TCB In RMB: Le Eco Woes, Gu Crows, CAA & IMAX Grow

Welcome to TCB In RMB, a weekly summary of important developments in the Chinese entertainment business.

Director/Cinematographer Gu Changwei and his actress wife, Jiang Wenli score big on the sale of their production company.

LeEco, Le Sigh

Due to financial difficulties, a trading halt was announced Monday on shares of the Shenzhen-listed Leshi Internet Information and Technology Corporation, an arm of the internet and entertainment conglomerate LeEco.

Leshi immediately announced a meeting of its board to discuss restructuring. It said the suspension would not last more than five business days.  This is not Leshi’s first suspension—it was suspended from trading last December after a plunge in share price.

LeEco’s greater cash crunch began as early as last October, the result of overexpansion and its disastrous LeCar initiative. On Thursday, Leshi reported an RMB 340 million loss for 2016 ($49.4 million), sliding into the red for first time since 2010.

Showbiz Family Sells Out, Great Wall Buys In

On Tuesday, Great Wall Movie And Television Co.,Ltd., one of China’s leading TV drama producers, announced two proposed aquisitions: a 1.35 billion outright purchase ($196 million) of the entertainment company, Premiere Age, and an RMB 545 million ($79 million) purchase of the film exhibitor, Zheng Jiang Tonight Films.

Founded in 2010, Tonight Films operates five cinemas with fifty-six screens in China.

Premiere Age is a family company, owned by the acclaimed Fifth Generation cinematographer and director Gu Changwei and his actress wife, Jiang Wenli. Jiang’s niece, Ma Sichun—who won Best Actress at the Golden Horse Awards in November for her performance in the romantic drama, Soul Mate—is also on the board.

Premiere Age’s market capitalization stood at RMB 602 million ($87 million) at Thursday’s close, meaning the company is poised to reap a 3168.99% premium. Gu and Jiang’s family stand to cash out some RMB 800 million ($116 million) through the deal.

At the same time, Gu has guaranteed significant profits out of Premiere Age over the next three years, with minimum benchmarks of RMB 90 million ($13 million) this year, RMB 125 million ($18 million) in 2018, and RMB 159 million ($23 million) in 2019. If these are not reached, the family has pledged to refund the shortfall to Great Wall from their earnings on the sale.

At least one analyst has warned the state-run newspaper, Securities Daily that securities regulators may frown on the deal, especially given the government’s recent scrutiny of celebrities’ financial activities.

CAA with Chinese Characteristics

China’s CMC Capital Partners, a private equity firm controlled by former Shanghai Media Group president, Li Ruigang, has taken an equity stake in Creative Artists Agency (CAA). Li joins CAA’s board, and the two companies will also launch a joint venture, CAA China, to enhance CAA’s presence in China’s entertainment industry. The size of the deal has not been disclosed.

CAA has been in China for 12 years, helping Chinese directors and actors elevate their global profiles, while also bringing Hollywood stars to China. Last year, rival agency WME/IMG launched their own China entertainment and sports-based venture, WME/IMG China.

“CAA’s profits notwithstanding,” Li announced in the Chinese press, “CMC attaches greater importance to the fact that CAA is one of the core institutions of the American entertainment industry.”

Youku Bets Heavily On Streaming Originals, a subsidiary of e-commerce giant Alibaba, launched an RMB 1 billion initiative on Tuesday ($145 million), the “Hao” project, designed to fund production of feature films for online distribution, alongside a comprehensive platform, underlying IP and support resources.

Similar to Netflix and Amazon’s free spending on original online content, the project is a collaboration with other Alibaba entertainment divisions including Alibaba Literature and Alibaba Pictures which will support these productions with a variety of services from financing to marketing.

As part of the Hao project, Youku also announced a collaboration with Alibaba Literature and Mango Entertainment to adapt the well-known writer Ma Boyong’s novel, The Rock-n-Roll Journey to The West as an online film, scheduled for streaming release on later this year.

Jiangsu Omnijoi IMAXimizes

Jiangsu Omnijoi, one of China’s top ten cinema operators, announced plans this week to add 40 additional IMAX locations by 2021. This new deal will bring the number of Omnijoi’s IMAX screens to seventy-two, more than double the the cinema owner’s current commitment, making Onnijoi IMAX’s fifth largest partner in the world.

The new screens are set to range widely across China in cities of all sizes, from first to fourth-tier. Omnijoi owns one hundred and sixty-five cinemas and operates 1,254 screens in China.

China now has the greatest number of IMAX screens of any country in the world. IMAX China was established as a separate subsidiary in 2011. According to IMAX China’s 2016 annual report, the number of IMAX screens in China has reached four hundred and seven,  located in 149 cities.