Oriental DreamWorks at centre of US-China split over strategy
Universal Pictures to offload stake in venture as Chinese backers court Warner Bros
Universal Pictures, the movie studio owned by Comcast’s NBCUniversal, is on course to offload its stake in Oriental DreamWorks, the animation group, following disagreements over strategy with one of the company’s other main backers, Li Ruigang’s China Media Capital.
CMC has had preliminary talks with Warner Brothers, the Time Warner-owned studio, about replacing Universal in Oriental DreamWorks, according to two people briefed on the discussions.
Universal and Warner declined to comment although a person with knowledge of the talks that Warner has had with CMC said it was unclear how serious Warner was in pursuing a deal.
Universal inherited its 45 per cent stake in Oriental DreamWorks, widely regarded as the flagship joint venture between Hollywood and China, when it acquired Jeffrey Katzenberg’s DreamWorks — the studio behind the Shrek and Kung Fu Panda films — in 2016 for $3.8bn. However, it quickly became clear that it had a different vision to Mr Li.
“We talked about changing the strategy of Oriental DreamWorks and decreasing the size of the company in order to focus more on the creative side,” Mr Li told the Financial Times.
“Also, I am focused more on China and less globally while they want to make films in China for the world. Today, the priority of Universal is a theme park in Beijing.”
Mr Li already has a relationship with Warner, having formed Flagship Entertainment, a Chinese film venture, with the media company in 2015. But if a deal cannot be struck with Warner to take on Universal’s Oriental DreamWorks stake, the future of the animation group is unclear.
“The only way this will be resolved is if someone buys Universal’s share or someone buys CMC’s share,” said one former employee. “If nothing happens [Oriental DreamWorks] will just die.”
Owning the Oriental DreamWorks stake is less essential for Universal because it has other film distribution and consumer products operations in China.
Mr Li recently raised $600m for his second US dollar fund for offshore investments, though many Chinese investors believe he could have raised far more.
“The system trusts him and he is commercial enough so that investors trust him as well,” said the head of a private equity firm that has many of the same investors as Mr Li, adding that media is the most sensitive area in China, making government connections particularly valuable. “For entertainment he is the only game in town.”
With talks between Oriental DreamWorks investors continuing, the company has been losing staff because of budget cuts, with many top executives poached, said one former employee who now works for a competing company.
The last movie the company released was last year’s Kung Fu Panda 3, which earned $154m at the box office, making it one of the most lucrative animation movies ever released in mainland China. Everest, the next Oriental DreamWorks movie scheduled for release, is not expected to be shown before 2019