Independent studio Relativity Media is jumping into the fast-growing Chinese film market with a deal that gives it a stake in a local production company and a means to release its own movies in the country.
Relativity said Sunday evening that it was investing in SkyLand Film & Television Cultural Development Ltd., a China-based entertainment production company. By doing so, Relativity is joining forces with SkyLand's two other financial backers: SAIF Partners, an Asian private-equity firm with $3.5 billion under management, and IDG China Media, the Chinese arm of Boston-based tech firm International Data Group.
SkyLand, formed two years ago, saw its latest film "Snow Flower and the Secret Fan" flop in the U.S. and Canada, where it has grossed just $1.2 million since its release last month.
The deal is the latest salvo in Hollywood's bid to expand into China, where the potential for growth is huge: China's box-office receipts jumped 64% in 2010 to $1.5 billion, making it the sixth-largest market for movies in the world. Legendary Pictures, a Burbank company that helped finance and produce such movies as "The Dark Knight," announced in June a venture to make big-budget English-language movies in China for worldwide release.
The U.S. movie industry also is pressuring China through the World Trade Organization to further open its market: The Chinese government limits the number of foreign films released in the country that can share in the revenue they generate to about 20 a year.
That makes it particularly difficult for small studios such as Los Angeles-based Relativity to get their movies into the country, unless they accept a low flat fee in lieu of a cut of box-office receipts.
So news on Sunday that state-owned Huaxia Film Distribution Co., China's second-largest film distributor, was also going to partner with SkyLand gives Relativity an edge. Relativity Chief Executive Ryan Kavanaugh said many of his company's future films, including November's action movie "Immortals" and next year's adaptation of the "Snow White" fairy tale, will be released in China as part of the agreement.
That's significant for Relativity, as the young studio is transitioning from co-financing movies with Universal Pictures and Sony Pictures into the riskier business of producing its own films.