wanda Group Co. bought the U.S. theater chain AMC in a deal val­ued at $2.6 bil­lion.

Although fi­nan­cial terms of the deal an­nounced Wed­nes­day were not dis­closed, the new ar­range­ment will en­able STX to spend about $1 bil­lion ev­ery year on pro­duc­ing, mar­ket­ing and dis­tribut­ing its films through 2017, the com­pa­nies said.

Huayi Bros. will share in the global rev­enue of the films and will be granted a first-look dis­tri­bu­tion deal in China on most STX En­ter­tain­ment films.

Huayi’s in­vest­ment will en­able STX to sub­stan­tially in­crease its out­put, which was pre­vi­ously limited to eight to 10 films a year, giv­ing it the fi­nanc­ing to pro­duce more low- to mid-bud­get films over­looked by the ma­jor stu­dios.

It also gives the com­pany a foothold in China’s rapidly grow­ing film mar­ket.

Huayi will part­ner on nearly ev­ery STX ti­tle pro­duced by the stu­dio through 2017.

Those in­clude “The Gift,” a psy­cho­log­i­cal thriller due out in July di­rected by Joel Edger­ton and pro­duced by Ja­son Blum that stars Ja­son Bate­man, Re­becca Hall and Edger­ton; the re­cently an­nounced “The Free State of Jones,” a Civil War drama to be re­leased in 2016 di­rected by Gary Ross and star­ring Matthew McConaughey and Gugu Mbatha-Raw; and “The Boy,” a 2016 hor­ror film from direc­tor Wil­liam Brent Bell and star­ring Lau­ren Co­han (“The Walk­ing Dead”).

Although the films will tar­get an in­ter­na­tional au­di­ence, Huayi’s in­volve­ment could make it eas­ier for the films to qual­ify as co-pro­duc­tions, which guar­an­tees pro­duc­ers a larger share of rev­enue than other for­eign films un­der China’s quota sys­tem.

Den­nis Wang, who founded Huayi Bros. with his brother in 1994, said the deal will help the com­pany gain ac­cess to Hol­ly­wood.

“Part­ner­ship with STX is an im­por­tant step as Huayi Bros. im­ple­ments its in­ter­na­tional growth strat­egy and en­ters the U.S. film mar­ket,” Wang said in a state­ment.

China’s big­gest In­ter­net com­pa­nies, Alibaba and Ten­cent, have each re­cently taken 8% in­ter­ests in Huayi Bros., one of the most suc­cess­ful Chi­nese film pro­duc­tion com­pa­nies in re­cent years.

Si­monds launched STX a year ago with TPG Cap­i­tal, a pri­vate in­vest­ment firm, fo­cus­ing on films with low- to mid-level bud­gets of $20 mil­lion to $60 mil­lion.

The com­pany brought on for­mer Uni­ver­sal Pic­tures Chair­man Adam Fo­gel­son to run its movies di­vi­sion in Septem­ber, and hired Oren Aviv, 20th Cen­tury Fox’s for­mer chief mar­ket­ing of­fi­cer, that same month.

Si­monds said the idea of part­ner­ing with Huayi Bros. was first sug­gested six months ago by his long­time as­so­ciate Don­ald Tang, a for­mer Bear Sterns ex­ec­u­tive who helped to ne­go­ti­ate the deal.

Tang said Huayi will of­fer key ad­van­tages to a new stu­dio like STX.

“Their reach is vast in China,” Tang said. “Their con­nec­tiv­ity in­side China is far bet­ter than the Amer­i­can stu­dios.”

Chi­naFo­toPress via Getty Images

HUAYI BROS. ME­DIA founders James Wang, left, and Den­nis Wang, along with direc­tor Feng Xiao­gang, at­tend the film pro­duc­tion com­pany’s 20th an­niver­sary cer­e­mony in China’s Hainan prov­ince in June 2014.

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