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Cinema to Drive Culture Expansion

2012-05-30 08:54:18        Global Times

With $2.6b acquisition of AMC, Wanda buys strategies and ideas

It's been almost two weeks since Chinese property conglomerate and Asia's largest film distributor, Dalian Wanda Group, bought US movie theater chain AMC, the world's second largest film distributor at $2.6 billion. But industry insiders are still wondering what impact this deal will make in the Chinese film making and distributing industry.

In addition to the $2.6 billion acquisition price, Wanda will pay $500 million for the operation of AMC and its debt. As the largest M&A deal in China's cultural industry, Wanda hopes to acquire, alongside cinemas, influence as a major cultural player and producer.

According to Wang Jianlin, chairman and president of Wanda, the company will reduce its revenue in the real estate sector to under 50 percent by 2020, making culture and tourism its two main cash cows.

AMC experience 

First built in 1920 in Kansas City, US, AMC boasts a reputation for its high quality service and cinema design.

"AMC has a sound customer management and service system," said Luo Jie, a film critic. AMC is also innovative. Stadium-style seating, complete with love seats and accommodation for the handicapped, was first implemented by the theater chain.

In its 90-year history, AMC went through over four merger and acquisition deals. Wanda, the latest buyer, will benefit from AMC's advanced cinema management experience, said Luo.

Luo shared his experience in watching films at AMC in US, where parking, food options, and adjustable seats are the norm. While these features are still rare in China, with Wanda's acquisition of AMC, it will be only a matter of time before these amenities arrive.

"AMC is experienced at film distribution, and Wanda will benefit from this," said Bi Chenggong, a film critic. Overall the US film market is much more developed, Bi said.

AMC's film industry covers the entire chain industry: film making, distribution, and release. The latter two are easier to learn, as they mostly skill oriented, he said.

Domestic film industry 

Though Wanda is already a player in the film distribution sector, it has ambitions of conquering the entire chain management in the film industry line, according to Qiu Yuan, a film commentator.

A week before Wanda's deal, Murdoch's News Corporation acquired 20 percent stake in the Chinese private company, Bona Film Group.

"In today's market, when the film industry and capital are highly integrated, it's common for film distributors to extend its industry line upward when it can," Qiu said.

Though these two deals have seemingly different goals, both are trying to extend their impact on the film industry as a whole, starting from gaining chain management control.

But while the deal offers an opportunity for Wanda to cover main aspects in the industry line, domestic insiders question the future impact on Chinese film making. Film critic Bi predicts that this acquisition will bring few noticeable benefits to Chinese film making in the short term.

Sony, for example, acquired Columbia Film Company in 1989 but has yet to shoot any Japanese films. Whether its AMC or Columbia, it will be unlikely for buyers to release domestic films on foreign soil, he said.

As to whether this acquisition will bring more Chinese films to AMC, Wang stated to the public that Wanda and AMC never addressed this question in their contract.

Whether Chinese films hit the overseas market is not the sole responsibility of film distributors. The quality of the film is very important, according to Wang, and if domestic producers were capable of making Avatar-like films, these domestic film would have penetrated the international market long before.

While most domestic insiders are hesitant on the deal's impact in film making, it seems it'll more likely be a kind of psychological encouragement for domestic film makers.

A silver lining for domestic film makers, though, is that the deal will facilitate cooperative films between China and foreign countries. Bi said that thanks to the acquisition, Wanda will be more practical and professional while cooperating with US film makers.

"I hope they can establish an effective mechanism for China-US cooperative films in the near future," Bi said.

Film licenses 

In February, the Chinese government loosened policies on overseas films by increasing the annual quota by 14 to 34, for overseas blockbusters. Currently, there are only two State-owned enterprises (SOEs) that are qualified to release overseas films, including Huaxia Film Distribution Co and China Film Group Corporation.

Those two companies have the overseas film permit license issued by the State Administration of Radio, Film and Television. But according to the agreement by China and US set earlier this year, the overseas film permit license should not just be issued to SOEs but also private film companies.

Whether it's Wanda or News Corporation, their merger deals are partly aimed at striving the third overseas film permit license, said Qiu Yuan. Wanda's Wang did not deny their ambitions in this regard.

"I'm a business man, and whatever our company does is out of commercial interests," he said. "Currently the only two overseas film licenses are owned by two SOE. Private film companies should also have one. We have submitted our application, and whether we get the license depends on the government," the president of Wanda said.

One thing is certain, with Wanda going overseas and foreign companies entering domestically, China's movie market will see some changes.

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