CaSe
eXaMpLe
China goes to hollywood – Wanda’s move into the
US movie industry
Patrick Regnér
Introduction
Chinese foreign direct investments in the USA have
reached record levels and exceeded $10bn (£6bn,
€7.5bn) in 2014. Despite this, Wanda’s $2.6bn acquisition of US second-largest cinema chain AMC in 2012
and the later $3.5bn acquisition of one of the world’s biggest movie producers, Legendary Entertainment in 2016,
sent shock waves through the US entertainment industry.
The AMC acquisition created the world’s largest cinema
company by revenues and the Legendary Entertainment
acquisition was the biggest China–Hollywood deal ever.
Wanda Cinema Line Corp. is China’s largest operator
by cinema screens with close to 300 cinemas and 2,550
screens. Through the AMC acquisition, Wanda now controls more than ten per cent of the global cinema market. AMC is the second-biggest cinema chain operator in
North America, which is the world’s biggest film market
with ticket sales of over $10bn. The company has more
than 5250 screens and 375 theatres in this market and
is the world’s largest operator of IMAX and 3D screens
including 120 and 2170 screens, respectively.
The AMC and Legendary investments marked a new
era as Chinese investment reached into the heart of US
entertainment and culture. Although Chinese acquisitions in the USA have proven to be controversial before,
they may prove to be even more challenging, and it was
speculated that a Hollywood ending was far from certain.
According to Chen Zheng, manager of Saga Cinema in
Beijing, the AMC deal strengthens Wanda’s global status
as movie theatre owner:
‘Wanda has been the largest theatre owner in the second largest film market in the world. Now the deal makes
it also the owner of the second largest theatre chain in
the largest film market.’1
Another analyst commented on the Legendary deal:
‘Buying Legendary entertainment puts Wanda on the
road to becoming a global media company and one of
the world’s biggest players in movie production.’2
Legendary Entertainment is a leading film production
company that owns film, television, digital and comics
divisions. Its big-budget, action and special-effects global
blockbuster type of movie productions has performed
very well in China. These include films such as The Dark
304
Gerry Lopez, CEO of AMC Entertainment Holdings, left,
shakes hands with Zhang Lin, Vice President of Wanda
during a signing ceremony in Beijing, China, Monday, 21
May 2012.
Source: Ng Han Guan/Press Association Images.
Knight batman trilogy, Jurassic World, Inception, Pacific
Rim and Godzilla – the last two particularly successful in
China. The Hollywood studio adds experience and expertise to Wanda’s movie production business. Wanda group
is constructing a $8.2bn studio in eastern China which is
claimed to be the biggest studio complex globally, competing with and even exceeding Hollywood’s best studios,
but with Chinese costs.
Although the acquisitions are huge, they are relatively small compared with the rest of the Dalian Wanda
real-estate conglomerate. Dalian Wanda Group Corp.
Ltd includes assets of over $86bn and annual income
of about $39bn (2014). Wanda, which means ‘a thousand roads lead here’, consists of five-star hotels, tourist
resorts, theme parks and shopping malls. The ‘Wanda
Plaza’ complexes that combine malls with housing and
hotels have been a huge success in China and can be
found in more than 60 Chinese cities.
Mr Wang Jianlin, the Founder, Chairman and President of Dalian Wanda, is the richest man in China. He
joined the army as a teenager and stayed in the military
for 17 years. In 1988, he founded Dalian Wanda and
rode the wave of China’s phenomenal growth by investing in property. His military background and ties to local
officials helped him as large commercial land sales are
handled by local governments. As he was willing to take
CHINA GOES TO HOLLYWOOD – WANDA’S MOVE INTO THE US MOVIE INDUSTRY
on whatever property the local government was ready
to give, he became popular with officials. Soon Wanda
was the first property company to work in several cities.
