NYT: Dalian Wanda of China Offers a Carrot to Hollywood

  October 17, 2016   News Stories

News story originally published at NYTimes.com

By Brooks Barnes

Wang Jianlin, chairman of the Dalian Wanda Group, the Chinese conglomerate that is emerging—controversially—as a superpower in the entertainment business, sat in an opulent armchair at the Peninsula Hotel here on Sunday and discussed his business ventures with a casual efficiency.

His response to criticism from a member of Congress that Wanda, after a spectacular $8 billion shopping spree in Hollywood, is a propaganda threat and should be subject to more Justice Department scrutiny? It is “not like we are invading,” Mr. Wang said, contending that Wanda’s goal involves “helping” American film companies “to get more market share in the emerging movies market that is China.” (And, of course, making money for Wanda along the way.)

Mr. Wang, visiting California to unveil sizable financial incentives aimed at wooing American productions to Wanda’s new $5 billion studio complex in China, went on to call himself an “angel” investor. He noted that Wanda had purchased struggling companies like AMC Theaters and Legendary Entertainment—“the best companies would not sell to us”—and strengthened them. AMC’s stock price, for instance, has risen 64 percent since Wanda bought it for $2.6 billion in 2012.

But what about concerns that Wanda is moving aggressively in Hollywood as part of a move by the Communist Party to control the portrayal of China on screen? Mr. Wang, who noted that Wanda was focused on entertainment “profit” 14 times during a 40-minute interview, said storytelling decisions by American studios in relation to China, with or without Wanda ownership, were about maximizing returns at the fast-growing Chinese box office.

“More Chinese elements mean more Chinese profits,” he said.

Mr. Wang arrived by private jet over the weekend to wrap up Wanda’s latest acquisition—the company is buying Dick Clark Productions for about $1 billion—and dangle an enormous carrot in front of Warner Bros., 20th Century Fox, Paramount, Universal and Walt Disney. Wanda and the Qingdao municipal government have established a major incentive program to lure movie and TV production to the 408-acre Qingdao Movie Metropolis.

Billed as an effort to “bridge the entertainment capitals of the world,” the program will provide a 40 percent rebate on certain production spending in Qingdao, which is about 450 miles north of Shanghai and is the site of Wanda Studios, still under construction. Scheduled to fully open in 2018, Wanda Studios will feature 30 advanced soundstages, including the world’s largest at over 107,000 square feet; an underwater stage; and a 221-acre back lot.

The rebate on each film or television production will be limited to $18 million. The total amount available to disperse will be $150 million annually. There will be three classifications of rebate productions, according to Wanda, and only one of those would require Chinese cultural elements, Chinese actors and Chinese investors—films classified by the Chinese government as co-productions that are not subject to import limits. (Only 34 non-Chinese films are allowed to play in the country annually and those must suit Chinese censors.)

Applications will be evaluated by a 10-person committee of government officials and Wanda executives, a Wanda spokeswoman said.

The incentives plan was to be announced on Monday by Mr. Wang; Eric Garcetti, the mayor of Los Angeles; Cheryl Boone Isaacs, the president of the Academy of Motion Picture Arts and Sciences; and Jack Gao, the head of Wanda’s Cultural Industry Group. A private dinner for 100 studio executives and agency chiefs was planned, with performances from acrobats, magicians and a Chinese pop star.

Mr. Wang, a spry former military officer who is said to be China’s richest man, said he hoped that an additional $3 billion in Qingdao amenities—“international hospitals, international schools, yacht clubs, hotels, shopping”—would make American stars and marquee directors more willing to spend months at a time working there. “Like going on a vacation” is how he described it.

He added that the incentives were not just about busying Wanda Studios and increasing the supply of movies to Wanda’s theaters, both in China, where it controls 3,056 screens, and elsewhere.

“Am I a fool? Of course not,” he said, with a laugh, before alluding to Wanda’s vast real estate division. “Because I attract so many people, that place will become very popular and famous. And the value of the land there will increase. And I can sell more houses.”

