China’s television and film production industry is poised for more consolidation after the industry’s largest-ever deal last month.
So says Zhao Yifang, the general manager of Zhejiang Huace Film & TV, one of China’s biggest production studios. Huace at the end of last month said it would buy an unlisted, smaller studio, Croton Media, for 1.65 billion yuan, or $270 million, in a stock and cash deal that is the industry’s biggest acquisition to date.
“In the next one to two years, there will definitely be a lot of acquisitions,” Zhao said in an interview earlier this month with Forbes and two local media at the company’s headquarters in Hangzhou. Through the process, China will develop its own pool of top talent, she predicted.
Entertainment industry revenue in China is on the rise as 30 years of economic reform and growth boosts disposal income. Spending on filmed entertainment in the country will increase by 15% annually in the next five years, according to a recent report by PwC.
Huace, which whose storylines have Chinese cultural themes, has been one of the biggest winners among TV and film production studios. The company’s domestically traded shares have tripled since the company went public in 2010, fueling the fortune of its main owners. Zhao’s husband Fu Meicheng holds about 58% of Huace, giving him a fortune worth $1.5 billion. Zhao, a former executive in the state broadcasting industry, runs the operations.
Huace sells programs to Chinese TV stations. Its overseas customers include TVB, Hong Kong’s top broadcaster that is partly owned by Taiwan billionaire Cher Wang.
Huayi Brothers, a Chinese TV and film studio backed by Chinese Internet billionaire Jack Ma, last month said it would pay 672 million yuan in cash and stock for a 51% stake in mobile game producer Yinhan.
China, which restricts the distribution of foreign movies, should welcome foreign entertainment companies aiming at the domestic market as part of an era in which Chinese and international cultures are blending, Zhao said, while adding that the “rules of the game” should also be clear. DreamWorks and Disney are among the U.S. business taking aim at Chinese customers.