Warners off China exhib circuit

Studio divesting cinema ops after gov't tightens rules

It's curtains for entertainment giant Time Warner's cinema operations in China after tighter rules from Beijing pushed Warner Bros. International Cinemas to say Wednesday that it will withdraw its investment there after only four years (HR 11/9).

WBIC, which has run China's top-grossing cinema for the past three years, will abandon plans to expand on the cinemas it began to open in 2002 — spurred then by a policy that allowed foreign operators 75% ownership of cinemas in select cities, a Warner Bros. spokesman said.

A policy change Beijing announced last year required WBIC and other theater builders attempting to invest in China to give control to domestic partners, a Warners spokesman said.

Time Warner was one of the few big foreign companies to pour money into China's theaters, where ticket sales climbed 30% to 2 billion yuan ($254 million) last year.

Warner Bros. said it will remain committed to its other businesses in China, including local-language film production, a home video joint venture, consumer products and studio stores, "all of which have different legal structures, business models and regulatory requirements."

"We have to pull out after repeated discussions with the government led nowhere," a Warner Bros. spokesman said.

WBIC was involved with the design, construction and managment of 10 cinema locations in China with various partnerships and currently is invested in four locations in China — two with Shanghai Film Group and two with Shenzhen Investment Trust, the spokesman said.

"We had a business plan to invest in a total of 30 locations, which will now no longer be the case," he said.

Industry sources said WBIC president Millard Ochs, who was in Beijing several times during the past year and a half, was unable to negotiate a compromise with film industry regulators eager to protect domestic companies' market share.

Warners' pullout comes as China's largest-ever film delegation visited Hollywood studios and guilds in hopes of finding more co-production money and tried to sell its films to buyers gathered at the American Film Market.

WBIC opened its first cinema complex in China, Shanghai's Paradise Warner Cinema City, in early 2002 with the Shanghai Film Group. The first to be operated and branded in China by a foreign entertainment company, the state-of-the-art complex has been the highest-grossing theater in the country for the past three years.