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Alibaba Pictures Group, the film studio subsidiary of Jack Ma’s e-commerce giant Alibaba, has extended a $103 million loan to leading Chinese film studio Huayi Brothers Media.
The loan is part of a five-year cooperation partnership signed between the two Beijing-based entertainment powerhouses. Huayi Brothers says the funds will be used as working capital and to pay for operations. The deal was disclosed Wednesday to the Hong Kong stock exchange, where Alibaba Pictures is listed.
Under the terms of the agreement, Huayi Brothers pledges to produce 10 theatrical films over the next five years, giving Alibaba Pictures priority as a potential investor, marketer, distributor and merchandising partner. The deal also commits Huayi Brothers to “mak[ing] it a priority” to work with Alibaba’s flagship online film services, including ticketing platform Tao Piao Piao and the big data analysis product Beacon. The companies also agreed to collaborate on talent management, with the business specifics to be determined following further negotiation.
Alibaba and its subsidiaries have been minority shareholders in Huayi Brothers since 2014. In 2015, Alibaba upped its stake, as did fellow internet giant Tencent Holdings.
The deal represents a continuation of Alibaba’s recently unveiled “Jin Cheng Co-Production Project,” an investment strategy designed to give the company increased participation in the major blockbusters released during China’s key holiday periods, when the bulk of ticket revenue from local language films is generated. Just last week Alibaba cited its Jin Cheng plan when it disclosed that it had taken a significant minority position in Tingdong Film, the studio founded by Chinese celebrity writer turned director Han Han. That pact gives Alibaba a piece of Han’s upcoming release Pegasus, one of the most anticipated new titles that will be released next month during Chinese New Year.
One of China’s most influential film studios for over two decades, Huayi Brothers, founded by Wang Zhongjun and Wang Zhonglei, is also a noted international film investor. The company is the majority financial backer of AGBO Entertainment, the new studio venture established by Marvel mainstays Joe and Anthony Russo. Huayi also recently wrapped up an 18-picture slate financing deal with Bob Simonds’ STX Entertainment.
The company was hit particularly hard by the tax evasion scandal that rocked the Chinese film industry in late 2018, however. Although never officially named by the authorities, Huayi Brothers was widely thought to be implicated in the explosive tax case that engulfed Chinese star Fan Bingbing. Fearing the company might become a target, many investors briefly fled, with Huayi’s market capitalization on the Shenzhen stock exchange shedding more than half of its value last year.
Earlier this week, Chinese tax authorities revealed that $1.7 billion in back taxes and fines were paid by Chinese entertainment companies in the wake of the scandal.
The Alibaba pair-up and cash influx was welcomed by the market on Thursday. Huayi Brothers shares finished the day up 7 percent in Shenzhen.
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