Friday, November 10, 2017

Paramount Loses China Company Deal

Paramount Pictures and Huahua Media have formally ended their financing partnership the two companies announced on Tuesday. The partnership, estimated to be worth $1 billion if it had run its course, was used to fund around 25% of the cost for Paramount movies in return for a piece of the profits over three years. Transformers: The Last Knight and Ghost in the Shell were the first (and I think only) movies made under the partnership. Both movies performed well below expectations and were considered barely profitable by most industry estimates. The decision was basically forced on Paramount as Huahua's loss in confidence in the relationship was for them to simply stop making payments to Paramount.

“The actions we are announcing today establish a financing model that is better aligned to Paramount’s new strategic approach to film production,” Gianopulos said in a statement. “Our focus on a more balanced slate — a mix of big, broad-audience films and more targeted and co-branded films made with greater fiscal discipline — demands a more flexible and tailored financing model going forward.”

Technically Paramount could have sued to enforce the contract (but would have to do it in China as a US judgement is unenforceable) but remember China is a communist country so from their perspective Huahua is "owned" by the Chinese government so in effect Paramount would be suing the government for breach of contract and expecting that same government to find in Paramount's favor, a highly unlikely scenario that could also have side effects such as blocking Paramount movies from being shown in the country. Considering the growing importance of the Chinese market is for Hollywood's profit margins, it makes more financial sense to simply take the hit and move on.

As for its impact on future Transformers films, the likely catalyst for why the partnership even occurred, it is doubtful it will have any. The new five year deal with Hasbro probably already insured the franchise's future. Also the Bumblebee movie's $70 million budget already indicates Paramount was already making moves to cut costs of future Transformers movies.

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