Warner Bros. Talking to China Media Capital About Local Language Co-Productions (Report)

Shanghai Film Festival 2 H 2015

CMC is one of the biggest players in the world's second-biggest film market.

Despite mounting woes in the equity market, Warner Bros. is in discussions with the giant state-backed private equity fund China Media Capital about producing local-language films, the Wall Street Journal reported on Tuesday.

The report said it wasn’t immediately clear how many movies the joint venture would produce or how much money each partner would invest.

There was also no confirmation whether the recent collapse of the Chinese stock market meant the deal would be closed or not.

The WSJ report said talks had been going for many months, due to the complications of forging deals and getting government approvals in China.

China Media Capital is run by Li Ruigang, who is formerly a senior figure in Shanghai Media Group and is a major backer of DreamWorks Animation's Asian venture Oriental DreamWorks, which is working on the next installment of the Kung Fu Panda franchise.

Li founded CMC in 2009 and in 2013, CMC formed a strategic investment partnership with Time Warner, involving a $50-million investment by Time Warner, and it acquired the Star China assets from News Corp.

China Media Capital could not be reached for comment.

While the overall economy is slowing, China's film business is expanding rapidly and the deal is evidence that Hollywood still sees value added in the world's second-largest film market.

According to the research outfit Entgroup, the Chinese box office has already reached $4.41 billion, which is only $160 million shy of last year’s $4.57 billion total, and it is on track to beat last year's total by the end of August.

China has over 23,600 cinema screens (compared to just 5,000 in 2010), the vast majority of which were added in the past two years, and local movies are given favored status.

Hollywood movies such as Universal's Furious 7 and Marvel's Avengers: Age of Ultron have done well in China, but local movies still dominate and gaining co-production status is the best way to ensure access and get around the quota system, which limits the number of foreign films allowed in China on a revenue share basis to 34.

Chinese movies have benefited from the annual blackout of Hollywood movies that takes placed during the July-August period, which gives domestic fare an uninterrupted run at the country's box offices.