Wanda "buys, buys" multiple companies 'top resources to build a financial film company

The acquisition of Hollywood film companies like Legendary Pictures allows Wanda to try the possibility of using capital to open up the industrial chain. "What Wanda may be interested in is the resources that can connect with the six major Hollywood studios through Legendary Pictures as a matchmaking medium."

On January 12, 2016, Wanda Group announced that it would acquire Legendary Pictures of America for no more than US$3.5 billion in cash. This film company, which has produced Hollywood blockbusters such as Batman, Inception, Jurassic World, Superman, and Pacific Rim, has temporarily become the focus of attention of China.

According to foreign media, this is the first time that an American film studio with global influence and large investment capacity has been acquired by a China company. It is also the largest foreign film company acquired by a China company to date.

In troubled Hollywood, what kind of partnership will it be with well-capitalized China buyers and silent medium-sized film companies?

Although "financial film companies"

have produced a series of Hollywood blockbusters that have won high box office in the China market, Legendary Pictures is still unfamiliar to most China people.

Founded in 2004, Legendary Pictures is an independent film production company. Behind it are several investment companies from Wall Street. Its essence is a film investment company mainly focusing on financing and joint investment. Its profit method is to invest in commercial films through cooperation with major Hollywood studios such as Warner Bros. and Universal. Get a share of the benefits.

The "Batman" series is a collaborative project between Legendary Pictures and Warner. But as Chen Shaofeng, deputy dean of the Institute of Cultural Industry at Peking University, told reporters: "Legendary Pictures does not actually own the IP of movies like Batman. These IPs are firmly in the hands of Warner Bros."

Since its cooperation with the six major Hollywood studios remains at the capital level, Legendary Pictures does not have the rights to produce these commercial films. Unlike the "Hollywood Big Six", Legendary Pictures does not have strong and stable capital support. Once there is a problem in the capital chain, it will be difficult to deal with it.

In 2015, Relativistic Media, which is similar to Legendary Pictures, declared bankruptcy. The company was once one of the world's largest mid-sized film companies, but it lacked independence and did not have huge funds to support its film landscape.

One of the main reasons for the collapse of Relativistic Media was the current state of the North American film market.

Su Beiqi, general manager of marketing at Shuoguo Media, has served as a publicity director in film companies that have long had international cooperation such as DMG Entertainment, Kimi Pictures, Kirin Pictures, and New Wilderness Entertainment. He has been responsible for "Cloud Map" and "Iron Man 3". Marketing and promotion of Hollywood movies. Su Beiqi told reporters that the North American box office has become saturated, which is why Hollywood film companies are eager to enter the China market.

"The profit model in North America is different from that in China. Film revenue depends on the industrial chain, not just on the box office." Chen Shaofeng said that therefore, the acquisition of Legendary Pictures, which has only investment experience,"has certain risks. After all, Legendary Pictures can only be regarded as an important medium-sized company, or even a second-rate film company."

What can be compared is still Relativistic Media, which was also established in 2004. Backed by a New York-based hedge fund, it spent about US$1 billion to invest in "Big Six Hollywood" movie projects such as Universal and Sony, such as "Speed and Furious 6" and "Social networks." Among them, what is familiar to China audiences is "The King of Kung Fu" co-starred by Jackie Chan and Jet Li in 2008.

After its establishment, Relativistic Media adopted a strategy of quantitative expansion. However, it relies on external funds, and its cash flow is always very tight. It obtains loans through the project establishment of one film after another to make up for past gaps and debts.

In 2015, Relativistic Media, which tried to use innovative financial models to change and subvert the traditional film industry system, filed for bankruptcy protection. Legal documents show that it may have as many as 5000 creditors.

However, Relativistic Media does not have a high-quality film copyright library. In a series of "big-money" projects, it does not really have its own strong IP. In fact, in 2012, in order to raise funds, it sold its film library to its own investors.

Another comparison is Marvel Pictures. This film company, which started as a comic book company, continues to set new records in film history with a series of high-quality IPs such as Avengers, and has become the most profitable film company in the world within 10 years. However, Legendary Pictures '"Batman" and "Superman" and other IPs are obviously not eye-catching.

Wanda's gameplay and logic

Legendary Pictures has a clear understanding of its shortcomings and has been working hard to transform.

In 2011, Legendary Pictures established Legendary Oriental Pictures in Hong Kong to produce localized Sino-US co-productions using the Hollywood model, also in order to break through China's import quota. In 2014, SoftBank announced that it would invest US$250 million in Legendary Pictures. The two sides will also establish a joint venture to expand the China and Indian markets.

Wanda Cinema is the largest cinema chain in China and has also acquired the second largest cinema in the United States. This acquisition will also help Legendary Pictures achieve greater film revenue. Thomas Tour also admitted,"We will follow the original path, but now we have more solid support."

In any case, Wanda's acquisition has transformed the overseas development of China's film industry. Since 2014, there have been more and more cooperation between China film and television companies and American film companies, such as Huayi Brothers and STX of the United States, Radio and Television Media and Lionsgate Films, but most of them are project cooperation.

In fact, in addition to an increasingly saturated market, Hollywood is going through perhaps the most difficult period in history.

On the one hand, the average cost of films has increased by about 20 times in the past 20 to 30 years, and the way film production and operation has become more and more "pioneer". Large teams have been formed during the planning stage and a large amount of money has been accumulated before filming.

