Fosun to seek gold on the silver screen

Conglomerate joins Shanghai Film Group to produce, distribute movies

Private conglomerate Fosun Group and State-owned Shanghai Film Group on Tuesday announced the establishment of a joint investment fund to tap into opportunities in China's burgeoning film and entertainment market.

The fund will be used as a platform to cooperate in such areas as film and television production, distribution, screening and development of derivative products, according to a statement on Fosun's official website.

Fosun and SFG will invest in and import domestic and foreign films as well as TV shows. Meanwhile, the two firms also are looking into acquiring cinema assets, "to fully explore industrial opportunities in the explosive growth of China's film market," the statement said.

The statement didn't reveal the size of the fund, nor the details of its future investment.

"By combining Fosun's resources and financial strength with our industry experience and operational capacity, we can practice forward-looking strategies," said Ren Zhonglun, president of SFG.

"At the same time, partnering with Fosun will also play an active role in the reform process of SFG," Ren said.

Last year, Shanghai issued a reform plan of large State-owned enterprises, aimed at fostering several globally competitive companies within the next five years. As one of the biggest film companies in China, SFG also is looking to head a leading film group in the international market.

SFG is building a major film studio in Shanghai in cooperation with UK-based Pinewood Studios, which is the shooting base for the James Bond films. SFG also is looking to become the nation's first State-owned film company to be listed in the A-share market.

On the other side, as China's leading private investor, Fosun also is expanding rapidly into the film sector in addition to its pharmaceutical, real estate and insurance businesses. In June, it signed an agreement to invest in Hollywood film company Studio 8; it also is the second-largest shareholder of Beijing-based Bona Film Group, with a 20.8 percent stake.

"We have always been bullish on China's cultural industry," Fosun Chairman Guo Guangchang said, adding that SFG will help the company to dig deeper into cultural pursuits.

Peng Kan, research and development director of Legend Media, a Beijing-based consultancy, said the partnership with Fosun International could help SFG to get its stock market listing.

The cooperation between Fosun and SFG also is in line with a trend in the world's second-largest movie market, where film companies are seeking to become comprehensive media conglomerates, or are looking for potential partners within or outside the film industry.

"Eventually, there will be only five or six movie conglomerates left in China after reshuffles in the industry, just like in Hollywood, and that's why every company now is striving to increase in size," said Peng.

China overtook Japan to become the world's second-biggest movie market in 2012, logging $2.66 billion at the box office. A report by PricewaterhouseCoopers estimated that spending in China's film industry will grow by 15 percent annually over the next five years, while overall spending in the entertainment and media sector will increase by 8 percent.

An ambitious cinema-building program is driving the box-office boom - each day, nine new screens open up on the Chinese mainland. The number of screens on the mainland has increased 10-fold in a decade, from fewer than 1,300 in 2002 to more than 13,100 by the end of 2012.

"The growing affluence of a rapidly emerging middle-class consumer with a propensity to spend on entertainment and media experiences, combined with improving infrastructure, is bolstering overall growth," said Marcel Fenez, global leader of PwC's entertainment and media section.