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Relativity Raises Chinese Backing for Global Studio to Produce and Release Films in and Out of China

by Anne Thompson
August 14, 2011 10:56 AM
1 Comment
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Thompson on Hollywood

Relativity Media's Ryan Kavanaugh doesn't sit around. The guy has pacted with a Chinese equity firm and a China-focused investment entity to back a production/acquisition/distribution company geared toward Chinese language films with global appeal.

Crucially, Relativity also plans to release in China via new combine Skyland and a partnership with China's Huaxia Film Distribution Co., its own English-language films Immortals, Haywire, Act of Valor, Snow White and The Raven. This is a huge breakthrough. Distribution has been an enormous stumbling block for foreign films in China, which censors and controls and limits the numbers of outside films showing on Chinese screens to 20 a year. Through this deal Relativity can release movies in China free from the quota, on a revenue-sharing basis.

China is a huge market that the studios have been eager to penetrate, but have had only limited access to its screens. “China is the fastest-growing film market in the world," Kavanaugh said, "with over 6,000 screens and over $1.5 billion in box office revenue last year, an increase of over 60% last year alone."

It seems that Relativity's willingness to release commercial Chinese films around the world made the difference here. The studios are already entrenched with their international and domestic release machines, which tend not to be geared toward anything but Chinese art films, in the case of Sony Pictures Classics. And China's relationship with indie Weinstein Co. has been strained ever since Harvey Weinstein reneged on his promise to release Chen Kaige's $35 million epic The Promise. Long-delayed John Cusack-starrer Shanghai, which the Chinese did not permit to be filmed in China, is still on the TWC shelf. Relativity marks a fresh indie entity for the Chinese--there are no prior institutional barriers to overcome.

Relativity has acquired a portion of Skyland from Asian private equity firm SAIF Partners and IDG China Media, a China-oriented investment arm of Boston's International Data Group (IDG), at the same time gaining investment from them toward producing, acquiring and distributing Chinese fare overseas.

Oddly, the Chinese released one story and Relativity another.

Here's Relativity's:

SAIF Partners, a leading Asian Private Equity Firm, and IDG China Media, a China-focused investment arm of Boston-headquartered International Data Group (IDG), and Relativity Media announced today that they have formed a partnership to develop, produce, distribute and acquire Chinese material that also possesses worldwide appeal.
Relativity will distribute all of its future films in China, including Immortals, Haywire, Act of Valor, Relativity’s Untitled Snow White Project, and The Raven, through SkyLand. SkyLand is a fully-funded, vertically-integrated film and multimedia production, distribution and financing company, which was jointly owned and controlled by SAIF Partners and IDG China Media, and now is also owned by Relativity. SkyLand is also partnered with a China-based RMB fund to co-invest in local film and television content and production, which is the equivalent of $100 million US dollars. The parties are already working on numerous projects which will bring well-known Chinese folklore and content to the big screen and to audiences worldwide.
SkyLand functioned as SAIF Partners and IDG China Media's entertainment arm, and most-recently co-produced Snow Flower and the Secret Fan, inspired by the worldwide best-selling novel by Lisa See, with screenplay penned by Academy Award® winning writer Ron Bass (Amelia) and directed by Wayne Wong (The Joy Luck Club). Backed by two leading investment firms in China and now co-owned by Relativity Media, SkyLand is on track to grow into a competitive production and distribution entity at the forefront of American and Chinese entertainment and media. SkyLand was formed by SAIF and IDG over two years ago and has been very active in and at the forefront of the Chinese film and television business.
“China is the fastest-growing film market in the world, with over 6,000 screens and over $1.5 billion in box office revenue last year, an increase of over 60% last year alone. We’re excited to be entering into this booming market with such great partners in SAIF, IDG and our new strategic partnership with Huaxia. Given the substantial platform created by SAIF and IDG in SkyLand, we believe together we can grow a distribution business in China which brings global product to China, and brings Chinese product to the global market,” said Relativity’s CEO, Ryan Kavanaugh.
Andy Yan, Managing Partner of SAIF and a large investor in SkyLand and Relativity said, "The China entertainment industry has become one of the fastest and most lucrative industries in China today. Until now, there has been a major void in bridging the two worlds of the American and Chinese film industries. After spending significant time learning about Relativity's business and how they approach the international markets, we couldn't be more pleased to have entered into what will undoubtedly be a revolutionary shift in the China film business as we know it. Relativity's business model has revolutionized the film business in the US, and this partnership will do the same for China."
Hugo Shong, Founding General Partner of IDG China Media and a co-financier of SkyLand said, “We couldn't be more excited about creating this revolutionary partnership, and simultaneously entering into a strategic partnership with Huaxia, who has successfully distributed such films as Harry Potter, Transformers, Kung-Fu Panda, Fast Five, Prince of Persia: The Sands of Time, 2012, Alice in Wonderland, Sherlock Holmes and many others in China."

