Sources: Paramount's Chinese Partners Haven't Paid a Penny of Promised $1 Billion
Shanghai Film Group and Huahua Media are said to have insisted on meeting with Viacom's CEO amid questions over the studio's direction.
With China blocking money from leaving the country, Paramount Pictures has yet to receive the first payment it had expected from a billion-dollar financing deal with partners Shanghai Film Group and Huahua Media, sources tell The Hollywood Reporter. And it appears that the Chinese government is not the only roadblock.
The Viacom-owned studio's partners have expressed concerns since Paramount currently has no chairman and has announced a new strategy that relies in part on mining intellectual property from its television network siblings, including MTV, Nickelodeon and Comedy Central. The Chinese partners are said to have told Viacom that no funds will be forthcoming until they meet with Viacom CEO Bob Bakish and whomever is appointed to run the studio to get an explanation of the slate strategy going forward.
Currently, Bakish is in talks to select a new leadership team, with former Fox film chief Jim Gianopulos and producer Michael De Luca currently favored.
A source with knowledge of studio affairs says the departure of previous management likely has caused anxiety for the Chinese partners. Departed studio chairman Brad Grey and vice chairman Rob Moore had established ties with China, setting up co-production deals and casting Chinese talent in the studio's films. A notable success was 2014's Transformers: Age of Extinction, which was approved as an "assisted production," shot in China and received preferential marketing treatment. It grossed $320 million in China, at the time a record for an American film.
Some subsequent Paramount movies that disappointed in the U.S. did well in China. The February release xXx: The Return of Xander Cage was a standout, pulling in almost $160 million there.
The slate financing deal with Shanghai Film Group and Huahua Media called for about $140 million in payments by this point, but those have not been made, according to sources. The money was expected the first week of January, and Paramount is said to have requested payment repeatedly.
Meanwhile, Bakish, as he attempts to engineer a studio turnaround, has touted making five to 10 movies each year branded with the Viacom network labels. With the exception of Nickelodeon, those brands are not known in China.
Under the terms of the deal, which was agreed upon in November and announced in January, Shanghai Film Group and Huahua agreed to finance at least 25 percent of each film on Paramount's slate for three years with an option for a fourth year.
Speaking at a Morgan Stanley conference on March 1, Bakish said money from the Chinese partners would aid efforts to turn the struggling studio around by supporting big-budget films. "Selling 25 percent of the slate is the right place to be," he said.
Reps for Huahua and Shanghai Film Group declined comment, as did Viacom.
As part of the deal, Shanghai Film Group and Huahua Media have said they will open and jointly maintain an office on the Paramount lot starting later this year, and the new partners said they would explore future co-productions.
Currently, companies are having difficulties moving money out of the China because of restrictions imposed by China's foreign-exchange regulator. Late last year, the State Administrator of Foreign Exchange, an affiliate of China's central bank, issued a directive requiring companies to check with the regulator before transferring more than $5 million, in dollars or renminbi, out of the country.
Shanghai Film Group and Huahua, like other companies, cannot move mass sums of money out of the country, and ahead of the 19th Party Congress to be held in Beijing in October, the country is on regulatory lockdown, according to another source. Since China's foreign-currency reserves have stopped plunging, the controls may loosen up, but much also depends on how relations develop between China and the Trump administration.
Patrick Brzeski contributed to this report.