Breakingviews: Hollywood’s Oscar glow could be dimmed by China

Published Fri, Feb 24 20172:30 PM ESTUpdated Fri, Feb 24 20172:37 PM EST

Breakingviews

Jennifer Saba

Hollywood's Oscar glow could be dimmed by its biggest financial star. A cash crunch from China threatens to restrict what has been a welcome infusion of capital over the last few years. More than $5 billion from the People's Republic was pumped into U.S. movie production between 2014 and the second half of 2016, according to California-based lender East West Bank. A frenzy of deals included Viacom's Paramount Pictures, which recently received $1 billion from Shanghai Film Group and Huahua Media to help finance a quarter of its film slate for three years. The arrangements have worked well both ways. Studio bosses get the red carpet rolled out for them in the world's biggest movie market and much-needed funding as margins flatten out or fall. More from Breakingviews : China regulator reshuffle leaves turf intact Chinese investors, meanwhile, get to enjoy A-list treatment and the opportunity to spotlight the Middle Kingdom's appeal to the rest of the world. Dalian Wanda Group's Legendary Entertainment, for instance, co-produced "The Great Wall," with Matt Damon starring as a European mercenary during the Song dynasty. Though reviews were mixed, it has raked in $270 million worldwide, more than half of which came from Chinese theatergoers, according to Box Office Mojo. The Beijing-Los Angeles connection may be starting to strain, however. For one thing, Chinese regulators are beginning to crack down on money leaving the country. That may be one reason Wanda boss Wang Jianlin's $1 billion deal for "Golden Globes" producer Dick Clark Productions is on the rocks. Chinese copper miner Anhui Xinke New Materials also scrapped its purchase of "The Hurt Locker" producer Voltage Pictures in December. These factors suggest cost-cutting could be in store. Twenty-First Century Fox's operating margin, for example, has slipped from 18 percent in 2010 to 13 percent last year. Lions Gate's motion-picture division, whose "La La Land" is a best-picture nominee this year, also has suffered a decline in profitability. If China's role gets smaller, Hollywood's whole script could be rewritten. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com

An Oscar statue is seen for the Annual Academy Awards in Hollywood.

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Hollywood's Oscar glow could be dimmed by its biggest financial star. A cash crunch from China threatens to restrict what has been a welcome infusion of capital over the last few years.

More than $5 billion from the People's Republic was pumped into U.S. movie production between 2014 and the second half of 2016, according to California-based lender East West Bank. A frenzy of deals included Viacom's Paramount Pictures, which recently received $1 billion from Shanghai Film Group and Huahua Media to help finance a quarter of its film slate for three years.

The arrangements have worked well both ways. Studio bosses get the red carpet rolled out for them in the world's biggest movie market and much-needed funding as margins flatten out or fall.