Coupled with inflation factors, Hollywood's annual box office has actually been decreasing in recent years, and the absolute total has often hovered outside the top ten in history.

In 2015, box office revenue of three of the "Big Six Hollywood" fell by more than 10% year-on-year. This "market change" makes it difficult for companies like Legendary Pictures to enter high-quality, high-return projects.

But the acquisition is not the first step in Wanda's efforts to expand its cultural landscape overseas. Wanda, which started out in real estate, began to intervene in the film industry from building cinemas, and gradually entered the upstream production process from the downstream of the film industry. Wanda's internationalization strategy has also followed the same path.

In 2012, Wanda acquired AMC Entertainment, the second largest movie theater chain in the United States, for US$2.6 billion. Today, through its strong capital strength, it has turned AMC into a profit and went public in one fell swoop. In 2014, Wanda acquired Hoyts, Australia's second largest movie theater operator, for US$600 million.

"Buying Hollywood companies at the capital level will not be Wanda's goal. It is like playing a game of chess. This chess piece serves as a link between the past and the future." Su Beiqi believes that the acquisition of AMC has given Wanda a place in public relations in the North American market.

The acquisition of Hollywood film companies like Legendary Pictures allows Wanda to try the possibility of using capital to open up the industrial chain. "What Wanda may be interested in is the resources that can connect with the six major Hollywood studios through Legendary Pictures as a matchmaking medium." Su Beiqi said.

Chen Changye, chief researcher of Huayi Brothers Research Institute, told reporters that when acquiring AMC, Wanda did not replace AMC's management, but only changed operating efficiency through board management. "The biggest problem in overseas mergers and acquisitions is actually the integration of the team and the connection with corporate culture after the merger is completed."

Chen Shaofeng believes: "Wanda needs to grow rapidly, and it takes a long time to transform itself into a company with brands and resources internationally. Mergers and acquisitions are the shortest way."

Relying on Wanda, Legendary Pictures was able to get rid of the dilemma of relativistic media. But Thomas Tour also made it clear that Wanda will not make substantial changes to Legendary Pictures 'business, and Legendary Pictures will continue to produce films targeting the global market.

"I don't think this will make a huge change in the films produced by Legendary Pictures, or adapt or even cater to the tastes of the China market. We make the movies we want to make, and fortunately, these movies are popular in China." he said.

At the press conference, Wang Jianlin also said: "Maybe in the near future, a bigger ceremony will be held. We may merge a so-called large entertainment company or even an entertainment group. This thing is entirely possible."

What Capital Can Do

In recent years, in order to "please" the China market, some Hollywood films have indeed made changes. For example, in the movie "2012", China was entrusted with important tasks to quickly build an ark; in "Rescue to Mars", rescuing trapped astronauts requires thrusters manufactured by China's aerospace department. "Iron Man 3","Transformers 4" and "Ring Messenger" also attracted China actors to participate.

For example, several highlights of the science fiction film "The Ring Messenger" were filmed in Shanghai, and China actor Xu Qing starred as the wife of the first male lead.

"Why did the male protagonist of" Ring Messenger "come to Shanghai? Because China capital has intervened in the production process, there are China advertisements implanted in the filming in China." Su Beiqi said that "The Ring Messenger", like many similar co-productions, has been made in an overseas version and a "customized version for China," and in the overseas version, the lines of China actors will be deleted.

This proves that the China elements in many Sino-foreign cooperative films are actually blunt or unnecessary at the story level. The reason is that China only participated in the capital cooperation of the film, but was unable to enter the creative link.

In Su Beiqi's view, there are actually three stages in Sino-foreign film cooperation.

The first step is the single-piece cooperation that started around 2011. China has invested in films such as "Cloud Map","Ring Messenger","Iron Man 3", etc. The second step is the strategic cooperation behavior between companies since 2013. For example, when Wanda acquired Legendary Pictures, when Hollywood faced the problem of "lack of money", it would be attracted to China companies.

The third step should be to create a "smarter" new way of playing, that is, to match top resources with multiple companies and cooperate with valuable IP.

The prerequisite for this step is that Chinese companies have the ability to communicate with Hollywood and have talents who can break into the Hollywood circle.

"Hollywood is very creative in doing things, but it is very conservative when dealing with people. Nowadays, most of the people who represent China and Hollywood are foreigners." In Su Beiqi's past experience in cooperating with overseas projects, she concluded that Hollywood affairs are "watching others serve the dishes", which makes China have to hire people with foreign background to communicate with them."The original team of the acquisition company is also because Hollywood recognizes the original people, and if you want to make good use of the original resources, you must retain the team."

Chen Shaofeng said that internationalization is an important direction for the development of China's films, and mergers and acquisitions are an important way of internationalization, which represents one of the directions for the future development of China's films. "It also brings a signal to the international film industry that China is constantly going global, especially private enterprises, to seek influence. It can even be said that China has replaced Japan and emerged as a new generation of Hollywood investors. Therefore, this acquisition has a strong symbolic significance."

In short, Su Beiqi believes that talents with savvy vision and strong communication skills are needed in China's film industry to intervene in upstream production in the film industry: "Hollywood companies have good and bad film projects, and they have Du Shiniang's treasure chest. Why should they give you the best? You have to let the other party see your ability to choose IP, so that you can get rid of the impression that we have always been stupid and rich."

Wen| Liu Jiaxuan, Liu Yuanhang, Mei Yu, Qin Liudi

Editor: vian