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This story first appeared in the Oct. 10 issue of The Hollywood Reporter magazine.“>
Get used to the term “BAT”: Baidu, Alibaba and Tencent. China’s three biggest Internet players all are making inroads into entertainment and establishing themselves as the global studios of the future. And those plans should both excite and terrify Hollywood.
The record-breaking Alibaba stock listing Sept. 19 valuing the company at an estimated $25 billion with a market value of roughly $230 billion highlights the bulging war chests that will fund expansion. Most believe the e-commerce power will spend big to develop its content offerings.
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For instance, in June, Alibaba launched Alibaba Pictures with the purchase of ChinaVision Media Group in Hong Kong for $804 million. It then appointed Zhang Qiang, second-in-command at the powerful China Film Group, to run the new studio. China locals consider this a major statement of intent, and those close to Alibaba chairman Jack Ma say he does not intend to stop at the domestic market. Ma, a Forrest Gump fan, is said to be setting his sights on Hollywood, and he has cash to buy a U.S. studio if he wants.
Ma perhaps telegraphed his intent when, after buying half of a Chinese soccer club earlier this year, he said, “We’re not investing in football, we’re investing in entertainment. Alibaba’s future strategies are health and entertainment.”
While Alibaba and Ma have garnered attention lately, Baidu (think China’s Google) and Tencent (home of messaging services used by 1 billion people) also have announced plans to expand their film presence. Tencent recently launched a film unit that aims to make four or five movies a year. Not to be outdone, Baidu’s video site iQiyi launched iQiyi Pictures with plans to make seven local films and one Hollywood- style film next year. Insiders say this is only the beginning.
“In the future, all the movie companies will work for Baidu, Alibaba and Tencent,” Yu Dong, the outspoken head of distributor Bona Film Group, said in June in Shanghai. “They are shaking up the industry in a disruptive way, which will lead to a restructuring of the content industry. The next 10 years will be revolutionary, where we see Internet companies leading the movie industry.”
Yu was referring to the Chinese movie industry, but BAT could have a major impact on U.S. studios as well. The companies plan to enlist Hollywood’s help to expand, either through cooperation and partnerships or through acquisitions. What form that interaction is going to take is the multibillion-dollar question.
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Executives from several Chinese firms — including production and distribution outfit Bona and Fosun Group, which partnered with former Warner Bros. chief Jeff Robinov in Studio 8 — have been in L.A. in recent weeks to discuss opportunities. Hollywood studios seeking money from Chinese companies or even an outright sale have an asset to trade in experience and connections that China desperately needs. But Chinese companies must feel courted, and ultimately the allure is in learning how to run a studio so they can do so without U.S. help.
All eyes are on Robinov’s Studio 8 as it attempts to simultaneously make Hollywood movies while also answering to Fosun, which has $200 million invested in the company. The overall view is that if this partnership works, Sony-based Robinov will get cash and a fresh injection of Chinese vigor, while China gets to feed its content needs and also start making movies that work abroad as well as at home. And hovering over it all are the BAT companies, surely watching to see if this template can work for them.
“This is a win-win situation for Hollywood studios and Chinese tech companies like Baidu, Alibaba and Tencent,” says Beijing-based analyst Li Chengdong. “BAT will be able to help [Hollywood] understand the [Chinese] market better and come up with a better strategy to promote movies.”
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