The draw of China, with its legions of viewers who can’t get enough of Hollywood movies and TV shows, has seduced DreamWorks Animation (NYSE: DWA), which is preparing to set up a joint venture to make films just for the Chinese market. Western media are reporting the animation arm of the studio founded by Steven Spielberg and Jeffrey Katzenberg has hired a recruitment firm to staff up a production operation in China, though additional details of the plan were thin. (English article) If true, this would mark the second big move in China for DreamWorks, which just last month signed a distribution agreement with leading online video Website Youku (NYSE: YOKU) (English article), and is part of a broader trend that has seen the major Hollywood studios take a recent new interest in the China market as demand for legal content grows. DreamWorks’ two moves would follow the phenomenal success of its latest “Kung Fu Panda” film, which broke the box office record for an animated feature in China, partly due to its Chinese theme that appealed to local audiences. DreamWorks wouldn’t be the first to set up a filmed entertainment joint venture with an eye to earning big bucks in China. Warner Brothers (NYSE: TWX) was quite bullish on the market when it established a similar joint venture a while back, but had difficulty competing with the pirates who made its films available on bootleg discs usually within days of their theatrical releases. What’s different here is that while Warner was going for a smaller slice of the Chinese market with lower-budget films, DreamWorks has shown with “Kung Fu Panda” that it can make blockbusters that can do well enough at the box office to support their big budgets. The latest “Kung Fu Panda” earned nearly $100 million at the Chinese box office this summer, proving the market is growing fast and could easily justify a made-for-China title with a budget of up to $20-$30 million. Given its expertise at making popular animated films and China’s growing fondness for such films, I would say DreamWorks’ China dream looks like more than just a fantasy, with a very good chance for big success.
Bottom line: DreamWorks’ plans for a China animation joint venture looks like good business for this animation specialist, drawing on Chinese viewers’ fondness for slick Hollywood blockbusters.
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