Alibaba Expands Film Investment Plan, Loans $100 Million to Huayi Bros.
Alibaba Pictures Group, the film business arm of Chinese e-commerce giant Alibaba, has struck a strategic co-operation deal with leading film studio Huayi Brothers. The deal terms include a $ 103 million (RMB700 million) loan to Huayi.
Alibaba Pictures said the agreement was part of its recently announced strategy to be a part of major movies that release in of China’s four yearly holiday periods (Chinese New Year (around January-February), the summer, the National Day holiday period in October and at the end of the year. The so-called Jin Cheng Co-Production Project runs for five years. (‘Jin Cheng’ translates roughly into English as ‘Golden Orange’).
The deal further expands the power and influence of the deep-pocketed Internet platforms over the Chinese film industry. Alibaba and companies owned by Alibaba founder Jack Ma have been significant minority shareholders in Huayi since 2014, and increased their positions again in 2015.
The new deal runs for five years and commits Huayi to delivering 10 films in which Alibaba Pictures subsidiary Asian Union can be a co-investor and co-distributor. The two also agree to work together on talent development, film marketing and merchandise sales through Alibaba’s Tao Piaopiao and Beacon platforms.
The five-year loan, provided at China’s 5-year base rate, will be used by Huayi as working capital and company operations. As security for the loan, Huayi is providing share pledges, rights to returns from a film fund, and “unlimited joint and several guarantees provided by two major shareholders.” That appears to be a reference to Huayi founders and principals Dennis and James Wang.
Last week Alibaba pointed to its Jin Cheng plan as behind a move to take a 13% stake in the Tingdong Film company controlled by celebrity race car driver turned blogger and filmmaker Han Han (“The Continent,” “Duckweed”). His new movie “Pegasus” is one of the most anticipated of the upcoming Chinese New Year season. Alibaba also recently invested in “The Green Book” and “A Dog’s Journey,” the sequel to hit “A Dog’s Purpose.”
Huayi, in business as a private sector leader for over 20 years, has been behind hit films including the “Detective Dee” fantasy action franchise, and a string of movies by Feng Xiaogang (“Youth,” “I Am Not Madame Bovary”). It was also the China partner of Hollywood independent STX Entertainment until the non-renewal of their deal at the end of December.
On Thursday morning, Huayi Bros shares climbed 6.6% to RMB4.85 on the news. Alibaba Pictures shares were little changed at HK$ 1.29 apiece.