Chinese investments in Hollywood films seemed like a gold rush for a few years. Co-productions like The Great Wall and Transformers: Age of Extinction, Chinese financing companies and releasing Hollywood movies like Warcraft and The Mummy in China have improved box office returns. Yet the end of the Chinese funding rush worried some that the bubble had burst. Beijing regulators restricted entertainment investments, killing billion-dollar deals between HuaHua and Paramount, and Wanda and Dick Clark Productions.
As Huayi Brothers Entertainment CEO James Wang told the Hollywood Reporter in December, China has more to contribute to the film industry than money and an exhibition market. “Those left in the market will be people who want to cooperate on producing good films rather than money speculators,” Wang said in the THR article.
DreamAlliance sees the long-term opportunities for this changing climate of Hollywood’s relationship with China. The company behind dreameGGs Funding Club, which has financed independent movies including the film festival hit Sollers Point and the upcoming I Hate kids, DreamAlliance raised a $50 million fund for 3D productions. In addition to the fund, DreamAlliance partnered with Legend 3D and Dragon Dream to create the joint venture Legend China.
Legend China will provide 3D conversion services and 3D production facilities that can be used by Chinese or Hollywood movie studios. They just announced a 60,000 square foot facility in Luoyang City that can employ 600 artists. This will keep studios coming back to China for years. They expect to open in the Spring.
3D is one area in which China and Hollywood can develop a strategic and sustainable relationship. According to Forbes, 98% of Chinese movie screens are 3D, and China keeps building more 3D screens at a rate of 17%. Investing in 3D services and technology, and in slate deals with the studios, gives Legend China a stake in the industry across the board. Every studio has 3D movies in the pipeline, both English-language and Chinese language studios.
Given DreamAlliance’s expertise in making deals between Chinese and Hollywood companies, they have the skills to make sure these deals close over the fund’s next five years.
“The biggest challenge is not the language barrier, but the different code of conduct,” said DreamAlliance executive Lorelei Tong. “It’s a fundamental cultural barrier that we have to constantly deal with, communicate efficiently and find common ground. There are also different legal systems in the two countries which need attention.”
The deal took six months to close, with dedicated support from the City of Luoyang, and strong partners such as Dragon Dream and the Dadi theater chain. Dragon Dream’s president structured a similar joint venture for animation with Dreamworks. Dadi is committed to contributing to Chinese distribution, including P&A, for the movies in which the fund invests.
The fund will invest in individual films, making up the 3D budget for conversion or stereoscopic production facilities. Chinese companies may be forbidden from buying American studios, but certainly may invest in their own work, improve the industry standard with Hollywood and bring business to the cities of China.
“In selecting films, the fund will consider films scheduled to be presented in 3D, and compare them to blockbusters in similar genres that sold a lot of tickets in 3D,” said Tong. “Also, films likely to be released in China are the goal.” They expect the fund to invest in 10-15 movies depending on their budgets, focusing on two or three films per year. That keeps them busy for the next five years, but this is still only the beginning.
The fund and joint venture in Legend China exemplifies a new partnership model between nations in the industry and is just a first step for DreamAlliance. They are also working on structuring deals for VR, animation, distribution in China, as well as producing and creating new Intellectual Properties between Hollywood and Chinese players.