China takes first stake in Hollywood firm

4:42 AM PST 09/27/2010 by Jonathan Landreth, AP

Chengtian pays $25m for 3.3% of Legendary Pictures

BEIJING -- It's finally happened: a Chinese entertainment company has bought a piece of Hollywood.

Though Chengtian Entertainment is a subsidiary of Hong Kong-listed Orange Sky Golden Harvest Entertainment, the company that on Monday bought a 3.3% share of "Inception" producers Legendary Pictures of Los Angeles is Beijing-based and focused squarely on China's booming entertainment market.

After months of speculation that a cash-rich Chinese bidder, or one from Bollywood, might pick up a debt laden Hollywood property such as MGM, Chengtian CEO Chen Xiaowei, formerly president of Nasdaq-listed The9 -- one of China's largest online gaming companies -- called Chengtian's partnership with hit-factory Legendary a "match built in heaven."

"Chengtian and Legendary will produce and distribute films in China and around the world and also produce and distribute games," Chen told The Hollywood Reporter before boarding an airplane to meet Legendary founder Thomas Tull for the first time.

"I've watched 'Inception' twice and I told Thomas over the phone that this deal feels like a dream," she said, noting the deal was negotiated in under a month. "I want to meet him to make sure it's real."

The purchase of Legendary shares for HK$194 million ($25 million) comes at a time when Hollywood's box office growth is dwarfed by China's, where ticket sales jumped an astonishing 80% in the first half of this year as a newly-wealthy middle class flocked to hundreds of gleaming new cinemas nationwide.

Having a way to say a film was made with a Chinese partner could help Legendary get its products into the booming market around a Chinese government-imposed import cap that limits to 20 the number of foreign films allowed to share in their box office receipts here each year.

Founded in 2005, Chengtian invested in John Woo's pan-Asian co-production and box office hit "Red Cliff" (2008) and also made the commercially underwhelming 2009 sequel "Storm Warriors II" directed by the Hong Kong-based fraternal duo Danny and Oxide Pang.

Chengtian made a bigger name for itself when chairman Wu Kebo began in 2007 to amass a majority stake in the storied Hong Kong film company Golden Harvest, of Bruce Lee and Jackie Chan fame, and when Wu partnered Chengtian with Avex of Japan, that country's largest independent record label.

In addition to film production and distribution, Chengtian runs an artist management company and has divisions in charge of television, online entertainment and advertising. Chengtian parent, Orange Sky Golden Harvest, was founded in 1970 as Golden Harvest. The OSGH Group, of which Chen is co-CEO with Kelvin Wu, also operates 29 multiplexes with 229 screens in China, Hong Kong, Taiwan and Singapore.

In a statement released from Los Angeles late Sunday, Legendary called its new partnership with Chengtian a "strategic investment." "The transaction is part of an effort to explore broader partnership opportunities in China and beyond," the statement said.

Not only does China, now the world's No. 2 economy, have more web surfers and mobile phone users than any other nation, but over the last few years the country also rapidly has become the second largest market for theatrically screened Hollywood exports. "Avatar" alone grossed more than $200 million here.

With partner Warner Bros., Legendary's productions include "Inception," which has grossed more than $750 million worldwide, "Clash of the Titans" ($491 million worldwide), "The Dark Knight" ($1 billion worldwide), "300" ($456 million worldwide) and "The Hangover" ($467 million worldwide).

"Legendary's products have a natural game element to them," Chen said, noting that a three-way partnership with her former employer, The9, "was not discussed in negotiations with Legendary." Chen said Chengtian was "evaluating gaming opportunities."

The Chengtian-Legendary transaction could allow Legendary "to diversify its content production and distribution strategies beyond filmed entertainment to other mediums not excluding digital, television and video games," the statement from Legendary said.

Among the game universe-to-film projects Legendary currently is in the process of adapting are "Warcraft," to be directed by Sam Raimi ("Spiderman"); "Godzilla," based on Toho Company's famed giant Japanese lizard; Warren Ellis' "Gravel," and "Mass Effect," based on Electronic Arts and BioWare's hit videogame franchise.

Chen, who was appointed Chengtian's first CEO on July 2, joined the company after a stint at The9, where, beginning in May 2008, she renegotiated the company's operating contract with game designers Blizzard for the hugely successful "World of Warcraft" franchise and also helped rebuild The9's own game development team.

Before The9, the University of Pittsburgh-educated Chen worked as a consultant for Mc Kinsey & Co. in New York and was a television producer for China Central Television.

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