Donald Tang Reveals His China-Focused Plans to Make a Real Profit on Movies
The founder and chief of Tang Media Partners opens up about his vision for Global Road Studios and what Hollywood can learn from China.
Not long ago, if Donald Tang's name was uttered in Hollywood, it was within the cloistered confines of a boardroom, or among the upper-executive set striving to court China, vital growth market and ever-enticing capital source.
Tang's first act included a storied career on Wall Street, where he served as chairman of Asia Pacific at Bear Stearns, prior to that historic bank's disappearance into the maw of the 2008 financial crisis. For a time afterward, he leveraged his Rolodex as a discreet, behind-the-scenes power broker for some of the largest cross-border deals involving the U.S. and Chinese film industries, including AMC Entertainment's $2.6 billion sale to Dalian Wanda Group in 2012 and Beijing-based studio Huayi Brothers' 18-picture slate investment at Bob Simonds' then-upstart STX Entertainment.
Now, Tang, 54, has stepped fully into the spotlight with an ambitious entertainment concern all his own, Tang Media Partners. Founded in 2015 with investment from a range of strategic backers including Chinese tech giant Tencent, China Everbright Limited, China Media Capital and Sequoia Capital's Neil Shen, TMP in mid-2016 bought majority control of Stuart Ford's foreign sales, financing and production outfit, IM Global, while simultaneously launching a TV production fund with the company's recently hatched IM Global Television unit (the two transactions were estimated to be worth a combined $200 million). In January, TMP snapped up Los Angeles-based content developer and digital analytics firm Chaotic Good Studios for an undisclosed sum. This was followed by perhaps the biggest splash: In August, Tang closed a long-rumored buyout of North American distributor Open Road. Veteran studio exec and former Summit CEO Rob Friedman soon signed on to run the combined companies under the banner of TMP's recently rebranded content division, Global Road Studios.
Although headquartered in Los Angeles, TMP has locally incorporated affiliate offices in Shanghai and Beijing, an arrangement that gives the firm flexibility to tap the incentives or circumvent the regulatory constraints of the world's two largest entertainment markets — North America and China. Buzz emerging from the Chinese side, meanwhile, suggests TMP is at work on an outlay of similar ambition to what it has assembled in the U.S.
Born in Shanghai, Tang moved to L.A. at age 17 ("I had $20 in my pocket and spoke little English") and eventually earned a degree in chemical engineering from Cal Poly Pomona. A father of two with his wife of 35 years — "my first girlfriend and last" — Tang invited THR to his offices in Beverly Hills to discuss the vision behind his growing global studio.
With the disruption now roiling the U.S. TV and film industries, what enticed you to enter this sector after a lucrative career in banking?
I observed this trend — in my own children, out in the world — where the desire to own assets through money and power is fading as the driving aspiration across society. This old model is being replaced by a new one: the desire for access to positive experiences, often empowered through technology. This isn't something that's going to happen; it's happening right now. It has become clear to me that high-quality content, or storytelling, that satisfies this yearning for positive experiences is the business of the future. If done right, I believe it can make a lot of money.
Is the next phase of TMP's growth going to be about integrating the entities you have already acquired, or is there more buying to come?
I would never say never, but the majority of the acquiring and assembling of the key pieces is now done. We are now focusing on the operational side of things.
What kind of films will Global Road Entertainment produce?
We recently hired Rob Friedman to be our chairman and CEO. In 2007, he did that Summit deal and put together a best-in-class team of senior management with adequate financial resources — and he executed that vision for growth flawlessly. At Lionsgate he ran their film division successfully. When Rob did that, it was Summit 2.0. Now he's joining us to do it again. Rob's vision is to expand over time to a steady slate of 15 films per year, with some mini-tentpoles in the mix. We'll also be producing films in China.
TMP's capital requirements will be escalating pretty dramatically as you move into full-scale production. How will you address these needs?
We're in the process of conducting a growth raise for approximately $150 million in equity. And then we're going to stack that with the appropriate traditional film financing model, with many multiples on top. The raise will be used to further build our global production-development slate and related overhead in order to get to our goal of eventually releasing about 15 films per year.
The core of TMP's model is about bridging the gap between the U.S. and China. How is this achievable?
I like to say we have a "dual-core business model," with the North American and Chinese markets dictating everything we do. Or, to be less mechanical, because content is about emotion, we have a two-hearted approach, with both hearts beating in tandem, sensitive to each culture's sensibilities, with neither side dominating the other. I believe it's possible to bridge these worlds because I'm living proof of it.
On the North American or Hollywood side, the key asset is moviemaking magic — captivating storytelling. [Hollywood] has a 100-year history, and the quality of our filmmakers is second to none. It's not even close. And on the business side, there also are very sophisticated, institutionalized structures, such as ultimate financing and other time-tested, empowering processes. Both of these strengths are a perfect match for China's needs. They are putting their physical studios together and recruiting people from around the world, and in due course, Chinese film companies will be truly great — but they have a long way to go. They also could use more tools to finance movies in more innovative ways; it's almost all equity financing there.
And Hollywood's opportunity in China?
