Alibaba Group Holding Inc. (BABA) inked a partnership with Steven Spielberg’s Amblin Entertainment to acquire a minority stake in the movie company. According to the agreement, the company will help finance Amblin movies and distribute them across the world, including China. At the same time, the deal will allow Alibaba Pictures, the company’s movies arm, a foothold into Hollywood. Alibaba founder Jack Ma also gets a Board seat at Amblin as part of the deal. 

China, which is already the second-biggest box office revenue earner for Hollywood movies, is forecast to become the world’s biggest entertainment market by 2020. (See also: Big Picture: China Set For Cinema M&A Wave). Hungry for know-how about the business of entertainment, Chinese companies have increasingly sought partnerships or acquisitions in the United States. For example, the Dalian Wanda Group, the world’s largest property developer, bought theater chain AMC Entertainment Holdings Ltd. (AMC) last year. It also acquired Europe’s largest cinema theater chain Odeon & UCI Cinemas Group in July this year through AMC. (See also: AMC Entertainment Acquires U.K. Chain Odeon & UCI).

For their part, American companies have found willing audiences for their products in China. For example, tickets to the Walt Disney Company’s (DIS) Shanghai Disneyland sold out within hours of going on sale. Similarly, Lions Gate Entertainment Corp. (LGF) release “Now You See Me 2” flopped in the U.S. but broke records in China. 

This is not Amblin’s first partnership with a foreign player. The company was formed out of the remnants of Spielberg’s earlier venture – Dreamworks Studios – with the help of India’s Reliance Entertainment. 

During a conversation at a Hollywood hotel to announce the deal, Spielberg said there would be co-productions (between Amblin entertainment and Alibaba Pictures) and that the deal would “bring more of China to America and more of America to China.” Alibaba Pictures, which reported losses earlier this year, has funded Hollywood releases, such as “Star Trek Beyond” and “Mission Impossible – Rogue Nation.” A WSJ story on the agreement quotes Jeff Small, president and co-CEO of Amblin, as saying that his company wanted a Chinese partner which “had a deep bond with and knowledge of Chinese people.” Presumably, he was referring to Alibaba’s e-commerce services as well as its brand in China. Alibaba Pictures, which reported losses earlier this year, also runs an online ticketing platform in China. The story also mentions the possibility of both companies partnering in the field of virtual reality. 


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