Alibaba could give Hollywood studios new pipeline into China
He’s the richest man in China, and he’s coming to Hollywood.
Jack Ma, who founded Chinese e-commerce juggernaut Alibaba Group, will be in town next week to visit the lots of major studios, including 20th Century Fox, Sony Pictures Entertainment and Paramount Pictures, for a series of sit-downs with high-level executives.
One likely agenda item is Internet streaming of films and other content. Like Amazon in the U.S., Alibaba is the dominant player in online retailing in China — and could use that clout to give Hollywood a new pipeline into millions of Chinese households.
It’s a plan that would appeal to the studios, which must contend with a quota system for theatrical releases in China. Deals with Alibaba could potentially enable the studios to circumvent that restrictive arrangement.
Pacts with Alibaba would also ensure that more of studios’ content would be viewed legally in a country that has long been a haven for digital piracy. Alibaba’s diverse entertainment holdings include a stake in popular online video portal Youku Tudou, which already shows some U.S. films and television shows.
“Theoretically, there is no limit to the number of Hollywood movies and shows that can be distributed online,” said Rob Cain, a producer and veteran studio consultant on China. “Studios are already doing business that way in China — but the difference here is Jack Ma. He’s a big player with a lot of money.”
Alibaba’s initial public offering of stock in September gave Ma a formidable war chest — the company has about $16 billion in cash, according to analysts, and a market value five times greater than General Motors’.
And Ma, a former schoolteacher said to be enamored of show business, is worth about $21 billion.
“Hollywood loves it — the one thing Hollywood wants is money,” said USC political science professor Stanley Rosen, a Chinese film business expert.
Even so, doing business in the world’s second-largest film market carries unique challenges.
Studios have run up against China’s censors and had trouble getting some films shown there, with projects including “Django Unchained” yanked from theaters and others such as “Noah” being denied a release.
There also is a history of foundered deals between U.S. entertainment companies and Chinese businesses.
Beijing film production company Huayi Bros. Media Corp. was in talks this year to invest as much as $150 million in Studio 8, the new film company led by former Warner Bros. Pictures Group President Jeff Robinov. But no deal was struck. Only months later did Robinov find a backer in Shanghai-based Fosun International.
“Everybody at these [studios] has been approached by dozens of people from China purporting to do certain things,” Cain said. “Everybody has had disappointments.”
Beyond cutting content deals, Ma is seen as a potential investor in studios, following a long line of tycoons (including Joseph P. Kennedy and Howard Hughes) attracted by Hollywood’s starlight.
This week, the New York Post reported that Alibaba is looking to take a roughly 37% stake in Santa Monica-based Lionsgate, which has the “Hunger Games” franchise.
Alibaba is reportedly interested in buying the shares owned by Mark Rachesky, Lionsgate’s chairman and largest shareholder, who is president of the New York investment firm MHR Fund Management.
Analyst Matthew Harrigan, who follows Lionsgate for Wunderlich Securities, said a deal could make sense because the companies have worked together before. In July, they made a deal to create a subscription service that lets customers in mainland China stream Lionsgate movies and TV shows such as “Divergent” and “Mad Men” on Alibaba’s set-top boxes.
Lionsgate and Alibaba declined to comment.
Alibaba, whose IPO raised $25 billion, is a jack-of-all-trades in China. In addition to its enormous e-commerce businesses, the company has interests in banking, maps, cloud computing, online payments, music streaming, and TV and film production.
Rob Enderle, principal analyst at Enderle Group, said Alibaba is “trying to create an amalgam of Amazon, EBay, Google and Netflix.”
Getting movies and TV shows from the U.S. is a key part of Ma’s push to become a global player in the e-commerce business.
Alibaba wants more entertainment content to attract people to its set-top boxes, which essentially gives the company a foothold in Chinese households and makes it easier for customers to shop from home. Ma has been making Western brands available through its shopping websites, and American movies and TV shows are a logical next step.
So far this year, three of the top five theatrical movies in China are American, led by “Transformers: Age of Extinction.”
Alibaba, founded in Ma’s apartment in 1999, now counts 279 million buyers and generated $8.46 billion in the fiscal year that ended March 31.
Unlike U.S. e-commerce companies Amazon and EBay, Alibaba came to prominence at a time when its home country’s consumer culture was just emerging, giving it enormous influence over the way people shop.
It’s no secret that Chinese Web companies are interested in the entertainment business, with Alibaba trying to catch up to two other Internet titans that have made headway in that space: search giant Baidu and online services firm Tencent.
In June, Alibaba acquired a 60% stake in ChinaVision Media Group, which it renamed Alibaba Pictures. Action star Jet Li is the entity’s independent nonexecutive director. Ma and another Alibaba executive also have an interest in Wasu, an online video business.
Among the Hollywood power players Ma is scheduled to meet are Fox Chairman Jim Gianopulos, as well as Paramount Chairman Brad Grey and Vice Chairman Rob Moore, according to people familiar with the plans.
Talent agent David Unger, who represents Chinese actress Gong Li, foresees a long relationship building between Ma and Hollywood.
“I wouldn’t be surprised if we see Alibaba make more substantive investments in this area,” Unger said. “I believe it is only the beginning.”
Times staff writer Julie Makinen in Beijing contributed to this report.
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