Chinese Firms Continue to Penetrate and Influence the U.S. Film Industry

On October 11, the Alibaba Holding Group signed a partnership agreement with Steven Spielberg’s Amblin Entertainment that includes taking a minority stake in the company and a seat on the company’s Executive Board.  Alibaba will reportedly assist in the financing and distribution of films across the globe.  This investment is believed to be an effort to gain experience and connections that Alibaba can use as it looks to increase its presence in the U.S. film industry in the future.  The Chinese film company has already financed a number of U.S. films.

There is growing criticism, however, not only concerning the security and strategic implications of having Chinese companies taking influential – and sometimes controlling – positions in the most significant of American film companies and distribution channels, but also concerning the reality that foreign firms (including those from the U.S.) still face major restrictions when it comes to similarly investing in Chinese film and distribution companies.

In fact, these inequitable restrictions may play a role in the stimulus for U.S. companies to partner with Chinese firms in the first place, providing one of the only means of gaining access to the Chinese market.  China is the second largest box office revenue earner in the world for U.S. films and is on track to become the world’s largest entertainment market by 2020.  A number of movies that were considered “flops” in the U.S. went on to make millions in the Chinese market.


Entertainment Industry Footprint Worldwide

Presently, however, all foreign films must be approved by China’s Censorship Board before their release.  Content prohibited under Chinese law includes, but is not limited to, broad categories such as subject matter that: opposes the fundamental principles within the country’s Constitution; impairs the prestige and interests of the state; incites hatred and discrimination among ethnic groups; harms national “unity”; violates customs and habits; insults or slanders others; or infringes upon the legitimate rights and interests of others.  Tom Hanks’ 2013 film “Captain Philips” reportedly lost almost $10 million in revenue after China’s Censorship Board denied the country domestic attribution, citing the film’s positive depiction of the U.S. military as the reason for its denial.

Over the past year there have been a number of Chinese acquisitions and investments in U.S. film and production companies, including:

  • On September 27, 2016, Dick Clark Productions entered exclusive talks with the Dalian Wanda Group for what could be a $1 billion acquisition of the U.S. company.
  • On September 23, 2016, Dalian Wanda and Sony Pictures formed a partnership to cooperate in film production.  Dalian Wanda is looking to use this opportunity to highlight China within these films and expand their U.S. marketing.
  • In July 2016, Dalian Wanda began talks with Viacom on the purchase of a 49% stake in Paramount Pictures.  If completed, the deal would be worth $8 to $10 million.
  • In April 2016, Alibaba invested in two paramount films, Star Trek  and Ninja Turtles.
  • On January 12, 2016, Dalian Wanda finalized the purchase of a controlling stake in Legendary Pictures for $3.5 billion.
  • On July 15, 2015, Dalian Wanda invested $30 million in the Weinstein produced film SouthPaw.  This was the first such investment in the U.S. film industry by Dalian Wanda, which was the sole financier for production.

Chinese firm Dalian Wanda has also made significant efforts to expand its ownership of U.S. movie theaters:

  • In May 2012, Dalian Wanda acquired AMC Entertainment holdings for 2.6 billion.  With this purchase, the firm took ownership of the largest chain of movie theaters in the world.
  • In March 2016, Dalian Wanda-controlled AMC agreed to purchase Carmike Cinemas for $1.1 billion.  The U.S. firm owns 2,954 screens.  The deal is still pending as a number of Carmike shareholders have opposed the bid.
  • In July 2016, Dalian Wanda announced that it will be increasing its bid in order to further “sweeten” the deal.  If completed, AMC will become the largest U.S. cinema chain.

Other research points to the increasing reliance on the Chinese market to “self censorship” on the part of the film industry in order to increase the chance of distribution within China.  This effect has been noted and detailed by the U.S.-China Economic and Security Review Commission, which is tasked by Congress to monitor trade between the U.S. and China.  Production companies often softened political themes and removed content before presenting films to China’s Censorship Board.  With the lure of untapped millions of ticket sales, the Chinese government has gained effective leverage over its depiction in foreign films.