Warner Bros. and RatPac Entertainment are poised to deepen their investments in China with the launch of a new film fund, which they will use to finance Chinese-language movies and other content for the country's booming theatrical market.
"Ratpac, Warner Bros, [China Media Capital] and Shanghai Media Group will do a local Chinese fund to invest in Chinese movies, television and live entertainment," director turned movie mogul Brett Ratner told The Hollywood Reporter during an interview at the Beijing International Film Festival, where the filmmaker served as jury chair.
"The exciting thing is that China will be the No. 1 movie market in the world soon," he added. "We would like to be a big part of that."
RatPac, a partnership between Ratner and Australian billionaire James Packer, has a standing deal with Warner Bros. to co-finance almost every film in the studio's slate — as well as an existing investment in China.
In 2013, Ratpac and Warners Bros.' parent company, Time Warner, became co-investors in a Chinese media fund set up by China Media Capital (CMC), the state-backed investment group headed by Li Ruigang, the influential former head of Shanghai Media Group. Occasionally likened to "China's Rupert Murdoch," Li has secured CMC's majority stake in Oriental DreamWorks and minority investment in Imax China. Warners and Ratpac were joined in the earlier fund by advertising agency WPP, Japanese telecom giant SoftBank and others. That fund has focused on investment opportunities across the Chinese media sector.
The new fund, according to Ratner, will focus exclusively on Chinese-language content for the booming Chinese entertainment markets.
"Li Ruigang at CMC has been an incredible partner, so I went to him and I said, 'We want to invest in Chinese local entertainment, but I don't know how to do it. We want you to be our partner on this new venture,'" Ratner explained. "Together, we're identifying Chinese projects we can put through that fund, and separately Ratpac is also going to be doing co-productions — big Hollywood-style movies that have Chinese cultural stories."
Over the past year, Chinese film studios have poured capital into Hollywood film slates. Beijing-based Perfect World Pictures is raising $500 million to invest in Universal's slate, and Bona Film Group put $235 million into 20th Century Fox's forthcoming tentpoles.
But as the market has swelled, and local Chinese films have become more competitive against Hollywood imports — in the first quarter of 2016, Chinese titles took nearly 70 percent of local box office — U.S. filmmakers and financiers are beginning to seek ways to make more local-language movies for the Chinese audience. Meanwhile, Chinese regulators maintain a strict quota on foreign-film imports, limiting the market access of U.S. studios.
Joe and Anthony Russo, the sibling director duo behind Marvel's Captain America franchise, recently set up a Chinese fund to produce Chinese pictures. Ratpac and Warner Bros. are set to do the same.
"I did [2014's] Hercules and it came out here and it didn't do too well," Ratner said in Beijing. "I just realized that the Chinese want their own film culture and business. Hollywood wants to get their movies into the market. Maybe next year they'll be able to get more films in, but still, at the end of the day, what do the Chinese want? They want their own movies." (Hercules, which Ratner directed, grossed $13.1 million in China.)
Warner Bros.' participation in the new fund will mark an escalation of the studio's already ambitious efforts to produce localized content for China. Last year, Warners launched Flagship Entertainment, a joint venture headed by studio veteran Richard Fox but majority controlled by Li's CMC. In March, the upstart studio announced a diverse slate of 12 films to be made in China. Flagship plans to release its first Chinese film later this year.
In addition to the titles that emerge from the new fund, Ratner currently is producing a romance picture for Flagship called Beautiful Coma, which was developed and translated from an American script that Ratpac owned. The film will be directed by Hong Kong's Peter Chan.
"We're exploring many different hybrids and ways into the market," said Ratner. "Separately, Ratpac has taken a well known Warner Bros.' IP and reimagined it as a Chinese co-production franchise, which can be filmed in China."
The bang for buck that can be achieved in the Chinese market also is enticing to Hollywood execs. China's biggest hits to date, Raman Hui's Monster Hunt ($385.2 million) and Stephen Chow's The Mermaid ($525 million), were both made for less than $50 million, according to most insider estimates.
Concluded Ratner: "There is a huge opportunity here, because when you look at the performance of some of these Chinese movies versus the cost, it's staggering."