Paramount Pictures, the Viacom Corp.-owned studio that has struggled at the box office, is getting a financial boost from two Chinese media companies.
Shanghai Film Group and Huahua Media have agreed to co-finance the studio's slate of films over the next three years, the companies said in a statement Thursday. Financial terms were not disclosed but the partnership will be worth as much as $1 billion in financing to the studio, according to a person briefed on the pact.
Shanghai Film Group and Huahua Media will open and jointly maintain an office on the Paramount lot in Los Angeles starting later this year.
The deal is the latest Hollywood investment by Chinese power players and comes three months after Viacom's board rejected a plan to sell a 49% stake in Paramount Pictures to Dalian Wanda Group. After Viacom scuttled the sale plan, Paramount Chief Executive Brad Grey and Viacom Vice Chair Shari Redstone needed a plan to better capitalize the studio, which had suffered for years from a thin film slate. Paramount signed the deal on New Year's Eve, after Grey talked to nine different companies about investing.
"Clearly we now have the capital, the wherewithal and the capabilities to produce the movies we want to make and compete head to head with the other majors," Grey said in an interview.
Many major and mini-major film companies have secured financing agreements with investors from China.
Dalian Wanda Group has been the most aggressive, signing a deal last year to invest an undisclosed amount in Sony Pictures movies. The Chinese conglomerate has also acquired Dick Clark Productions, Legendary Pictures and the AMC theater chain.
China's Perfect World Pictures last year pledged up to $450 million for Universal Pictures productions over five years. Alibaba Pictures, the entertainment arm of Jack Ma's e-commerce giant, recently announced a deal to co-produce and co-finance movies with Steven Spielberg's entertainment company, Amblin Partners.
China's Hollywood ambitions, however, have raised red flags in Washington. Last year, 16 members of Congress signed a letter calling for increased scrutiny over China's involvement in American films, citing "growing concerns" over Chinese efforts to exert "propaganda controls on American media."
Paramount, Huahua and Shanghai Film Group said they would actively seek opportunities for co-productions, which exempt studios from China's strict quota on foreign movies.
The partners will also help promote Paramount films to audiences in China, the second-largest movie market behind the U.S. and Canada. The two Chinese companies have previously invested in Paramount movies, including "xXx: Return of Xander Cage," due in theaters Friday, and "Jack Reacher: Never Go Back."
The deal is expected to cover 25% of the costs of each film on Paramount's slate and could extend for a fourth year, according to the knowledgeable person who was not authorized to comment publicly.
The financing should help Paramount increase the number of movies it makes. The studio has lagged behind its rivals in the box office in recent years partly because of its thin slate and movies that fared poorly, including the just-released movie "Monster Trucks" and the Brad Pitt World War II drama "Allied."
Paramount released 15 movies last year, up from eight to 12 in previous years. New funds could boost its output to 17 movies a year, closer to the level of rivals such as Universal and 20th Century Fox, Grey said. "There was a real appetite … to figure out how to capitalize a slate for years to come," Grey added.
Shanghai Film Group is the studio arm of Shanghai Media & Entertainment Group, a major Chinese entertainment conglomerate that owns movie theaters. It makes live action, animated and documentary films in China. Huahua is a marketing and distribution firm that has worked on Paramount films such as "Transformers: Age of Extinction," "Star Trek Beyond" and "Mission Impossible: Rogue Nation."