Hunan-Lionsgate deal could be just the beginning

The recent investment by China's second-largest broadcaster Hunan TV in US film studio Lionsgate is likely to be followed by other similar investments from Chinese companies seeking to expand their presence in the US, said the lawyer behind the deal.

China's Hunan TV & Broadcast Intermediary Co Ltd formally announced the pact with Lionsgate Entertainment Corp last month, under which Hunan will put up 25 percent of the combined $1.5 billion budget for co-productions and distribution over the next three years, marking it the largest Chinese investment in Hollywood to date.

Lionsgate, maker of the popular Hunger Games film series, will distribute Chinese films produced by Hunan in overseas markets, and Hunan will have exclusive rights to four Lionsgate movies a year in China, according to the agreement, which was reached after 11 months of talks.

"I think the partnership between Hunan TV and Lionsgate is exciting. It's going to lead to more co-productions in China and distribution by Lionsgate of films created by Hunan TV," said Schuyler Moore, the Los Angeles-based lawyer who handled the deal.

"China is trying to expand its film industry dramatically, and therefore they want to get talent from the US and knowledge from the US. They want to be able to have US companies distribute Chinese films and produce films in China," he explained. "So it's a natural fit for them to come to Hollywood to tap the knowledge, the creativity and the distribution capability."

Established in 1998, Hunan TV & Broadcast Intermediary Co Ltd, with total assets of $2.7 billion as of the end of 2013, has long been targeting the overseas market. In 2000 the company sent a research team to Hollywood and two years later set up Magicplay Entertainment Corporation in the US, through which such Chinese films as Raise the Red Lantern and Postmen in the Mountains were screened in the US.

In 2013, Hunan TV distributed Lionsgate's Now You See Me and raked in about $24 million in the Chinese market.

"China has a thriving and growing film industry, and Chinese companies usually have that in mind in making any US investment," said Moore, who is a partner in the corporate entertainment department of Stroock & Stroock & Lavan, LLP.

"They want to distribute Hollywood films in China, they want to learn and adopt Hollywood techniques for Chinese productions, and they want to spread Chinese culture by arranging for worldwide distribution of their Chinese films. This is a very different focus than for other foreign investors, who are usually content to just make their bets on Hollywood films," he said.

A number of Chinese companies have been investing in Hollywood and cinemas. Last year, AlibabaGroup andLionsgatelaunched a subscription video streaming service for the Chinese mainland called Lionsgate Entertainment World.

Last June, Shanghai investment company Fosun International made a deal to invest in Studio 8 in the US and in 2012, China's Dalian Wanda Group bought the US theater chain AMCand also showed interest in acquiring stakes in Lionsgate and Metro-Goldwyn-Mayer Inc.

"Very little has happened up till now, but I do think this will open the floodgates and there will be more investment coming," Moore said.

China's theatrical film market is the second-largest in the world next to the US. Total ticket sales surged 36 percent to $4.8 billion last year. Its rapidly growing movie industry is expected to pass the US' as the world's largest in coming years.

liazhu@chinadailyusa.com