China Tiptoes into Hollywood

Entrance to Grand Ocean Cinema at Harbour City
Image via Wikipedia

In the Hutong
Windows open
1454 hrs.

It was one of those temporal ironies that remind me that the Almighty (or Chance, for you secular humanists out there) has a sense of humor. Not long after I wrote a post warning Hollywood to use care in its dealings with China, Legendary Pictures announced that it had accepted a strategic investment for 3.3% of the company from a subsidiary of Orange Sky Golden Harvest Entertainment.

What makes the deal even more fun here in the Hutong is that my brother-in-law is on the executive team at Legendary. But let’s set that aside for a moment.

Nikki Finke over at Deadline.com does a writeup of the details, so I won’t dive too deeply into the nuts and bolts, nor will I wax poetic about Legendary’s successes. It is worth noting, however, that Legendary’s fare has a Chinese audience: their most recent hit, Inception, recently took in over RMB200 million at the Chinese box office.

Relationships aside, I expect the deal will avoid the tripwires I outlined, for several reasons.

  1. Legendary is a production company rather than one of the big studios. Washington is unlikely to raise an eyebrow.
  2. While the amounts involved were not disclosed, logic and experience suggest that we are not talking billions of dollars in paid-in capital. This is a “toe in the water” for all involved, an opportunity to get to know your partners while the stakes are low.
  3. The investment is for a very small stake – this is more about strategic opportunity than control over content.

In fact, I expect this deal to be widely imitated: production houses that are not already looking for Chinese partners will start hunting, and Chinese film entities will now follow their cultural instinct to Keep Up with the Zhous by looking for similar tie-ups.

Therein lies the caveat: it is in the predictable imitative that reason lies for concern. If further deals match the modesty of the Legendary OSGH tie-up, and the partners remain as overtly commercial as Golden Harvest, the China-Hollywood link will build without outside interference.

But if the pace of deals grows too quickly in frequency and/or size, it will elicit a response that will serve neither the industry nor the companies well. In any case, firms on both sides of any deal need to be transparent about the rights and powers granted to each partner in the tie-ups. More important than confidentiality in these cases is the comfort of the governments and movie-going publics in the U.S. and China with the closer relationship between the two industries.