Amblin could help Alibaba expand its movie production and distribution business worldwide
Chinese e-commerce giant Alibaba Group Holding Limited’s (NYSE: BABA) Alibaba Pictures Group Ltd. is buying a stake in Amblin Partners LLC, an American content-creation company co-founded by Steven Spielberg, to work together on production, marketing and distribution of Hollywood movies both globally and in China, as reported by Bloomberg on October 9th, 2016.
Amblin is a consortium of media giants that includes DreamWorks Studios, Participant Media, Reliance Group, and Entertainment One that produces and develops films and television programming. In December 2015, Amblin raised $800 million in debt and equity from banks and partners; as part of this deal, Amblin’s films will henceforth be distributed by Comcast Corp.’s (NASDAQ: CMCSA) Universal Pictures Ltd rather than The Walt Disney Co. (NYSE: DIS). Universal Pictures recently released the first movie from its pact with Amblin, “The Girl on the Train,” based on the best-selling mystery novel.
Alibaba Pictures is a Hong Kong-based investment holding company that focuses on presenting media-related goods and services, with the Alibaba Group being its largest shareholder. As part of the deal, Amblin could help Alibaba expand its movie production and distribution business worldwide. Alibaba will also name a representative to the board of Amblin Partners, whose Chairman is Spielberg. The latest deal is not Alibaba’s first tryst with Hollywood; in 2015, the company has invested in Paramount’s “Mission Impossible – Rogue Nation”, in return for equity stake and the right to stream it across Alibaba’s various online services. The latest Alibaba-Amblin tie-up would aim to make six to nine movies a year and the films would be distributed by a network that included Universal Pictures.
The deal comes at a time when Hollywood has met with resistance to make inroads into China’s film industry because of limited control over the dissemination of their movies in the country owing to government quotas on foreign films. Furthermore, movies that had low returns in the U.S. might actually perform better in China. Simultaneously, China is trying to expand its reach globally and is predicted to become the biggest box-office in the world soon.
Stronger U.S.-China ties
The Alibaba-Amblin agreement is a latest example of a growing trend in which American film companies are seeking bigger audiences in China, while Chinese firms are trying to expand their reach globally. Another Chinese billionaire, Wang Jianlin, recently made headlines when his company, Dalian Wanda Group Company, bought Legendary Entertainment, the film company behind the hit Jurassic World. The company also owns AMC Entertainment Holdings Inc., which operates the world’s largest chain of movie theaters. Jialin is also in the process of buying Dick Clark Productions, the Hollywood production company behind the Golden Globes. Other Chinese players investing in studios include Fosun Group and Huayi Brothers.
However, the rapid pace of Chinese acquisitions has raised eyebrows of U.S. lawmakers, who have called for an overhaul of regulations to give the U.S. greater ability to scrutinize and block Chinese investment in U.S. media, as well as force lobbyists acting for the Chinese to register their interests.
U.S. market for films reaching saturation
China has been a focus for Hollywood studios in recent years as the U.S. film market has reached a level of saturation. In 2015, China’s box office totaled $6.8 billion, up 49% from the previous year, according to consulting firm Artisan Gateway, and as reported by Bloomberg on October 9th, 2016. The North American box office had its biggest year in 2015 at $11.1 billion, according to the Motion Picture Association of America.
American studios have been looking to Chinese partners for funding and ways to maximize their revenue from a country that limits the number of foreign films exhibited annually to 34. Hence, Chinese media firms have been eyeing potential tie-ups that could enable them to reach worldwide audiences at a time when internet streaming of movies has reached a crescendo globally.
Industry watchers have also predicted that China is going to replace Hollywood as the hub of global filmmaking talent. Hollywood producers are heading to China for both economic and artistic reasons. Anthem Pictures, a startup studio funded by Chinese private-equity fund HDQH, will produce Chinese-language films targeting local audiences. Also, an increasing number of modest-budget Chinese-language films released in recent years have raked in more money than Hollywood blockbusters, setting in motion a reversal of trend in which Bollywood movies ran full houses some years ago.
Alibaba’s stock ended the day at $103.62, falling 1.53%, at the close on Wednesday, October 12th, 2016, having vacillated between an intraday high of $105.11 and a low of $101.82 during the session. The stock’s trading volume was at 17,734,147 for the day. The Company’s market cap was at $258.96 billion as of Wednesday’s close.