DreamWorks Finds Home In Shanghai

DreamWorks starts work on Shanghai complex

A growing love affair between Hollywood and Shanghai has taken a major step forward, with the formal ground-breaking for a $2.4 billion entertainment complex being co-developed by US giant DreamWorks Animation (NYSE: DWA) and the city’s leading broadcaster. As a longtime industry watcher, I’m most encouraged that this project is actually moving forward, even if the latest price tag is a bit lower than the figure given when the deal was first announced nearly 2 years ago. Over the years I’ve seen too many cases where big new Sino-foreign projects have been announced with big fanfare, only to later die quiet deaths due to failure to get necessary approvals and financing.

The official ground-breaking for this new project in Shanghai’s Xuhui district indicates there’s a good chance that some or all of the Dream Center complex will actually be built. (English article; Chinese article) The ground-breaking was attended by DreamWorks CEO Jeffrey Katzenberg, co-founder of the company behind the popular “Shrek” and “Kungfu Panda” animation franchises.

I first wrote about this project back in 2012, just months after DreamWorks signed a landmark deal to set up an animation studio in partnership with Shanghai Media Group (SMG), the city’s dominant broadcaster. (previous post) At the time, DreamWorks said the new venture, called Oriental DreamWorks, would be based at the new complex. Few details were given besides the complex’s location and its price tag of 20 billion yuan ($3.2 billion).

Fast-forward to the present, where the latest investment figure for the project has come down a bit to $2.4 billion, shaving off about a quarter from the original figure. Such a drop isn’t that unusual, since some elements of the project were inevitably modified in the 2 years of planning before this ground-breaking. And no matter how you look at it, $2.4 billion is still quite a large sum of money, not too far behind the $3.7 billion investment that Disney (NYSE: DIS) and Shanghai are making to build a new Disneyland theme park in China’s financial capital.

In addition to Oriental DreamWorks’ new studio, the new complex will contain a 500-seat Imax theater for high-profile film premiers. Developers also intend to build a series of theaters to mimic the popular theater districts in London’s West End and New York’s Broadway. The complex will be based along the banks of Shanghai’s Huangpu River, in an area being redeveloped by the city government as a major entertainment destination.

This new entertainment center is slated to open in 2017, 2 years after the scheduled opening for Shanghai Disneyland. The 2 massive projects should provide a strong base for Shanghai as it attempts to emerge as China’s entertainment capital, both as a tourist destination and a center for content creation. Historians will note that Shanghai was China’s entertainment capital before 1949, playing home to the country’s biggest film-making studios and a wide array of theaters.

As I’ve said above, I’m most encouraged to see that this newest project is moving forward at all, since many similar massive developments often run into problems due to their complexity. Two of the most noteworthy examples have been Universal Studios theme parks that at different times were set for construction in Beijing and Shanghai. Both ultimately got abandoned for reasons that were never fully explained. This latest ground-breaking by DreamWorks seems to indicate the project has gotten necessary approvals and financing, reflecting Shanghai’s determination to reclaim its title as Asia’s entertainment capital.

Bottom line: Ground-breaking for a new $2.4 billion entertainment complex anchored by DreamWorks animation in Shanghai indicates the project has received necessary financing and approvals, and is likely to be built.

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