Is China going to Hollywood?

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(China Daily/Agencies)
Updated: 2009-09-14 07:38

Is China going to Hollywood?

Chinese and Indian companies might be next to invest in Hollywood movie studios. Hollywood has a long history of attracting overseas investments, especially during tough economic times in the United States. [Agencies]

Disney's $4 billion purchase of "Iron Man" moviemaker Marvel Entertainment signals a possible wave of media industry consolidation, but the cash to do deals may come from India or China, not Hollywood or Wall Street.

Even before Walt Disney Co and Marvel Entertainment Inc recently made their announcement, Hollywood watchers said Indian firm Reliance ADA Group's recent $325 million investment in Steven Spielberg's DreamWorks movie studio was a sign that opportunities exists for similar deals.

As the recession took hold in late 2007, Hollywood saw financing from US hedge funds and banks dry up, and experts say Indian and Chinese firms are now in a better position to invest.

For its part, Hollywood needs overseas cash to continue expanding globally where growth opportunities are strongest.

"If you have capital to invest, you can probably cut a better deal now than any time in the last ten years," said Larry Gerbrandt, principal at consulting firm Media Valuation Partners.

"A lot of Indian and Chinese companies have excess capital these days and Hollywood, aside from the fact there's a certain glamor factor, those (Indian and Chinese) markets also need content, so there's interesting deals to be made," Gerbrandt said.

Sky Moore, an attorney who worked with Reliance as it put together the DreamWorks financing package, said a bigger deal could be in the offing within two years.

"I think the bigger move is buying a studio, and I don't know if it will be (a company from) India or China, but I think somebody is going to buy a studio," Moore said.

Studio targets

The Disney/Marvel deal fueled speculation that DreamWorks Animation SKG Inc, maker of the Shrek movies and a separate company from DreamWorks Studios, could be next on the acquisition target list because of its solid position in the marketplace and focus on the lucrative family market.

Moore and Gerbrandt also named Metro-Goldwyn-Mayer Inc as a potential acquisition target, although they said they had no specific information of any deal in the works.

Rumors of MGM's potential sale have existed for years. The storied Hollywood studio faces looming payments on $3.7 billion of debt from a 2005 buyout of the firm, and earlier this month it replaced its CEO and hired a turnaround expert.

China's ties

Chinese film studios are strengthening ties with their peers across the Pacific.

The Huayi group, which Morgan Stanley called "China's Warner Bros for tomorrow", has said it is seeking capital to expand and has developed movies with Hollywood majors such as Sony Pictures.

Its larger rival, The China Film Group, is reportedly eager to develop projects in the United States, as well.

India's expanding reach into Hollywood has included Reliance's purchase of about 50 US theaters.

"It's not about bringing Bollywood to Hollywood; it's about mainstream worldwide English-language entertainment," he said.

Hollywood studios have also made big investments in India. Warner Bros, a division of Time Warner Inc, has signed multi-picture deals with Indian companies People Tree Films and Ocher Studios.

Hollywood abroad

Foreign investment in Hollywood is nothing new, of course. In the 1990s, German tax credits spurred production of US movies, and before that Japan's Sony Co in 1989 bought Columbia Pictures. Sony also has a stake in MGM.

David Molner, managing director of Screen Capital International, a media and entertainment financing firm, said that absent foreign investment, Hollywood could simply have to endure a slowdown due to lack of capital.

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