LOS ANGELES — One of Hollywood’s top film financiers and producers is making a major expansion into China.
Legendary Entertainment, which is affiliated with Warner Brothers and has backed such mega-hits as “The Dark Knight” and “The Hangover,” on Thursday finalized a deal with Beijing-based Huayi Brothers Media Corporation to form a new movie and television company. Their ambitious goal is to make English-language films and TV shows inside China that can be exported to the rest of the world.
The venture, Legendary East, will be based in Hong Kong, according to the partners. Publicly traded Huayi, one of China’s largest entertainment conglomerates, will co-produce the films – starting with one or two per year in 2013 – and distribute them in China. Warner is expected to distribute them in the rest of the world, including North America, the No. 1 film market.
Legendary did not disclose financial details, including anticipated budgets for the films and TV shows it expects to make. Similarly, it is unclear what kinds of stories Legendary East will seek to tell on screen; Chinese censors maintain a tight hold on entertainment involving sex and violence, which are attributes considered essential to sparking audience interest in the West.
Legendary has been working to deepen its Chinese ties for some time. In September, Thomas Tull, chief executive of Legendary Entertainment, sold about 3 percent of his company to Orange Sky Golden Harvest Entertainment, a Hong Kong movie firm run by Kelvin Wu. Mr. Wu has since left Orange Sky and will become chief executive of Legendary East.
Hollywood fervently wants to expand in China but faces a quota: only 20 non-Chinese films are allowed to be shown in local theaters each year. Legendary East’s output would presumably not be subject to those restrictions, although the company does plan to employ Hollywood actors and writers to a degree.
At a time when America’s film business is troubled — box office revenue is down and DVD sales have fallen off a cliff – China offers enormous opportunity. The Chinese government has identified film as a growth priority, and there is a race by exhibitors, Huayi among them, to build more theaters.
China currently has about 6,000 movie screens, up from about 1,500 three years ago, according to studio distribution executives. Chinese officials have said they expect 20,000 screens to be operating by 2015 and 40,000 by 2040, which would put it on par with exhibition in North America.
Mr. Tull has broad media ambitions. Variety, the entertainment trade newspaper, recently reported that Mr. Tull has been trying to raise between $600 million and $900 million through a consortium of banks to fund films, TV shows, Web series, games and comic books.
Legendary raised $1 billion in 2007 to co-finance and produce movies with Warner. The two companies have suffered some high-profile flops — “Jonah Hex” and “Sucker Punch” are two — but have also landed an envious string of hits, including “300,” “Inception,” “Clash of the Titans,” “The Hangover” and “The Dark Knight.”
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