Chinese film production company Huayi Bros. Media Corp. has closed a major film slate deal with Robert Simonds' new movie and television studio, STX Entertainment, highlighting the growing business ties between Hollywood and China.
Under the three-year deal, Beijing-based Huayi Bros., one of China's largest film companies, will co-produce and co-distribute 12 to 15 films annually with Burbank-based STX Entertainment. That represents virtually all of the studio's films through the end of 2017, according to a statement from the companies.
The pact increases Huayi Bros.' growing global footprint in the entertainment industry and is one of the largest film slate deals to date between a Hollywood company and a Chinese film studio.
"We knew that if you are going to try and build a studio in this day and age, China has to be part of your story," said Simonds, who has produced films such as "The Wedding Singer" and "Happy Gilmore." "That's why we went to Huayi. It's one of China's largest providers of film."
Major studios have signed deals with producers in China in recent years. Last month, China's Hunan TV & Broadcast Intermediary Co. announced that it would give Santa Monica film studio Lionsgate as much as $375 million in production financing over the next three years.
Yet few Chinese companies have invested directly in Hollywood films or entire slates, making STX's pact with Huayi Bros. unusual.
"It's one of the first major investments by a Chinese company in Hollywood films," said Lindsay Conner, a partner in Manatt, Phelps & Phillips, which represented Huayi Bros. in the negotiations.
"We've gone through a number of years where there was a lot more talk than action," Conner said. "Now we've reached the point where Hollywood and China are sufficiently comfortable with each other's way of doing business and deals can close."
The partnership is the latest in a series of tie-ups between Chinese companies and the U.S. film business as China becomes an increasingly important source of revenue for Hollywood. The world's most populous nation saw its box-office revenue jump 34% to $4.8 billion last year, helping the industry set a global box-office record in 2014, according to the Motion Picture Assn. of America.
At the same time, Chinese companies such as Huayi Bros. are increasingly interested in strengthening ties in Hollywood as part of Beijing's broader strategy to project so-called soft power by promoting Chinese films and culture around the world.
Last year a Shanghai investment company, Fosun International, made a deal to invest in Studio 8, a film company started by former Warner Bros. Pictures Group President Jeff Robinov. In 2012, China's Dalian Wanda Group Co. bought the U.S. theater chain AMC in a deal valued at $2.6 billion.
Although financial terms of the deal announced Wednesday were not disclosed, the new arrangement will enable STX to spend about $1 billion every year on producing, marketing and distributing its films through 2017, the companies said.
Huayi Bros. will share in the global revenue of the films and will be granted a first-look distribution deal in China on most STX Entertainment films.
Huayi's investment will enable STX to substantially increase its output, which was previously limited to eight to 10 films a year, giving it the financing to produce more low- to mid-budget films overlooked by the major studios.
It also gives the company a foothold in China's rapidly growing film market.
Huayi will partner on nearly every STX title produced by the studio through 2017.
Those include "The Gift," a psychological thriller due out in July directed by Joel Edgerton and produced by Jason Blum that stars Jason Bateman, Rebecca Hall and Edgerton; the recently announced "The Free State of Jones," a Civil War drama to be released in 2016 directed by Gary Ross and starring Matthew McConaughey and Gugu Mbatha-Raw; and "The Boy," a 2016 horror
film from director William Brent Bell and starring Lauren Cohan ("The Walking Dead").
Although the films will target an international audience, Huayi's involvement could make it easier for the films to qualify as co-productions, which guarantees producers a larger share of revenue than other foreign films under China's quota system.
Dennis Wang, who founded Huayi Bros. with his brother in 1994, said the deal will help the company gain access to Hollywood.
"Partnership with STX is an important step as Huayi Bros. implements its international growth strategy and enters the U.S. film market," Wang said in a statement.
China's biggest Internet companies, Alibaba and Tencent, have each recently taken 8% interests in Huayi Bros., one of the most successful Chinese film production companies in recent years.
Simonds launched STX a year ago with TPG Capital, a private investment firm, focusing on films with low- to mid-level budgets of $20 million to $60 million.
The company brought on former Universal Pictures Chairman Adam Fogelson to run its movies division in September, and hired Oren Aviv, 20th Century Fox's former chief marketing officer, that same month.
Simonds said the idea of partnering with Huayi Bros. was first suggested six months ago by his longtime associate Donald Tang, a former Bear Sterns executive who helped to negotiate the deal.
Tang said Huayi will offer key advantages to a new studio like STX.
"Their reach is vast in China," Tang said. "Their connectivity inside China is far better than the American studios."