Why is Wanda Group Working So Hard to Win Hollywood’s Favor?

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By Robert Cain for China Film Biz

September 25, 2013

I’ve seen more than my share of Chinese movies over the years, but not one has been nearly so entertaining as the show that Wang Jianlin and his Wanda Group have been putting on recently for Hollywood’s benefit.

With its $20 million investment in the Motion Picture Academy museum and its star-studded publicity blitz for a new mega-studio complex in the Chinese city of Qingdao, Wanda is mounting a big, fascinating show to win favor in Hollywood.

And it’s perfectly reasonable to ask “why?”

Now reportedly China’s richest person, Wang has styled himself as the P.T. Barnum of his age, a billionaire grandstander and showman who has brought panache to an industry that—in Hollywood, anyway—has become as moribund as a funeral parlor. Like the great 19th century circus master who preceded him, Wang has seized the global entertainment industry’s center ring with a wink and a nod and a fervent belief that there’s an endless line of suckers ready to buy what he’s selling.

And if you bought all the press that came out of Wanda’s $50 million media circus in Qingdao the other day—the event where the company assembled Leonardo DiCaprio, John Travolta, Nicole Kidman, Jet Li, Zhang Ziyi and Christoph Waltz (the new cast of The Expendables 3, perhaps?) to announce an $8 billion studio investment in a city better known for beer than for entertainment—if you took this Barnum & Bailey style dog and pony show at face value, then you, my friend, have been suckered too.

Wanda has set the movie world’s tongues wagging over a plan that defies logic. This is a company that has invested in barely a dozen pictures, most of which have failed to crack $1 million at the Chinese box office, that now claims it will soon dominate the global film business.

It’s a company that has announced designs to build the world’s largest film production base in a country that’s already glutted with underutilized sound stages, post houses, and state-of-the-art production facilities. Again, why?

If Wanda were able to time travel back to, say, 1940, then sure, it might make sense to construct 20 new soundstages and 100,000 square feet of production space, but this is the age of digital, baby, of green screens and GoPro cameras and desktop video. An age where technology and economics have made location shooting preferable and giant stages an overpriced luxury for most. The last time an American production company considered building such a grand filmmaking campus was back in 1994, when DreamWorks penciled out the cost/benefit and wisely decided to forego a massive bricks-and-mortar capital outlay.

And why Qingdao? It’s a lovely city, often described as China’s most livable, but Qingdao offers virtually zero advantages in the highly specialized and skilled labor-dependent entertainment business. It’s as if Rupert Murdoch suddenly announced he was moving his Fox empire to Annapolis, Maryland or Little Rock, Arkansas.  Wanda will need a huge proportion of China’s entertainment industry to uproot itself and relocate to Qingdao in order for this new complex to achieve long-term economic success.

But maybe he doesn’t care about all that. Wang is a shrewd operator with a phenomenal record of business success, so it would be foolish to dismiss his schemes as pure hubris. I’ve become a fan of Wang’s larger-than-life theatrics, and I think there’s a brilliant method to his madness.  To fully grasp what’s going on here it’s helpful to understand how a conglomerate like Wanda makes money.

Real estate.

Real estate.

Real estate.

One of the surest ways to make a quick buck (or a billion) in China is to syndicate a massive real estate project. First, you persuade your government buddies to grant you a sweetheart deal on a few square miles of land. You come up with a plausible, marketable plan for using that land. Then you attract your investor buddies to provide seed financing for the project.  Market the project properly and billions more will follow. And for every brick that gets laid, for every bucket of concrete that gets poured, you and your buddies take a healthy percentage of the churn. It’s a way to transfer wealth without actually creating economic value.

This is why China has so many huge ghost cities with no residents, so many luxury shopping malls with no customers, and so many production facilities with no productions.

And it gets even better. Movies are an even more liquid way to skim cash. There’s no completion bond industry in China because there are no producers willing to tolerate auditors looking over their shoulders. Some of the budget makes its way up onto the screen, and some of it goes, well, elsewhere. On each movie that Wanda funnels through its “Qingdao Oriental Movie Metropolis” it will make money coming and going, regardless of box office performance.

Which brings us back to Wanda’s outreach to the U.S. film business. What better way to gain global attention and sex up a project than by leveraging the glamor of Hollywood? Wanda has created a halo effect for itself and its Qingdao venture by presenting a huge check to the Academy museum, by touting its barrels of cash and its thousands of movie screens, and by surrounding itself with movie stars and major studio executives. It’s all about curb appeal. It’s a smart, creative, and ultimately reliable way to make lots of money.

P.T. Barnum would undoubtedly approve. As he himself once put it, “Without promotion, something terrible happens… nothing!”  And then again, “Every crowd has a silver lining.”

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

8 thoughts on “Why is Wanda Group Working So Hard to Win Hollywood’s Favor?

  1. Thank you for a fine and revealing article but your use of P.T. Barnum in an analogy here is not quite right – Barnum had a fine product he promoted. This man has dreams.

  2. If I had a Yuan for every time I heard someone say they’d rather not live in Beijing due to the pollution and it’s other big city problems I wouldn’t be quite as rich as Mr Wang but if his studio complex does get off the ground, where’s a freelancer going to go – Beijing or Qingdao? Not a difficult choice, especially if you have a family to raise. Although this, of course, doesn’t negate the main thrust of your post at all, I would think it gives the project a bit of hope and may, by accident or design, produce what has been promised at the cost of the older more established industry centred on Beijing.

  3. This guy knows a good deal or manipulates it that way and has a very good cash flow. I think that he will make it work even if it takes several years to start to churn out movies as they expect will come to produce. He has some clout with the film powers that be so that will be an advantage. Also he can promise buy outs for the China market and put them in his own cinemas both in China and the US. A good way would be to offer a buy out deal of payment after screening. That would cost him almost nothing and he could hedge his bets and the funds [Pun intended] over a dozen films per year.

  4. I agree with you Russell. Only time will tell, he has enough clout to make it happen. Good luck to him, I say let him live his dream whether it turns into a white elephant depends upon how the industry outside China treats him and his idea. I am reminded of the late Howard Hughes and his ambitions. I was waiting for your response to the event and I am glad you made such a balanced response Robert.

  5. I really love your insights. However, I can see it from another perspective.
    As a matter of fact, I think maybe he has been craving for attention and glamorous life for a long time. I totally agree with the “dream” theory, because this is more likely a dream to him.

    I don’t know how much you know about the real estate business in China. Actually, it’s simple and direct. Because there are more and more people who are in need of apartments, the price keeps going up and now it’s sky-high. Moreover, there’s no sign showing that it will be back cheap again. Tons of people in China became billionaires in one night because of this trend. Are they necessarily brilliant? Not really.

    Money can buy houses. Money cannot buy respect. So, Wang Jianlin is eager to show China, better yet, the whole world that he is classy and he can be part of the glamorous world. I wouldn’t see it completely as his ambition to conquer the entertainment world. On the contrary, I think it’s a way to show his insecurity about his social status. It’s typical in China.

    Actually, it’s not hard to understand. Your insights are great and your analysis is right to the point.

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