Imax sets deal with Wanda for biggest China expansion yet

Imax sets deal with Wanda for biggest China expansion yet
A Wanda Imax cinema location in the Hubei Province of China. Dalian Wanda Group has committed to adding 150 Imax screens to its theater circuit. (Photo by Zhang Peng/LightRocket via Getty Images)

Big-screen cinema company Imax Corp. is taking a major step to expand its footprint in China by deepening its ties with the country's largest cinema operator, Wanda Cinema Line.

Toronto-based Imax said Tuesday that it had signed an agreement with a subsidiary of conglomerate Dalian Wanda Group to add 150 theaters to its circuit during the next six years. Currently, Wanda operates about 160 Imax theaters in the country.


"It's the biggest deal in the company's 50-year history," said Imax Chief Executive Rich Gelfond in an interview. "The growth is just accelerating."

The pact represents the latest example of Hollywood's push into China, which is expected to surpass the U.S. and Canada as the world's largest film market as soon as 2017. The Chinese film business has exploded in recent years thanks to a rising middle class and substantial government support, growing nearly 50% to $6.8 billion last year.


Imax has been a major player in China's film business for about a decade, and is investing significantly to grow its presence there. Audiences in China have displayed a healthy appetite for the kinds of big, spectacle-based blockbusters such as "Captain America: Civil War" that work best in premium Imax format.

Imax also was a beneficiary of a landmark agreement in 2012 when China expanded the number of foreign movies it allows into the country under a revenue sharing agreement. Under the deal, China agreed to allow an additional 14 premium format films in the country, up from 20.

In another recent sign of Imax's bet on the growing market, the company's China subsidiary went public on the Hong Kong Stock Exchange in October. While investors responded tepidly at first, Imax China shares are up about 30% from their initial public offering price.

Wanda Cinema Line was one of Imax's original exhibition partners in China, opening a theater in Dongguan in 2007. The companies then signed a 75-theater joint venture deal in 2011, and in 2013 agreed to open additional theaters.


Worldwide, Imax has more than 1,100 theaters, 335 of which are open in China. With the new deal, Imax now has commitments to add 407 Chinese theaters in the coming years, including those from Wanda and other Chinese theater chains.

"Imax is big there and 3-D is big there, and that's where a lot of the box-office bump has been coming from," said Stanley Rosen, a USC political science professor who is an expert on China's ties with Hollywood. "[Imax] certainly sees China as their big market, with the U.S. being flat."

Wanda, the media and real estate giant run by billionaire Wang Jianlin, has been making film industry deals at a brisk pace to bolster its entertainment business and establish itself as a global player.

On Monday, the company inked a deal with Beverly Hills-based technology provider RealD to add 4,000 3-D projection systems to its cinema circuit. The additional RealD systems that will be installed during the next four years as part of the deal will grow its Wanda footprint to 5,600 screens.

"Our RealD-equipped theaters have been a significant part of our growth strategy," said Xiaobin Liu, executive president of Wanda Cinema Line, in a statement.

China's box office surpassed $4-billion in the first half of this year, up 21% from the same time in 2015, according to film industry consulting firm Artisan Gateway. Though that's a slower pace of growth than in recent years, it's still a sizable increase at a time when U.S. theater-growing is largely stagnant.

Much of the relatively small jump in ticket sales is because of the spectacular grosses for 2015 movies like "Furious 7" and "Jurassic World." Nonetheless, the numbers have raised concerns about a broader slowdown in China.

"The second quarter of Chinese box office was slow compared to a year ago, and people are concerned about that," Gelfond said. "I still think the Chinese box office is on a very torrid pace."


Imax has been an important partner for Hollywood studios trying to take advantage of the box-office trends in China. The video game adaptation "Warcraft," which bombed in the U.S., did huge business in that country, generating record-breaking first day ticket sales in Imax theaters.

In addition to standard Hollywood fare, Imax has shown Chinese films such as "Mojin: The Lost Legend" and "Monkey King 2" in its theaters, and local language movies have become a bigger business for the company. The Chinese Imax subsidiary is co-financing local movies.

The China-Hollywood relationship will face a major test with this year's release of "The Great Wall," a big-budget Chinese-American co-production starring Matt Damon that is set to get a big Imax release.

Wanda has been leading a wave of global consolidation of the entertainment industry, having acquired "Warcraft" and "The Great Wall" producer Legendary Entertainment earlier this year for $3.5 billion. "Warcraft" clearly benefited from the market clout of Wanda, which heavily promoted the movie in the country.

Wanda also owns AMC Entertainment, the second-largest U.S. theater circuit, for which it paid $2.6 billion in 2012. AMC is trying to buy smaller rival Carmike Cinemas in a deal valued at $1.2 billion, including debt. AMC is poised to become the world's largest cinema owner once it completes another $1.2-billion deal to acquire London-based Odeon & UCI Cinemas Group.

In addition, Wanda has recently been in talks to buy 49% of Paramount Pictures from the storied studio's parent company Viacom Inc. Such a transaction, though, would be complicated by the conflict raging between Viacom CEO Philippe Dauman, who is pushing for the transaction, and controlling shareholder Sumner Redstone, who opposes such a deal.

Follow Ryan Faughnder on Twitter for more entertainment business coverage: @rfaughnder