Paramount Gets China Infusion: $1 Billion, 3-Year Slate Co-Financing Deal With Shanghai Film Group &

Paramount Pictures has made its most significant long-term alliance in China since Viacom chief Shari Redstone nixed a 49% stake sale to Dalian Wanda for $4.9 billion last year. The studio has closed deals with Shanghai Film Group Corp and Beijing-based Huahua Media for those companies to fund 25% or more of the studio’s entire film slate for the next three years, with an option for a fourth.

The deal is worth a potential $1 billion in slate funds, which is retroactive to Par’s fourth-quarter films. It extends a relationship between the studio and Chinese companies that already was growing. The deal also will help Paramount with the release and marketing of its films in China. Shanghai United, the country’s second-largest distributor, will be very involved in assisting Paramount with the dating and distribution of its movies in China going forward. The prospect of a team-up in co-productions of Chinese films also is being eyed.

This is the most significant move made by Brad Grey since Shari Redstone and her father Sumner Redstone fought the proposed stake sale to Dalian Wanda Group, leading to the ouster of Viacom chairman Philippe Dauman. Movement toward this slate-financing deal began in November, right after Dauman exited. It was approved by Shari Redstone, who late last year also decided not to fuse Viacom with CBS, and the deals with the China companies closed at year’s end. The size of funds to be devoted to Paramount films is one-fifth of what would have been realized in the Wanda deal, and it seemed likely that most of those funds probably would have gone toward curing the stock shortfall created by the erosion of shares in Dauman’s stock-buyback plan.

Paramount was hamstrung by poor picture choices and Dauman’s strategy of stock buybacks at the expense of growing Viacom’s core film and television businesses. That left Paramount unable to buy Marvel or DreamWorks Animation, when it released films for both. Markets share has been lower than most rivals, as annual output of films in some years dipped as low as eight titles. The studio experienced the worst performance of Grey’s 11-year tenure in 2016: While year-end films Fences, Arrival and Silence have been in the awards mix, the expensive pictures Allied and Monster Trucks failed to catch on with audiences.

With the Dauman fiscal constraints gone, Grey is moving as fast as possible to build the studio’s output up to 15-17 films per year. Covering the risk of one-quarter or more of that certainly will help that effort, particularly as a deal with its most reliable co-financier, Skydance, moves toward expiration. Paramount will fill the 15-to 17-film slate with mostly homegrown fare, with some pre-buys and acquisition of a festival film.

Films in the Shanghai Film Group/Huahua Media slate deal include this weekend’s opener xXx: The Return of Xander Cage, for which both companies previously signed on as investors. The deal also encompasses funding of such upcoming films as the Darren Aronofsky-directed thriller with Jennifer Lawrence starring; the 2019 CGI animated family film Amusement Park; and the Rupert Sanders-directed Scarlett Johansson-starrer Ghost in the Shell, set for March release. It also encompasses Paramount’s franchises that include Mission: Impossible, Transformers, a new Top Gun and a World War Z sequel that’s expected to reunite Brad Pitt with director David Fincher.

The fit with Shanghai Film Group and Huahua Media was an easy one, as both previously have done business with Paramount, including a Huahua investment last year in Star Trek Beyond and Jack Reacher: Never Go Back, among other films.

The funding level makes it different than the pact Sony signed with Wanda in September that calls for China’s largest exhibition company to take minority stakes in some films; that deal was mostly done to facilitate entry into China for Sony’s tentpole fare.

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