The deal, announced on the eve of Chinese president Xi Jinping’s state visit to the U.S. will see the two companies establish a joint venture company Flagship Entertainment. It will be headquartered in Hong Kong, with offices in Beijing and Los Angeles.
The deal was announced by Li Ruigang, founding chairman of CMC, and Kevin Tsujihara, chairman and CEO, Warner Bros.
Flagship will be owned 51% by CMC—with Hong Kong broadcaster TVB holding 10 percent of the CMC-led consortium—and 49% by Warner Bros.
"Flagship plans to develop, invest in, acquire and produce a wide range of films for distribution throughout China and around the world, utilizing Warner Bros.’ unrivalled global film distribution network. The first titles bearing the new imprint could be released as early as 2016,” the partners said in a statement. “This creative collaboration between U.S. and China filmmaking partners also allows for the exchange of technical expertise and the development of young Chinese talent for years to come, combining Warner Bros.’ technical and creative knowledge base with CMC and TVB’s access to local talent and market expertise.”
The Chinese box office market is booming, with gross box office up by 49% in the first eight months of this year. Local language film-making is pacing the huge scores made by the biggest Hollywood titles and many forecasters have predicted that China’s box office will exceed North America’s within three or four years.
"We look forward to working with CMC in this exciting new venture, as we gain additional insight into the Chinese film industry,” said Tsujihara.
China Media Capital is a pioneering private equity style fund that was started with backing from state companies, and has since attracted international finance from top entertainment and media conglomerates including Warner Bros., WPP and Ratpac Entertainment.
Headed by Li Ruigang, former chairman of the Shanghai Media Group, CMC has in turn invested in a clutch of TV channels bought from News Corp., the Fortune Star film library and Oriental Dreamworks.
Recently, it emerged that Li and CMC were taking a small stake in one of the holding companies that control Television Broadcasts (TVB), Hong Kong’s dominant free to air broadcaster. While some people in Hong Kong have warned against the encroachment of mainland Chinese interests into Hong Kong media, TVB has long been criticised for not doing more to exploit its massive library of Chinese language programming.
Under Li, CMC has also moved into the production of smart TVs. Its sees itself and the companies it has invested in as content suppliers to Internet-connected consumers.
"With the proliferation of platforms available to consumers, premium content is more valuable than ever. This partnership with Hollywood’s most iconic studio will bring Warner Bros.’ deep experience in creative storytelling and unparalleled expertise in producing global titles to China’s film industry,” said Li. “It will also further CMC’s commitment to building a premier platform for making films that resonate with both Chinese and worldwide audiences, helping to enhance the cultural exchange between China and the rest of the world.
CY Leung, the Chief Executive of Hong, who met both management teams earlier this year, was quick to welcome the establishment of Flagship. “I and the current-term government attach great importance to cultural and creative industries in Hong Kong… This collaboration highlighted that the cultural and creative industries in Hong Kong have international flavour. Thanks to a high degree of openness, capability of external co-operation, an edge in language ability and close ties with the outside world on community levels, Hong Kong has an unique advantage in collaboration in international scientific research and art and culture.”