Huayi Brothers mulls taking different path to Hollywood

View of a logo of Huayi Brothers during an exhibition in Shanghai, May 25, 2015.[Photo/IC]

It is not unusual to hear about Chinese firms acquiring Hollywood movie studios these days, but film mogul Wang Zhongjun said that would not be his first choice to expand internationally.

Wang, president of Huayi Brothers Media Corp, said his company will accelerate its international expansion, especially in the United States. But he said purchasing big companies overseas is not the best way to do it.

"Just like when Huayi started its film business in China, we used the method of signing a large number of talented film directors and producers, and we hope this model can be used in the US," he said. "After all these years' of experience in the United States, we think it is possible to do that."

Huayi was founded in 1994 by brothers Wang Zhongjun and Wang Zhonglei. The company's roots are in movie production, but it also has expanded into developing and distributing mobile games and building theme parks in Asia. As a listed company, Huayi's market value is about $80 billion, equal to about five DreamWorks, Wang Zhongjun said.

Huayi tried to start its international journey by co-financing movies with US companies, but that resulted in three failed attempts and many challenges.

In 2014, the company changed its approach and directly invested $130 million to establish a wholly owned US subsidiary to produce and distribute movies and TV shows in the US.

Huayi also plans to work with STX Entertainment, a Burbank-based, fully integrated film and TV company, to jointly invest in and co-produce 18 films to be distributed worldwide by 2018. This will be the first time that a Chinese company participates in all activities in the value chain, from production to marketing and distribution.

Wang Zhongjun, president of Huayi Brothers Media Corp, attends a lecture in Chengdu city, southwest China's Sichuan province, 20 March 2014.[Photo/IC]

The deal could also help Huayi promote its brand globally and obtain access to the Hollywood film industry.

"I think it's an important strategy for Huayi in Hollywood to look for good directors and producers, and use the Chinese market's capital strengths," Wang said.

"In future, we would like to have a controlling stake and to develop Huayi into a very good studio with our own products, our own production lines, and distribution channels overseas," he said.

In its quest to develop a better internationalization strategy, Huayi held a forum on the topic recently in Beijing, inviting industry insiders for insights.

"Huayi is still new at working with the world and the tycoons of the entertainment market. We are still discussing it－how to find a better way that suits us, and how to find better platforms that help integrate Chinese culture and world culture. These are all things we are looking for," Wang said.

Ren Guoqiang, senior partner of Roland Berger Strategy Consultants, said he appreciates that Huayi has given a lot of thought to international strategy, noting that Wang has spent a lot of time in Hollywood communicating with international talent.

He said internationalization is not only about how much of the company's business, clients or income comes from overseas. The first step for companies to become international is for the owner of the company to be international.

Teng Binsheng, a professor with the Cheung Kong Graduate School of Business, a private institution in Beijing, said: "In the past few years, I have seen that some Chinese companies are able to make first-class movies together with their Hollywood partners, which is a good sign that Chinese companies are able to go global and begin to make movies that cater to the global audience's tastes."