The Chinese version, which the trades relied on, is slanted to stress the relationship with the Chinese government through the alliance with Huaxia necessary to conduct film business there:

Huaxia Film, Relativity Media and SkyLand Hold Ceremony Launching Strategic Partnership

August 15, 2011 (Beijing) - Huaxia Film Distribution Co., Ltd., Relativity Media and SkyLand (Beijing) Film-Television Culture Development Ltd. jointly announced today the milestone launch of their strategic partnership. The launch occurred at the headquarters of Huaxia Film in Beijing, marking a significant commitment to this Joint Venture from Huaxia. Huaxia Film's Executive Chairman Guoqing Gu, Relativity Media's founder and CEO Ryan Kavanaugh, SAIF Partners' Managing Partner Andy Yan and IDG China Media's Founding Partner Hugo Shong attended the press conference. The three parties, Relativity, SAIF and IDG also announced separately the formation of the first China/US distribution company Sky Land Entertainment.

The strategic partnership has assembled some predominant companies in the film industry, including Huaxia Film, Relativity Media, SAIF Partners, IDG China Media and Sky Land. Huaxia is one of the biggest movie production and distribution companies in China, having grown dramatically and already extending its business globally, releasing more films in China than almost any other company. Relativity Media has been the most prolific and innovative independent film studio in the US, having produced and/or distributed more than 200 films, with more than $16 billion revenue in worldwide box office, in the past 6 years alone. Sky Land has been prominent in the production, financing and distribution of Chinese content films in the past few years.

The strategic partnership among these companies will positively accelerate the co-production between the film studios across the borders, according to Huaxia Film's executive Chairman Gu. "This partnership will broaden the cooperation platform introducing significant resource for the co-production of future movies while allowing us to build on valuable movie production experiences from overseas. Meanwhile, such partnership will also open the channels for Chinese movies to air globally and offer international audiences a better understanding of Chinese culture."

Ryan, the founder and CEO of Relativity Media, is excited about this strategic partnership. "We're excited to be entering into this ground breaking partnership. With 6 new screens added daily in China and a business which has been tripling in revenue every 3 years, it is unquestionable that China and the United States must work closely together to build an entertainment business for the future, which strives to make and release global product appealing to worldwide audiences. This is a critical first step in achieving just that."

Andy Yan, Managing Partner of SAIF Partners and Relativity's partner and investor in Sky Land Entertainment, said: "The China entertainment industry has become one of the fastest growing industries in China today. Until now, there has been a major void in bridging the two worlds of the US and China film industries. After spending significant time learning about Relativity's business and how they approach the international markets, we couldn't be more pleased to have entered into what will undoubtedly be a revolutionary shift in the china film business as we know it."

Thanks to the partnership, several cross-border hits will be co-produced. The three parties are working on some high-budgeted China-themed movies, which are based on famed modern historical events. The purpose is to create movies which will be appealing to both Chinese and western audiences alike, attracting strong national and international box office success, and ultimately a goal towards solidifying a more fluid film partnership between the US and China while creating a good return for those investing in the business.

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More: Independents, News, Relativity

1 Comment

  • mary | August 15, 2011 2:23 AMReply

    In Mainland China, the government divisons are corrupted and the laws for movie industry are too inconsistent and ridiculous. (It is a major reason why most of Chinese box office hits are actually moneylosers.) On the other hand, much of box office revenue actually went to the government divisons (thanks to online film piracy, the home video market in China is nearly non-existent)

    US Studios know how corrupted Chinese government's divisons are, but no one is dare enough to say anything about it.

    Mainland China is simply a country without justice; it is not a good place to make films.

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