What’s the real reason for Dalian Wanda’s cinema acquisition spree?

April 9, 2013
April 9, 2013

Dalian Wanda, a Beijing-based private company, is in talks to buy an unspecified European cinema chain (paywall), according to the Wall Street Journal.  Dalian has a proven track record when it comes to shelling out money for overseas theater investments—it paid $2.6 billion for AMC last year—but why is it hunting for acquisitions abroad when it has a massive and fast-growing cinema market at home?

Leverage with film studios. A successful acquisition in Europe—industry rumor pinpoints Odeon & UCI Holdings or Vue Entertainment as the likely candidates—would give Wanda a presence on three continents, in three of the biggest movie theater markets. That could alter the balance of power between Dalian and the Hollywood studios, which typically negotiate distribution deals on a regional basis. “Exhibition has tended to be a territorial business,”   Screen Digest analyst David Hancock told the WSJ. “A major global chain could change the dynamics.” In addition to mulling a European acquisition, the company is currently exploring plans to build multiplex cinemas in India

Chinese soft power. Some surmise the acquisitions are part of a broader soft power agenda by the Chinese government to bring more renown to Chinese film and entertainment, in part by funding blockbusters like Iron-Man 3 and World War Z. The AMC acquisition, for example, gave Wanda a base for deals with Hollywood to lend more expertise and resources to Chinese film-making, Joel Backaler, a director at Frontier Strategy Group, tells Quartz. A joint US-China production studio in Dalian will start making films by 2016.

Expertise at home. There’s some benefit for Wanda at home too. Its 814 screens across China are still paltry compared to the 5,028 cinema screens and 346 multiplex theaters that AMC owned. Buying established movie theater operators gives Wanda expertise and exposure to industry best practices, which is perhaps its ultimate goal in China’s booming cinema market. An average of nine new cinemas open in China every day and competition from local competitors is growing.

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