What Does Wanda Want? Weighing the Chinese Conglom's Global Movie Theater Buying Spree
With AMC Entertainment's acquisition of Carmike for $1.1 billion, Wanda will control an unprecedented 11,500 movie screens worldwide, shaping the global entertainment industry for years to come.
Last week, Chinese real estate conglomerate Dalian Wanda Group cemented its position as keeper of the most movie screens on the planet. Whether you live in North America, China or Oceania, chances are Hollywood's next blockbuster is coming to a Wanda-owned cinema near you.
On March 4, AMC Entertainment, which is majority controlled by Wanda, agreed to buy Carmike Cinemas in a $1.1 billion cash deal. Once it closes, the acquisition will combine the second- and fourth-largest cinema chains in the U.S. to create the world's largest theater circuit with 8,400 screens.
Wanda became the world's largest cinema owner in 2012 when buying a 75 percent stake in AMC. Last summer, the Chinese company scooped up Hoyts, Australia's second-largest movie exhibitor, operator of 424 screens. Back home in China, Wanda Cinema Line commands the country's largest screen count with 2,650. With the AMC-Carmike deal, Wanda will own nearly 11,500 movie screens worldwide. But Wanda chairman Wang Jianlin, China's richest individual according to Bloomberg's latest estimate, is still hungry for more.
The company is thought to be eyeing further acquisitions, with Turkey’s Mars cinema group, the country’s largest chain with more than 600 screens; and pan-European Odeon/UCI (2,200 screens across the U.K., Germany, Spain and Italy) rumored to be on the shopping list.
Wanda's relentless expansion has given many in the industry pause, as they ponder just how big Wanda's cinema network might ultimately become, and how the company's unprecedented global scale will shape the industry in years to come. (For a prophetic metaphor of Wanda's will in this arena, look no further than its $20 million donation to the Motion Picture Academy's new museum: the institution's film history wing will be named The Wanda Gallery).
"Chinese businesses are not much different than American businesses in their desire to be number one," says Lindsay Conner, a partner at Manatt, Phelps & Phillips, LLP Entertainment, who represented Beijing-based Perfect World Pictures in its recent $250 million investment in Universal Pictures's upcoming film slate. "I think it does matter to Wang Jialin to be able to say that Wanda has the most screens in North America, as it does in China, over and above the specific business benefits."
So far, the film industry has not seen significant interference by Wanda in the operation of AMC in North America. The Carmike deal, in fact, was said to originate entirely from the U.S. team. “This plan to get bigger at AMC was our plan, and we took it to Beijing to make sure that they, as a 75 percent shareholder, would be supportive,” AMC CEO Adam Aron said after the deal was announced.
He also noted, however: “There was considerable enthusiasm at Wanda for AMC getting larger.”
As for the actual strategic vision driving Wanda's screen-buying spree, analysts see myriad economies of scale. Whether these synergies will actually be achieved is another question.
"A global footprint for Wanda Cinemas would enhance their buying power with vendors and suppliers of technology, equipment, concessions, merchandise and so on," says Rance Pow, founder and president of the Shanghai-based cinema consulting firm Artisan Gateway, who notes that Wanda could also get an edge over regional rivals by transferring best practices to all cinemas in its global network.
"Whether these benefits extend to global deals for film rents is a little trickier because of China's import quotas and content restrictions," adds Conner. China allows just 34 foreign films into the country for theatrical release on revenue-sharing terms each year. The announcement that a given Hollywood film has gotten the green light for import rarely comes more than four to six weeks in advance, which would present a big challenge to globe-spanning negotiations.
"Thus far we generally see film supply handled on a territory-by-territory basis," adds Pow. "However, for Wanda at some point to make this attempt would not be a surprise."
A spokesperson for Wanda didn't reply to a request for comment.
Wanda's Wang has previously stated that he hopes to control no less than 20 percent of the global film business by 2020. Aside from ratcheting up the expansion of its exhibition network, Wanda has been taking parallel steps in production and distribution to work towards that wildly ambitious target.
In January, Wanda paid $3.5 billion for Legendary Entertainment, financiers of such global hits as Jurassic World and Godzilla, becoming the first Chinese owner of a U.S. movie studio with a track record in producing international event pictures. Wanda's investments in the Chinese market have also paid dividends. The studio racked up grosses of $1.05 billion (RMB6.7 billion) in 2015, the most of any private Chinese film company, thanks to local blockbusters such as Mojin: The Lost Legend ($254 million) and Goodbye Mr. Loser ($228.5 million).
Many believe Wanda's massive exhibition platform could give the company’s production subsidiaries leverage when negotiating deals with distributors, producers and talent.
"They can now say to a distributor, Hollywood studio, a producer, a director, or even an actor, that as the largest exhibition chain in the world, we can deliver a guaranteed release of a film across more screens than anyone," says another Beijing-based industry veteran, who asked not to be named because of overlapping dealings with Wanda. "Nobody else in the industry can really say this," the analyst adds.
One of the long-term goals of China's film industry is to make movies for the global market, not just the Chinese domestic audience. Throughout his career, Wang has been particularly adept — as any enduringly successful Chinese tycoon must be — at aligning the growth of his businesses with the stated goals of the Chinese leadership. Wanda rose to become the country's largest real estate developer at a time when infrastructure development and urban building was needed to remake and modernize Chinese cities. Today, the Chinese leadership is understood to covet nothing more than soft power, which can only come through the promotion of Chinese culture and values via global media and entertainment. Again, Wang has placed his company at the center of the effort — good business, given the slowdown in China's commercial real estate sector, but conspicuously good politics, too.
In light of such considerations, some industry figures have occasionally questioned in private whether Wanda might someday wield its North American theater network in a way that boosts Chinese movies.
For now, most analysts agree, these concerns appear to be overblown. "Wanda-controlled cinemas might become a significant platform for the exposure and release of Chinese-themed films, but in the end the ticket buying audience will determine success and failure on a film by film basis," says Pow.
"The Wanda leadership is savvy and not interested in losing money," adds Conners. "Time will tell how it plays out in the long run. But soft power is clearly one of China's great ambitions and this fits into that overall strategy."