Legendary to Co-Produce 'Global' Pics With China's Huayi, Warner to Distribute

"Aftershock" is Huayi's most successful film to date and China's second highest-grossing domestic film.
"Aftershock" is Huayi's most successful film to date and China's second highest-grossing domestic film.
 Courtesy of China Film Group

BEIJING -- Legendary Entertainment, the makers of global box office hits such as Inception and The Dark Knight, on Thursday announced the formation of Legendary East a Hong Kong-based company that will begin in 2013 the annual co-production in English of one to two major “global” films per year with Huayi Brothers Media, China's largest independent film studio.

Warner Brothers Pictures, with which Legendary has had a nine-year relationship, will distribute the films around the globe while Beijing-based and Shenzhen-listed Huayi will distribute the films in China, the fastest-growing box office market in the world, where ticket sales soared 64 percent last year to $1.5 billion.

“It’s great to have a local partner that helps us overcome the unique challenges of the China market, but it’s imperative that these be global films that attract an audience around the world,” Thomas Tull, Legendary’s chairman and CEO told The Hollywood Reporter on the sidelines of a press conference announcing the deal.

Tull announced the formation of Legendary East in China's capital with his new partners, Wang Zhongjun and Wang Zhonglei, the brothers who are Huayi's president and CEO, respectively. Tull said Huayi is a “significant shareholder” in Legendary East. What about a Warner equity stake? THR asked Tull. “We’re in talks with Warners about distribution.” And are Warners a shareholder of Legendary East?  “Not yet,” Tull said.

Investment advice in sealing the deal came from Goldman Sachs & Co., advising Legendary Entertainment, and from Centerview LLC, which advised Legendary East. A public relations spokesman later emailed THR to clarify that Huayi is not a "significant shareholder" in terms of percentage, writing that "[Huayi] are significant as a partner, but technically not a significant shareholder."

Though Legendary’s and Warner’s 2010 films Inception and Clash of the Titans did well in China in 2010  -- China was Inception’s No. 2 global market after the U.S. -- Hollywood studio pictures remain limited by Chinese law to 20 a year that are allowed to repatriate a share of their box office take, on average 13 percent-17 percent.

In March, China was supposed to allow greater foreign participation in the distribution of films, books and music in compliance with a World Trade Organization ruling. Thus far, China has told the WTO to be patient.

Meanwhile, Hollywood films co-produced with Chinese partners or made by Hong Kong companies are able to skirt Beijing’s cap in exchange for the abdication of final creative control.  Each film made for distribution in China must submit to a board of censors at the State Administration of Radio Film and Television whose guidelines bar films whose plots include excessive violence, most depictions of sex and any political statement that doesn’t agree with the views of the ruling Communist Party, 90 years old this July 1.

Asked if the formation of Legendary East was a way to get the films of Legendary, and by extension, Warner Brothers, into China, Tull told THR: “The formation of our new company is about a commitment to growing our relationship with China long-term. This is not a parlor trick, it’s just good film economics.”

"China is one of the most important economic and culturally significant areas in the world and we are deeply honored to establish a base in the region to create entertainment that is globally appealing in quality, scale and impact," Tull said in a statement distributed before the news conference.

Legendary East was the brainchild of Tull and Hong Kong media and finance entrepreneur Kelvin Wu, who joins the new company as CEO as he leaves his post as head of Hong Kong and Beijing-based Orange Sky Golden Harvest. Hong Kong-listed OSGH last September invested $25 million for a 3.3 percent stake in Legendary to become the first Chinese company to take a stake in a Hollywood firm.

Asked what results had come of Legendary’s partnership with OSGH, also known, in Chinese, as Chengtian, Tull said: “It’s largely been a relationship of advice and guidance.”

Wu, who speaks English, Mandarin, Japanese and Cantonese, will leave his post as co-CEO with Chen Xiaowei of OSGH and join Legendary East “100 percent full time,” said Tull, who will be the new company’s chairman. Joel Chang will be CFO, also coming to Legendary from OSGH, where he held the same title.

"We think that together we can be a shining example for the Chinese film industry," Wu told reporters gathered in a luxury hotel ballroom.

Huayi's Wang Zhongjun, who goes by Dennis in English, is, with director Feng Xiaogang, the man behind the second highest-grossing Chinese-language film of all time, the earthquake disaster film Aftershock.

About Legendary East, which grew out of Huayi’s visit to a Sino-U.S. co-production summit in Los Angeles last November, Wang said: "We hope we can make wonderful movies with Asian themes and backgrounds."

The younger Wang brother, whose English name is James, added that he feels China’s rich history of legends will serve as great source material for Legendary East's first productions. Wang thanked Warner Bros. for its support for the new venture. He said the new company’s leaders would meet on Friday to discuss their first projects together.

Few Chinese films ever have done well at the box office in North America, where few moviegoers sit still for films with subtitles.  North America’s ticket sales last year were about seven times greater than China’s.

“I must stress that these are global movies we’re making if we do our job correctly," Tull added.

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