ENTERTAINMMENT: ‘Star Wars’ Rattles China Box Office, Draws SMG

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CMC teams up with special effects house Base FX

The newest “Star Wars” movie is in two headlines this week, led by a strong debut for the seventh installment in the franchise that has just opened in China several weeks after its global premier. The movie is also in headlines related to a new initiative by the hyperactive China Media Capital (CMC), which has just formed a joint venture with a company that made some of the special effects for “Star Wars: The Force Awakens”. In this case CMC’s new partner is Base FX,  a Beijing-based start-up with strong ties to Hollywood.

Much has been written about prospects for the new “Star Wars” movie in China, where the franchise isn’t very well known because none of the first 6 films in the series were screened in the country unit recently. To address that problem, the movie’s producer Disney (NYSE: DIS) has been working overtime to promote the film in China, with relatively strong results.

Western media are painting a mixed picture for the opening. Most are pointing out that the movie’s $53 million in ticket sales on its first 2 days is a record for a Saturday/Sunday opening at the China box office. (English article) But other reports are also pointing out the movie still looks much weaker than other recent Hollywood blockbusters such as “Fast & Furious 7”, which posted a whopping $182 million in ticket sales in its first 3 days last year.

At least two other Hollywood movies opened with stronger 3-day ticket sales last year, testifying to how important China’s box office has become to movie makers over the last few years. From my perspective, the “Star Wars” opening does indeed look relatively strong, especially because the movie might be difficult to understand for most Chinese who have never seen any of the first 6 installments.

But it’s also quite possible that many people who went to see the film did so mostly due to the hype, and that the movie could quickly fade in the coming weeks if word-of-mouth referrals aren’t very strong. Regardless of its final earnings, the movie’s strong opening reflects the power of Disney, which is the most active of the major Hollywood studios in China and is set to open its first mainland Chinese Disneyland in Shanghai later this year.

Special Effects for China

Next there’s the more industry-oriented news, which has CMC forming the production joint venture with Base FX for undisclosed terms. (Chinese article) The headlines on that tie-up point out that Base FX not only created special effects for the latest “Star Wars” film, but also created effects for “Monster Hunt”, a homegrown Chinese production that smashed domestic box office records last year. For those who don’t follow the industry that closely, CMC is the investment arm of Shanghai Media Group (SMG), one of China’s top traditional media companies that hopes to one day become China’s first global movie-making powerhouse.

This particular deal looks slightly reminiscent of one from 2012, which saw a Beijing company and an Indian investor buy Digital Domain, the struggling special effects house backed by superstar Hollywood director James Cameron. A number of twists and turns followed that deal, but Digital Domain’s Beijing owner was reportedly ultimately purchased in 2014 by the very same SMG that is CMC’s parent. (previous post)

It’s unclear if CMC’s latest deal with Base FX is related to the earlier deal involving Digital Domain. But based on the description of Base FX on its home page, it looks like the two companies aren’t related beyond their core business in special effects for movies.

What is clear is that CMC is rapidly building up its repertoire of Hollywood-style tie-ups, as the Shanghai-based SMG tries to challenge China’s young movie-making establishment that is large based in Beijing. One of SMG’s earliest Hollywood tie-ups was an animation joint venture with DreamWorks Animation (NYSE: DWA), and late last year the company announced its latest deal to co-produce movies with Warner Bros (NYSE: TWX). (previous post)

I’m not completely convinced that SMG will become China’s next big movie powerhouse, since the company had an earlier record of forming lots of foreign TV tie-ups that mostly failed. But perhaps this time SMG will be able to produce better results, since China’s climate for makers of movies and TV shows is now far more liberal than it was just a decade ago when many of the earlier tie-ups foundered.

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