Chinese conglomerate Dalian Wanda Group recently announced its purchase of an unspecified majority stake in U.S.-based Legendary films, the production company behind many of the biggest blockbuster franchises over the past few years, for $3.5 billion. The deal gives Wanda control over Legendary, which specializes in producing and financing pictures with Universal Pictures
Legendary has a proven track record at both the U.S. and Chinese box office, with franchise hits like The Dark Knight Rises, Godzilla, Inception, The Hangover, and Jurassic World. The recent acquisition brings the increased possibility of an extension of Legendary's properties to theme parks, as the Wanda Group recently opened a $2.5 billion Chinese park and is in the process of developing others. Despite this, the largest possible growth from the acquisition is not with licensing Legendary's intellectual property, but with the possibility of the Chinese government allowing all of Legendary's slate to bypass the country's foreign film cap.
While China is set to surpass the U.S. in box office gross by 2017, the country's policy that limits the amount of foreign films allowed to screen in the Middle Kingdom has stifled American studios from truly capitalizing on China's full potential in the market. The new deal brings questions as to whether Legendary productions will qualify as Chinese films because of Wanda's investments and, if so, how that will affect Chinese-American productions moving forward. If the Chinese government were to allow Legendary productions to bypass the foreign film cap, Chinese investors would have a strong competitive advantage when negotiating with American studios in the future. And with the Chinese government's emphasis on making Chinese films outgross American films in the nation, it seems likely that some films could slip through the restrictions if they are considered Chinese productions which add to the nation's domestic box office totals.
Additionally, the acquisition comes with the news that Wanda hopes to push Legendary towards an IPO in the near future with a combined Wanda production unit. Managing American companies is not foreign to Wanda, who Wanda purchased AMC, North America's second largest theater chain, for $2.6 billion in 2012. Soon after that investment, the valuation of AMC doubled under Wanda's guidance.
The partnership not only brings a strategic advantage in terms of potential access to the Chinese box office, but also in terms of developing Chinese-language films in addition to Legendary's current slate of dubbed films for Chinese audiences. Tull insists, though, that nothing will change creatively other than adding processes to develop Chinese-language films to bolster its offerings overseas.
While Wanda's purchase is the first major Chinese investment in an American studio, it is unlikely to be the last if Legendary continues to do well. The acquisition has the support of Universal Pictures, Legendary's distributor, and will likely increase revenue at the global box office for Universal. Even with these hopes, Wang already boasted with Tull at the announcement that the acquisition had made his company "the highest revenue-generating film company in the world."
