Yahoo Finance Crouching Tiger, Hidden Dragon: Time Warner’s sneaky China play
Despite growing concern in China over a slowing economy, Hollywood isn't flinching. In fact, one studio is raising the stakes.
Studios have been able to release a select number of bigger films in the Chinese domestic market, but they’ve been limited by quotas imposed by the government. But now, Time Warner’s (TWX) Warner Brothers studio is in talks to produce local language movies in China, through a joint venture with a state-backed firm.
A joint-backed venture would allow Warner Bros. and other studios to release movies in China without the imposition of a quota, and grab more market share in a growing market.
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“It’s a tremendous market in terms of the movie audiences, globally, it is really a bonanza over there because you still have lots of the theatrical moviegoing, it's still a novelty to have big Hollywood films,” Yahoo Finance’s Mike Santoli says in the attached video. “I think for Time Warner if you want to extend beyond just having the U.S.-made blockbusters travel over there as exports - why not make local language films?”
According to the Motion Picture Association of America, the Chinese theatrical market is currently the second biggest in the world, and it's actually up 40% this year and expected to surpass the U.S. market in a few years. This has Hollywood, and their big media corporate parents, especially excited.
This is where the appeal of creating local language films comes in. “There's a sort of regular run of releases that you want to participate in, the smaller movies, that on a week to week basis lots of people in China are going to,” Santoli notes. “China is just a massive market for them because you do have a middle class that's now able and willing to see more movies per year.”
While big studio players like Warner Bros. chief Kevin Tsujihara and NBCUniversal (CMCSA) vice chairman Ron Meyer are wasting no time entering the Chinese domestic market, they’re being cautious to not overexpose themselves. “It’s a $50 million investment [for Time Warner], it's really not that big a number," Santoli says. “It really is almost like planting a flag over there and saying ‘let's try to interlace ourselves with the domestic industry in China, and see if it can bear some fruit.’”
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