Hollywood Pursues China Marketplace Despite SEC Probe

Hollywood studios are proceeding with plans to partner with companies in China and to produce and distribute their entertainment products, despite an ongoing federal probe.

Reports that were circulated in the media, which concerned a Securities and Exchange Commission (SEC) investigation, caused industry insiders to question whether entertainment studios would slow down business relations with China entities.

The SEC had sent letters of inquiry to all of the major studios in March, seeking information about dealings with government officials and possible bribes.

“The SEC has routinely been suspicious of Hollywood because their view is that Hollywood plays by its own rules,” Michael Perlis, a former SEC attorney told Bloomberg.

“There was always the sense that cash didn’t find its way to where it should have,” Perlis added.

Hollywood is increasingly attracted to the growing entertainment market in China. Last year the Chinese box office experienced an increase of 35 percent to $2 billion, according to the Motion Picture Association of America.

“It’s hard to slow anything down in China,” Dan Mintz, CEO of Beijing-based DMG Entertainment explained. “Of course, you are careful about doing business and who you are doing business with.”

DMG is co-producing “Iron Man 3” along with Disney, which is the world’s largest entertainment company.

“China is a top priority for us,” Disney head Bob Iger said during a May 8 conference call with analysts and investors.

James Cameron’s 2009 film “Avatar,” the all-time top-grossing movie to date, took in $182.2 million from Chinese audiences, according to Box Office Mojo. The 3-D version of Cameron’s “Titanic” had taken in $134 million in Chinese ticket sales, according to its film distributor Fox.

“China used to be a zero in terms of forecasting,” Jeff Colvin, a senior vice president and head of film finance in Los Angeles for Comerica Inc., told Bloomberg. “Now it can be a top-three market after the U.S. and U.K.”