Landmark deals
AMC was considered a ‘trophy’ acquisition in the American entertainment industry and it was described as a
landmark deal by analysts and investors. As announced
by the Chairman and President, Mr Wang:
‘This acquisition will help make Wanda a truly global
cinema owner, with theatres and technology that
enhance the movie-going experience for audiences in
the world’s two largest movie markets.’3
Mr Wang considered the AMC deal to be a springboard
to expand Wanda’s global cinema presence further with
the goal to reach 20 per cent of the world movie theatre
market by 2020.
At the announcement of the deal Gerry Lopez, Chief
Executive Officer and President, explained:
‘as the film and exhibition business continues its global
expansion, the time has never been more opportune to
welcome the enthusiastic support of our new owners.
Wanda and aMC are both dedicated to providing our
customers with a premier entertainment experience and
state-of-the-art amenities and share corporate cultures
focused on strategic growth and innovation. With Wanda
as its partner, aMC will continue to seek out new ways
to expand and invest in the movie-going experience.’3
When expanding on its home market Wanda wants to
benefit from the know-how of AMC, which operates on a
market five times Chinese annual box office sales. AMC
has an established worldwide network of cinema theatres
and this will give Wanda a reputable brand. There is also a
trend for more foreign movies in China and the transaction
Signing of the Wanda Cultural Industry Group and
Legendary Entertainment merger
Source: Imaginechina/REX/Shutterstock.
may allow Wanda to secure more Hollywood movies for
distribution in China.
The Legendary Entertainment acquisition was considered as a next bold step towards Wanda’s goal of becoming a global film and entertainment company. Besides
expertise and intellectual property, it offered potential
synergies between film production and screening both
between and within China and the USA. It would help
the distribution of more films into the tightly controlled
Chinese film market. The quota of 34 foreign films per
year could be bypassed if Legendary could make films
in China. Mr Wang, however, particularly emphasised the
business integration benefits:
‘The acquisition of Legendary will make Wanda Film
holdings Company the highest revenue-generating film
company in the world, increasing Wanda’s presence
in China and the US, the world’s two largest markets.
Wanda’s businesses will encompass the full scope of
film production, exhibition and distribution, enhancing
Wanda’s core competitiveness and amplifying our voice
in the global film market.’4
Thomas Tull, the Chairman and CEO of Legendary added:
‘Together, Wanda and Legendary will create a completely new international entertainment company. There
is an ever growing demand for quality entertainment
content worldwide, particularly in China, and we will
combine our respective strengths to bring an even better entertainment experience to the world’s audiences.’5
Wanda’s Cultural Industry Group in the USa
Wanda’s acquisitions were part of a more general effort to
develop China’s own home-grown culture and entertainment industry. Cinema is an increasingly popular recreational activity in China and the film market is booming with
an amazing increase in box office sales of 50 per cent to
$6.7bn during 2015. The market is expected to overtake
that of the USA as the world’s largest film market by 2017.
Wanda’s investments in culture and entertainment
align well with China’s overall ambition to invest in the
sector. The company described the Legendary Entertainment investment as ‘China’s largest cross-border cultural acquisition to date’ and commented on the AMC
acquisition:
‘The Wanda Group began to massively invest in cultural industries in 2005. It has entered five industries,
including central cultural district, big stage show, film
production and projection, entertainment chain and Chinese calligraphy and painting collection. . . . Wanda has
invested more than $1.6 billion in cultural industries
and become the nation’s largest enterprise investor in
cultural industries.’5
305
ChapTeR 9 INTERNATIONAL STRATEGY
As Wanda’s acquisitions were the largest overseas
cultural investments of a Chinese private enterprise ever,
they raised some concerns in the USA. AMC is a US
household name, ‘once epitomised as the all-American
movie-watching experience’6 and the Legendary investment reached into the heart of Hollywood. This was a significant expansion of Chinese influence in the American
film industry and some were anxious about the effect as
many American movies are censored or even banned in
China. Mr Wang was after all a Communist Party member,
sitting on China’s top advisory council. Wanda’s acquisitions raised concerns that Chinese-style censorship of
politically controversial movies would become commonplace also in the USA. As reported by USA Today: ‘Beijing is investing heavily in projecting its “soft power”, or
cultural influence. . . .’7
Chinese investments in the USA had been of concern
earlier and the US government had rejected investments
in the past in the telecommunications and energy industry due to national security concerns. However, cinema
was unlikely to be considered a strategic industry for
the USA.