First, the obvious: the market. Box-office growth in North America is flat and moviegoing by attendance is actually declining. Meanwhile, in China, they've had 20 percent to 25 percent average annual growth even with last year's slowdown — very impressive, given the size of the base. And they're still building more cinemas. But that's just part of the story — the bigger picture is that theatrical still accounts for 85 percent of the revenue in the life of a film property there. In the U.S., just 25 percent comes from theatrical and licensing makes up around 75 percent. So you have this very significant raw box-office growth, but also the opportunity to grow from 15 percent to 75 percent for licensing and the ancillary market? I call that explosive. China is a huge growth engine that has only begun to move forward.
Market aside, what can Hollywood learn from China?
Consider how China makes and markets movies. They're in bootstrap mode, so their industry is very entrepreneurial and innovative. They use social, digital and whatever they can think of to market movies in a cost-effective way. They'll often market an imported American movie for far less while attaining a similar local box-office result. That should give us pause. In North America, we have what I would call a sustained P&A [prints and advertising] crisis. We keep on spending heavily on marketing, but we rarely know whether we're going to get the kind of return that justifies that spend. And we market very traditionally, with digital and social spending still small and in their infant stages. I'm not saying China's approach is perfect or directly applicable — but they are doing a far better job than us when it comes to cost-efficiency and innovation in this particular area. Then consider overhead: We're really great at what we do in Hollywood, but maybe it's true that you don't need thousands of people to do this. Because Hollywood is now a conglomerate-owned enterprise, it has become less flexible and less entrepreneurial as a result. The Chinese industry overall has a very cost-conscious nature and culture that we can learn from. So, these are the world's two largest markets, and their strengths and weaknesses are perfectly complementary. If you have the global operations and local understanding to combine the two, helping the strengths to outshine the weaknesses, I believe this is a fabulous business to be in.
Do you think we can expect a relaxation of Beijing's controls on capital outflows and investment?
If I told you I knew the answer, I'd be lying. I'll paraphrase Charles Darwin, who said: "It is not the strongest of the species that survives, nor the most intelligent; it's the one that is most responsive to changes in its environment." We are building a global content studio that's both inside and outside China, so we'll be able to operate our business plan either way.
Now that you're a U.S. distributor, how are you going to make that work? Many have tried and struggled, such as Relativity, Broad Green and EuropaCorp. Prior to your acquisition, many would probably say Open Road was on tenuous footing, too.
On the day to day, operational management of things, I would refer you to Rob. As a concept, I again want to emphasize our dual-core strategy, where we are working collaboratively with mitigated risks across North America and China. U.S. distribution isn't a stand-alone business for us; it's one key piece in a larger strategic picture.
What are some of the strategic benefits that emerge from integrating the entities you've acquired so far? How will it work?
Well, for presales and licensing, one of our advantages now is, precisely, having a U.S. distributor. As you know, a lot of the sales now are being done without a U.S. distributor in place, which makes it much harder to sell things internationally. You might have all of these territories who are interested in presales to help finance the movie, but if they don't have certainty of the journey — that someone's going to give it the big splash in the U.S. — they just don't want to buy. Now we can provide that certainty, combined with a very experienced international sales team.
How does China augment the strategy?
Consider Hacksaw Ridge as an example. The filmmakers released it through Lionsgate, and IM Global had international rights, which we then sold to a Chinese distributor. Overall, it was a very successful film and a worthwhile, profitable exercise for everyone — Lionsgate made their money; the Chinese distributor made good money (Hacksaw Ridge earned $62 million of its $175 million global box-office total in China); and we made our piece by holding back certain territories.
Today, for a similar title, we can distribute it in North America and China ourselves; we can sell rights around the world; and we can hold back some territories if we care to. So now we can capture all of the upside when we have a great film like that in our camp, whether we acquire or produce it ourselves.
What about moving in the opposite direction, for the films you are planning to produce in China?
Well, first of all, we'll want our Chinese films to travel, but we're not so naive to think that we can guarantee that they all will. It's still too early for that. Therefore, our Chinese titles will have to make their money in China. Then, everywhere else is gravy. And if the gravy comes, we will invest more and make sure we are marching down that global road. I do believe there are many stories involving China that can appeal to the world, if told and marketed in the right way.
As a former global finance guru, if capital continues to be prevented from flowing from China into Hollywood, where do you see it coming from next? The industry has moved through a number of phases, territories, billionaires ...
Everything aside, this is one of my favorite questions to answer. It's about the business model. It doesn't matter whether it's the Japanese, French, Chinese or Canadians; no one is in the business of investing and consistently losing money. We shouldn't focus on replacing one capital source with another — I think that's kind of short-sighted. We should focus inwardly on building the right kind of business model that creates mutual gain. If it's sustainable and contributes to the global industry's build-out, more people with capital and strategic alliance potential will be attracted to us. It shouldn't just be about the allure of glamour, because glamour always has an expiration date.
Outside of business, what are your passions?
We would define a passion as something one loves to do all of the time, right? But what do we actually do with most of our time? It's probably work. So if a passion is something one loves to do all of the time, and if I'm fortunate enough to really love what I do at work, then my passion becomes the work I do.
That has to be the most analytical response to that question I've ever heard. Do you have hobbies?
Well, as you can probably tell, I like to philosophize. (Laughs.)
A version of this story first appeared in the Nov. 29 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.