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Huayi Brothers eyes Hollywood as Chinese moviemakers expand

Hollywood has set its sights on the massive movie-going market in China but filmmakers in the world's second-largest economy are stepping up efforts to carve a niche in the U.S., says an executive at one of the country's largest movie makers, Huayi Brothers Media Corp.

Last year, Huayi struck a deal with America's STX Entertainment to produce at least 18 movies over three years.

The deal, along with conglomerate Dalian Wanda's $3.5 billion acquisition of U.S. film studio Legendary Entertainment in January this year, underscore steps by Chinese movie makers to move out of their home turf.

According to China's State Administration of Press, Publication, Radio, Film and Television, China's box office receipts grew 48.7 percent on-year in 2015 to hit a record $6.78 billion, according to the state-run Xinhua news agency.

For Chinese film makers, it's not just about capturing another large market but strengthening content making capabilities as well, said Huayi chairman and chief executive officer, Dennis Wang.

"So many American companies are coming to China, taking a certain percentage of our market share, yet they can still deliver billions of dollars of box office back home. I think companies like Huayi and Wanda do have the capital and experience to make English movies If we use three to five years, or even 10 years to own the intellectual property rights of many good English movies, that would be a big help to the growth of Huayi's entire industry chain," Wang told CNBC.

Founded in 1994, the company is listed on the Shenzhen Stock Exchange. In 2015, net profit rose 8.9 percent from a year ago to 976.1 million yuan ($150 million), Reuters reported in March.

Unlike Wanda, Huayi said it is not looking at its own studios in Hollywood to grow the company internationally. In 2014, the Chinese firm had tried to invest in Studio 8, a Hollywood startup in 2014 run by former Warner Bros executives but the deal fell through.

It then tied up with STX.

"We have given (setting up studios) a thought as well, but can't find a way to make it work in terms of cost-control and team-bulding," he told CNBC at a meeting of the China Entrepreneur Club, an exclusive summit of business leaders.

"Our focus has really been on the final outcome. Every company wants to internationalize and make different movies. Our approaches vary from one another."

Huayi's target is to produce seven to eight English movies a year, with a budget of $60 million per movie.

Since last year, Huayi has released four English movies with STX, including The Gift, which beat expectations at the box office.

The Chinese company is now building a separate team to produce bigger budget movies and hopes to produce two to three $100-million-budget movies each year.

In the medium-term, Huayi is targeting to make 10 English movies a year on top of 15 to 20 Chinese movies.

The company still sees domestic opportunities, said Wang.

"China is going through the best of its times … Given the current status and growth potential, I think China's movie industry will still grow rapidly for a long time, so we need to focus on the movie industry," said Wang.

Like its peers in Hollywood, Huayi also runs theme parks and gaming content.

"It sets a good example that the intellectual property rights of good movies can be extended in theme parks … Huayi's idea of launching our own theme parks comes from Disney, although we adopt a different model. Our investments are smaller, but Huayi will build 20 tourism villages in China; Disney won't be able to do that," Wang said.

Despite his bullishness on Disney's $5.5 billion theme park in Shanghai that will open in June, Wang said it is unlikely that the American giant will be able to open any theme park in China in the medium-term as its investment in each park is large and its open-air concept limited by geography. Huayi's theme parks meanwhile leverage on local content.

"Huayi and Disney have different approaches, but we share the same vision. That is to produce good movies and build solid brands. Disney has its impact felt globally and Huayi is making waves in China."

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