If successful, the rebates could shift the global movie incentives game, in which Hollywood has moved production to locales like Canada, Romania and New Zealand. Legendary Entertainment has plans to film at least two movies under the program, including a sequel to “Pacific Rim.”

In an interview, Mary Parent, Legendary’s production chief, dismissed concerns that Wanda was seeking to push a pro-Chinese agenda. “There has been zero interference with storytelling,” she said. Ms. Parent, an Oscar-nominated producer highly regarded in Hollywood, added that Wanda had made it possible for Legendary to increase its output.

“Unlike most Hollywood companies, we’re not operating in a resource-constrained environment, which creates tremendous opportunity,” she said.

Still, Mr. Wang’s trip probably won’t do much to ease concerns by some lawmakers, editorial writers and lobbyists about the ambition of Wanda, which has financial ties to relatives of senior Chinese Communist leaders. In an Oct. 6 letter to the Justice Department, Representative John Culberson, Republican of Texas, called for heightened oversight of Chinese moves in Hollywood. Mr. Culberson cited “serious concerns” about how Chinese media acquisitions “may be used for propaganda purposes.”

Mr. Wang said that Wanda intended to control 20 percent of the world’s movie theater seats by 2020. It currently has about 13 percent, including those run in Europe by the Odeon and UCI Cinemas Group, which Wanda bought for $650 million.

By 2020, Wanda aims to have annual revenue of $100 billion and net profits of $10 billion. With its real estate growth slowing, Wanda is also moving into sports. It recently paid $1.2 billion for Infront Sports and Media, a sports marketing company, and tourist destinations, including a $3.5 billion entertainment, shopping and hotel complex outside Paris.

“Cash flow for real estate in China is not stable in the long term,” he said. Wanda remains interested in buying more Hollywood companies as it seeks growth, including a major studio, he added. “If it is a very good company,” he said, there will be “no ceiling” for the price offered.

As Wanda pushes deeper into filmed entertainment, the company plans to build a $1.2 billion headquarters in Beverly Hills “to aid in China’s entry into Hollywood’s film industry and generally promote Chinese culture abroad,” Wanda said in a news release.

But it is clear that Mr. Wang, who spoke to The New York Times with the assistance of an interpreter, has gotten the message that a bit less bombast might help smooth Wanda’s forward march.

Take his approach to Disney. In the spring, as Disney was opening its first theme park resort on the Chinese mainland, the $5.5 billion Shanghai Disneyland, Mr. Wang went on the attack. “The frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed,” Mr. Wang said on state television in May. At the time, Disney called his remarks “patently absurd.”

On Sunday, however, Mr. Wang struck a friendly tone. “We respect Disney,” he said. “Competition is unavoidable,” he added, noting that Wanda has five theme-park-style properties open in China and seven more under construction. “But I respect Disney very much.”

Mr. Wang said he had personally visited every Disney resort in the world, with the exception of the Shanghai outpost.

In person, Mr. Wang came across as a disciplined executive—he arrived at exactly 8:59 a.m. for a 9 a.m. appointment and stayed exactly one hour—who cared only about making money and not tinkering with scripts. He said that he had not seen any video from “The Great Wall,” a coming $150 million Legendary Entertainment film starring Matt Damon.

He “is not quite into the technical details like that, because the entire movie sector in Wanda accounts for only one-eighth or one-tenth of the revenue,” he said. Wanda’s culture division, which includes the theme parks, domestic movie theaters and sports holdings, made a profit of 43.9 million Chinese renminbi, or $6.5 million, in the first half of 2015, against assets of about $11 billion, according to a Wanda stock prospectus.

The more hands-off that Mr. Wang can appear, of course, the better Wanda will fare among those calling for heightened scrutiny of its entertainment dealings. But all that matters to Hollywood is Wanda’s money. The mainstream movie industry, after all, has been only too happy to self-censor its scripts in an effort to appease Chinese regulators and win clearance into a fast-growing market.

By that measure, Qingdao applications should already be rolling in.

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