How Chinese Firms are Transforming the Global Media and Entertainment Industries

red hollywood

This week I take a look at how Chinese businesses are expanding into the sphere of international entertainment and media, shaking up industries such as leisure, movie making and broadcasting. Below I run through what this entails and crucially what it means in terms of opportunities and threats for everyone else.

Hollywood Meets Industrial China

Qingdao is not a place you would normally expect to see Nicole Kidman or Leonardo Di Caprio, but Hollywood royalty descended on the Northern Chinese city better known for shipping and manufacturing than cinema in September 2013 in order to witness the grand opening of the new movie making centre, the Oriental Movie Metropolis. The Metropolis will create twenty sound stages, an underwater studio and a host of other facilities all at a cost of US$ 8 billion to create both Chinese and Hollywood films (which are increasingly tailored to Chinese tastes) all with the eventual aim of creating a cultural powerhouse in Northern China.

Enter Wang Jianlin – Entertainment King of China

The person behind this scheme is Wang Jianlin, reputedly China’s richest man, thanks to a sprawling hotel, real estate and entertainment business named Dalian Wanda. Wang has a strong understanding of the power of culture and the media to create both wealth and power and he is in the process of building a global business empire encompassing many different sectors but which is likely to shake up the movie making business in an unprecedented way. Not only has he built the Qingdao Metropolis but he has also taken control of the US based AMC cinema group for US$ 2.6 billion, setting up Dalian Wanda to reach its target of taking a 20 percent share of the global film industry by 2020.

The Quest for Soft Power

It is no great secret that China and its government get a bad press around the world, sometimes the criticism is fair and other times misinformed or xenophobic. But the Chinese government is not blind to this reality and has started to invest in Chinese backed newspapers abroad and build up foreign bureaus of CCTV – the state broadcaster in an attempt to get their own message across and emulate the other publicly owned broadcasters with a global reach such as Russia Today and the BBC, as well as privately owned channels perceived to promote a particular (United States) agenda such as CNN and Fox.

While the English version of Xinhua, the Chinese Communist Party’s official mouth piece is akin to watching paint dry, other papers are making more of an effort. For example China Daily is widely distributed and offers interesting articles and strong analysis. The Chinese are not alone in this quest to build a global media brand; both France and Russia have joined the Qatari owned Al Jazeera in putting money into English language journalism in an attempt to put their message across in what they see as a US dominated media landscape.

Although the likes of China Daily are hardly crude propaganda pieces, these efforts to exert “soft power” have been often decried as counterproductive and clumsy, but from a business perspective it is highly likely that Chinese media companies will continue to expand their oversea presence in newspapers and broadcasting.

As they grow more confident Chinese companies overseas will target more entertainment and media brands, seeing the profitability and brand strength inherent in entertainment enterprises as attractive, but companies controlled by the government will also see the chance (how-ever subtly) to turn around the country’s reputation and steer the global conversation in their favour.

What Does This Mean For Me?

Chinese companies are interested in buying technical knowhow, firms which offer high value in terms of market share and/or profit, as well as innovative technology or capabilities, (such as computer game developers) particularly those adaptable for Chinese audiences are highly attractive to the many firms expanding abroad for the first time. For those not interesting in selling to Chinese firms, joint ventures to make products, movies, computer games for a global and Chinese audience (look at the many recent films incorporating Chinese locations) can be an attractive alternative, albeit one with a steep learning curve attached.

Newspapers, Magazines and TV

Thanks to the rise of Chinese owned broadcasters and media outlets there will be more opportunities to work with Chinese media companies in order to help them get their message across, whether it be as a writer, presenter, producer, economic analyst or political pundit. Chinese media’s spread across the globe will open doors for those willing to have Beijing as a paymaster and learning about these organisations and making contact with them now at a time they are growing rapidly is critical.

A word of warning, anyone working with Chinese media outlets will run the risk of being branded a mouth piece of the Chinese Communist Party or worse. The rise of Russia Today (RT), which employs many Western journalists has undoubtedly increased Russia’s soft power and international profile, but many have decried its coverage as pro-Russia propaganda and those working for it as Putin’s stooges.

Sports and Leisure

Up until recently Chinese companies have not been known for their involvement in the leisure industries of foreign countries. This looks set to change as we see the onset of Chinese firms and entrepreneurs taking an interest in overseas leisure assets, whether it be cinema complexes, restaurants, gyms or sports clubs. These enterprises are rarely classed as having strategic importance, so their purchase can be usually achieved with the minimum of political controversy. Chinese firms are likely to seek out assets with a clear strong brand with a view to repackaging and reverse integrating the brand back into China. If you own or are involved in this sector then this could be an opportune moment to seek out at Chinese buyer, as the recent sale of UK based Pizza Express to China’s Hony Capital for £900 million underlined.

A Jewel in the Crown

Buyers from the Gulf, Thailand, Malaysia and the USA have brought up many of the biggest football clubs in Europe, in many cases they have been purchased as a trophy asset, the crowning jewel of an otherwise dull investment portfolio, not likely to make much of a profit thanks to spiralling footballer wage payments and transfer fees. What owners get instead is glamour and prestige, a front row seat to the world’s best leagues, somewhere to take their friends, family and business associates and show off their ownership of the most skilful players. Other buyers put profit first, which could mean rebranding the team in a bid to make them more appealing for the overseas market. Vincent Tan the controversial Malaysian owner of Cardiff football team changed the clubs’ main kit colour to red in order to increase their appeal in Asia where red is seen as lucky and associated with good fortune.

Roll the Dice

Macanese backed casinos in Africa, Asia and Europe have the potential to shake up a tightly regulated industry. Macao, a Special Administrative Region of the PRC, is the only place along with Hong Kong in China where gambling is legal. The industry dates back from its time as a Portuguese colony, this and a Chinese love for gambling has resulted in the city has becoming the world’s biggest casino industry and extremely rich in the process. However gambling is never likely to become legal on the mainland which will result in Macanese casino companies seeking to build complexes across the globe in order to expand their holdings. Casinos are of course subject to tight regulations in many countries given the criminal and social ills associated with them, but the lure of money, glamour and extensive industry lobbying often makes them irresistible to cash poor governments, so we can expect to see Chinese companies seize on any changes to national gaming laws around the world to build casinos.



Categories: China Goes Global, Country Investment Analysis, Frontier Market Strategy

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