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October 28, 2011

China: Digitisation of Culture and Entertainment (Guest Post)

By Roberto De Primis

China has one of the oldest and most complex cultures in the world. However, for centuries, the Western influence has been unable to cross the boundaries. Nowadays, art, cinema and television are changing and the country has made a tremendous U-turn, allowing Western technique and culture to shape the Chinese culture.

Digital China

Cinema experiences a profound change with the new digital technology applied in theatres around the world. In China, the country faces two main challenges in this sector: the first one is the digital cinema conversion and, the other one, the wave of new screens which will be applied in the near future.

The digitalisation rate of cinemas is as high as 70% compared with a world's rate still at 25%. This impressive growth is due to the new complexes built every year. In 2007, China had 1500 movie screens and reached 6200 movie screens in 2010. The Chinese government expects 20000 screens to be operating by 2015 and 40000 by 2040.

A few days ago, the American private equity group Carlyle (www.carlyle.com) made public its 80% stake acquisition (worth 75 M USD) into the Hong-Kong based cinema digital server provider: Global Digital Creations Technologies (GDC Tech: http://www.gdc-tech.com/). The Chinese company holds around 54 % of the digital cinema servers in the country (approx 4500 installed servers). In this business sector, the main competitors are Dolby, Sony and Doremi.

The Carlyle strategy

the group has a long-term strategy of investment into technology, media and telecom sector. Furthermore, they are looking for raising more money from their Asian assets. On top of that, the Carlyle investment in China primarily focuses on businesses that are driven by domestic demand. This group is the third largest private equity group in the world with 40.5 Bn USD raised as of 2011 (just behind Goldman Sachs Capital partners and Texas Pacific Group).

Carlyle has been so many times mentioned in the news because of its close connection with the White House and the influence of one of his former Director, Frank Carlucci (ex-CIA Deputy Chief 1978-1982, ex-Secretary of State 1987-1989).

The rest of the digital Cinema market in China

Other Western companies are making big money in China. For instance, Canadian IMAX corp. announced in March 2011 a 75-theatre deal in China with Wanda Cinema Line corp. valued at about 100 M USD. This news is clearly a positive signal for Hollywood which tries to increase its blockbuster revenues into China but face the local law allowing only 20 non-Chinese films in each theater.

In the future, Fox Studios has decided to release only digital copies of his movies for the Hong Kong and Macao markets; another clear message for Carlyle and other competitors into the Chinese market.

Chinese Television industry

Next to the cinema business, television is also a growing industry in China. The last Mipcom edition (www.mipworld.com/mipcom) in Cannes made it clear that Chinese investors are looking to develop their television programs by importing western concept. Once, Chinese producers were investing in animated film, now, reality shows such as "Dancing with the stars" are blockbusters in China. As it turns out, for every big Western tv programme yet on air, producers consider how to develop and adapt it for the Chinese market. Even if "regulation" is a great barrier of entry for producers, this business sector in China is on his way to make very big money.

Performing arts in China

These past few days, we've learnt about a very profitable deal signed between the well-known Belgian art creator and businessmen, Franco Dragone (www.dragone.be) and Dalian Wanda, one of the leading groups in culture industry in China (group.wanda.cn/English/). This 10 year contract worth 395 M USD include the building of a design theatre in Wuhan and shows which will be held in 5 different Chinese cities, among others, Wuhan(where Nissan, PSA and other big corp. are already based), Hainan and Xishuangbanna. After having gathered 750.000 spectators in Macao for its show "The House of Dancing Water", the Dragone Entertainment Group marks his official entry in mainland China with this 10 year contract.

About The Author - Roberto De Primis is a business intelligence analyst with an M.A. in Political Science. from E.M. Solvay Business School. Writing from Brussels, he is the founder of Eurintelligence, linking economics, and finance with politics.  (EconMatters author archive here.)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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