Hollywood-China Love Affair In Chengdu Spotlight

Hollywood execs flock to Chengdu

Many of the usual global CEOs are in China this week for the annual Fortune Global Forum in the interior city of Chengdu, but what’s really interesting this year is the presence of many big Hollywood executives. I use the word “interesting” instead of “surprising”, because the presence of top executives from names like DreamWorks Animation (Nasdaq: DWA) and Time Warner (NYSE: TWX) isn’t really that unexpected considering the sudden love affair between China and Hollywood that’s developed rather rapidly over the last year and a half. Even the music industry is finally starting to believe in the huge potential of the China market, with the head of the US-based Recording Academy, organizer of the Grammy Awards, also attending the event in Chengdu.

From a news perspective, probably the biggest new development from the event is  Time Warner’s announcement of a partnership to invest in Chinese media companies. (company announcement) The partnership was announced by Time Warner CEO Jeff Bewkes, who was attending the forum alongside DreamWorks Animation chief Jeffrey Katzenberg and Recording Academy President Neil Portnow. Disney (NYSE: DIS) chief Robert Iger was also in China this week, though it was unclear if he was attending the Fortune event in Chengdu.

There wasn’t a lot of detail in the new Time Warner announcement, with no mention of how much money the partners will put into the new fund. But what’s most interesting is Time Warner’s choice of partner, a company called China Media Capital (CMC). CMC itself is a joint venture between the well-connected Shanghai Media Group (SMG), China’s second largest media company and a far more nimble player than the stodgy industry leader CCTV.

CMC is rapidly emerging as the partner of choice for foreign media companies in China. DreamWorks Animation chose CMC as partner for its Oriental DreamWorks joint venture animation studio last year, and CMC is also the majority owner of News Corp’s (Nasdaq: NWSA) former China TV assets. All of the Hollywood studios are eying a China box office that is growing at breakneck speed, with sales expected to jump more than 30 percent this year to reach $3.6 billion.

Generally speaking I do think the studios are making a smart decision by investing big money in China, which looks set to pass the US in the next few years to become the world’s biggest movie market. But I would also caution these companies to watch out for the occasional crackdown, which often comes from worried cultural officials in Beijing anytime this kind of foreign love affair gets too overheated.

The presence of the Recording Academy’s Portnow in Chengdu testifies to just how quickly the China-Hollywood love affair is evolving. The Recording Academy is planning its own concert at the Chengdu forum, featuring performances by mid-tier artists including Michael Bolton and Jody Watley, alongside a few Chinese names including piano superstar Lang Lang. (English article)

Unlike Katzenberg and Bewkes, who were gushing with praise about China, Portnow was considerably more low-key in his remarks in a media interview with the China Daily. He said the Recording Academy’s concert is just the start of a new relationship with China, and that he wants to set up a company in the next 1-2 years to hold official Grammy events in the country.

His understated tone reflects the very real fact that piracy remains a huge problem in China, and that musicians still face big difficulties making money there purely based on record sales. Still, his mere presence at the event does underscore just how quickly China has moved onto the global entertainment map, and I’m sure we’ll see the steady stream of exploratory trips and similar new joint ventures continue for at least the next year.

Bottom line: The presence of several major US media executives at a China event this week reflects the growing importance Hollywood is placing on the China market.

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