One of China's largest cinema chain owners has agreed to sell a
stake to the Warner Bros division of AOL Time Warner, a move
signalling wider opening of the Chinese film market, which has been
sluggish in recent years.
Shanghai Paradise Film Distributing Co, which owns Paradise Cinema,
said last week it would sell a stake of the 1,400-seat cinema to
Warner Bros.
Wu
Hehu, deputy manager of the company, confirmed the report over the
weekend but declined to give further details concerning the
deal.
The deal would expand the tiny foreign presence in China's film
industry, as China has promised in its World Trade Organization
(WTO) commitments, though Warner's stake would be below a 49 per
cent ceiling set by the WTO agreement.
Two foreign companies - Eastman Kodak Co, based in Rochester, New
York, and Golden Harvest Entertainment Cinema Co Ltd of Hong Kong -
already own minority stakes in two other Shanghai-based
cinemas.
In
the largest-ever investment in the industry, Eastman Kodak, jointly
with the Shanghai Film and TV Group Co, invested US$4 million in a
cinema which opened early this year.
Golden Harvest Entertainment Cinema Co in 2000 co-invested with the
Shanghai Friendship South Business Co in another cinema in the
city.
The Warner Bros office in Beijing said all comments regarding the
stake sale would be fielded by its headquarters.
"We are still awaiting governmental approval," Scott Rowe, a
spokesman for Warner Bros' head office, told Business Weekly via
e-mail.
"We began planning this project last year in anticipation of the
dynamic changes that will occur now that China has joined the WTO,"
said Barry Meyer, chairman and chief executive officer of Warner
Bros. "Such projects will fuel the growth of the Chinese film
business and help realize the vast potential of this as yet
untapped market."
Shanghai is a particularly important cinema market in China. While
it only represents about 1 per cent of China's population, it
accounts for 12 per cent of the country's total box office revenue.
Historically, the Shanghainese audience has also always been the
trendsetter in China in the consumption of both domestic and
imported films.
"The deal, which is awaiting government approval, is expected to
benefit our entire film industry," Wu said, adding that Warner
Bros' advanced concepts and experience will help Shanghai Paradise
promote its cinema management and movie marketing.
"Based on our experience in developing the multiplex concept in
other territories around the world, we have found that venues such
as this one provide the spark that triggers growth not only in the
exhibition arena, but also in the entire film industry," said
Millard Ochs, president of Warner Bros' International Theatres.
"As a result of China joining the WTO, industry experts predict a
two-fold increase in the number of films to be imported into China
this year alone, and the response to such recent films as 'Harry
Potter and the Sorcerer's Stone' indicates an upsurge of interest
by Chinese filmgoers for the theatrical experience," said Ellen
Eliasoph, another senior manager of Warner Bros.
The introduction of foreign investment will help activate the
currently sluggish Chinese film market, said an official of the
film distribution and exhibition division of the Film Bureau of the
State Administration of Radio, Film and Television.
A
recent survey shows more than 16 per cent of urban residents did
not make even one trip to the cinema last year, while half of them
made fewer than five visits.
The official predicted the introduction of new business models and
new ideas regarding management of film companies will bring the
industry to a new height.
Wei Jian, vice-general manager of Beijing Xinyinglian Film
Distribution Co, said the introduction of foreign investment in the
domestic cinema sector will be good for both Chinese audiences and
existing Chinese film companies.
Opened in February, Shanghai Paradise is Shanghai's leading film
distributor. Its distribution and exhibition circuit account for
approximately 90 per cent of the total box office sales earned
annually by both foreign and domestic films in Shanghai.
Shanghai Paradise's in-depth knowledge of viewing audiences and
marketing techniques have secured its position as a leading
exhibitor that operates 140 screens, representing 90 per cent of
the total commercial screens in Shanghai.
Shanghai Paradise's relationship with Warner Bros began in 1992
when Shanghai Paradise helped Warner Bros start a dialogue with the
central government regarding the importing and distribution of
foreign films.
Shanghai Paradise also helped bring about an agreement signed
between Warner Bros and the China Film Group in 1994 - the first
film distribution agreement in China to be signed by a major
Hollywood studio.
Prior to 1949, Warner Bros ran its Chinese distribution business
from Shanghai. In 1986, Warner Bros Pictures co-produced Steven
Spielberg's "Empire of the Sun" with the Shanghai Film Studio.Over
the last decade, Warner Bros' various distribution divisions have
maintained strong relationships with Shanghai's film and television
companies and government authorities.
(Business Weekly July 23, 2002)
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