Mr Wang insisted that Wanda had ‘no plans to promote
Chinese films in the United States’ and that AMC CEO
Lopez ‘will decide what movies will be shown’ in AMC
theatres.8 It was also made clear that AMC would continue
to be operated from its headquarters in Kansas City. Mr
Wang said Wanda will retain AMC senior management
and would not interfere with everyday operations and programming decisions, which should remain with the US
management and claimed ‘The only thing that changed
is the boss.’9 On the Legendary Entertainment deal Mr
Wang dismissed concerns that it would lead to censorship
or alter movie content claiming he is a businessman that
buys things ‘. . . to make money, so I don’t really think
about government priorities’10 and the main consideration
was instead commercial.
Some claimed, however, that China was already achieving its goal of ‘soft power’ as Legendary’s Chinese arm
(Legendary East) had partnered with state-owned China
Film Group to co-produce The Great Wall, starring Matt
Damon and Willem Dafoe alongside Chinese actors such
as Andy Lau, Jing Tian and Eddie Peng. The big-budget,
Hollywood blockbuster action-fantasy film was the largest
film intended for global distribution ever shot entirely in
China, starring Chinese actors, and incorporating Chinese
myths.
AMC and Legendary Entertainment were not likely to
be Wanda’s last investments into the global entertainment
industry. It acquired Hoyts, Australia’s second-largest
multiplex chain, 2015 and was rumoured to be looking
for a pan-European chain. In the spring of 2016, they
announced the intent to acquire Carmike Cinemas. If
approved this deal would make them the largest cinema
chain in the USA. Wanda also had plans to make the
movie theatre operator Wanda Cinema Line Corp public
in an initial public offering with the aim to raise money for
further worldwide expansion.
Sources: Wanda Group press release, 12 January 2016; The Diplomat, 13
January 2016; Forbes, 12 January 2016; Financial Times, 22–28 May; Los
Angeles Times, 20 May 2012; New York Times, 5 January 2016; New York
Times, 20 May 2012; Reuters, 21 May 2012; The Washington Post, 21 May
2012; Wall Street Journal, 21 May 2012.
Questions
1 Considering Yip’s globalisation framework
(Figure 9.2), what drivers of internationalisation
do you think were most important when Wanda
entered the US market through its AMC and
Legendary acquisitions?
2 What national sources of competitive advantage
might Wanda draw from its Chinese base? What
disadvantages derive from its Chinese base?
3 In the light of the CAGE framework, what
challenges may Wanda meet as it enters the US
market?
References
1. ‘Wanda’s AMC deal a ticket to global rule’, Beijing International.
2. BBC News, 12 January 2016.
3. ‘Wanda Group to acquire AMC Holdings Inc.’, Dalian Wanda press release, 20 May 2012.
4. ‘Wanda acquires Legendary for $3.5b in biggest Chinese overseas deal’, ChinaDaily, 12 January 2016.
5. ‘Wanda attends Shenzhen cultural fair’, Wanda Group press release, 18 May 2012.
6. L. Hook, ‘AMC deal to boost Wanda’s global exposure’, Financial Times, 22 May 2016.
7. C. MacLeod, ‘Chinese firm to buy AMC movie chain’, USA Today, 21 May 2012.
8. J. McDonald, ‘Chinese company to buy US movie theatre chain’, Yahoo News, 21 May 2012.
9. ‘Wanda’s AMC deal a ticket to golden role’, ChinaDaily, 22 May 2012.
10. S. Zhang and M. Miller, ‘Wanda goes to Hollywood: China tycoon’s firm buys film studio Legendary for $3.5 billion’, Reuters, 12 January 2016.
306