SONY Sony Group Corporation

   (FROM THE WALL STREET JOURNAL 11/7/15) 
   By Juro Osawa 

HONG KONG -- Tencent Holdings Ltd. has signed deals with two Hollywood studios to distribute online in China the entire James Bond franchise and coming movies such as the next "Star Trek," in a move that helps expand the Internet giant's entertainment offerings.

Tencent, China's biggest social-networks and online-games company, said Friday that Viacom Inc.'s Paramount Pictures agreed to make it the exclusive online distributor in China of the film studio's future theatrical releases, including "Star Trek Beyond," which is scheduled to come out next year.

Tencent also is acquiring from Metro-Goldwyn-Mayer Inc. the online distribution rights in China for the James Bond franchise, including the new "Spectre" film.

Tencent's latest deals come as China's biggest Internet companies race to beef up their entertainment businesses and meet a growing appetite for online movies.

Tencent and online shopping company Alibaba Group Holding Ltd. both operate film production units and have been expanding their movie libraries through deals with domestic and international partners.

Tencent runs QQ and WeChat, two of China's most popular messaging and social-networking platforms each with over 600 million users, as well as video- and music-streaming services. Entertainment programs entice users to spend more time on Tencent's platforms, possibly boosting revenue from subscription fees and advertisement.

China, the world's largest Internet market with about 650 million online users, is also the world's second-largest movie market by box-office revenue after the U.S. Tencent and Alibaba are starting to play major roles in the production as well as distribution, both at traditional movie theaters and online.

For their part, Hollywood studios are eager to find ways beyond the box office to make money, and digital-distribution deals are currently the best option. In part because there are virtually no legal DVD sales in China due to piracy, box-office receipts currently account for virtually all movie revenue in China, which compares with less than half in the U.S. and other Western countries.

Under the Paramount deal, which takes effect in April, Tencent will be able to distribute each new movie from the studio for 12 months. Other movies in the pipeline that would be available to Tencent include "Jack Reacher: Never Go Back" starring Tom Cruise.

Tencent said its deal with MGM makes it the only Chinese company with online rights to James Bond movies. The latest Bond film, "Spectre," will also become available on Tencent's online platforms, subsequent to its theatrical release in China, the company said. MGM said the deal goes into immediate effect.

Action films tend to be big hits in China and Bond films have a big fan base there. "Skyfall" earned $59.2 million in China's box offices in 2013, despite a two-month delay and issues with censorship. "Quantum of Solace" took in $21 million in China, showing on only a fraction of the movie theaters and screens that exist today.

The agreements with Paramount and MGM are the latest in a series of movie-related deals by Tencent.

In September, Tencent said its movie production unit would partner with U.S. studio Legendary Pictures and invest in the coming Hollywood film "Warcraft." Tencent said it would collaborate with Legendary in the production, marketing and distribution of movies. Also in September, Tencent signed deals with Walt Disney Co. and Twentieth Century Fox to become the exclusive online distributor in China of six Star Wars films. A year ago, Tencent struck a deal with Time Warner Inc.'s HBO network and became its exclusive online distributor in China.

Tencent, meanwhile, is in talks for a $1.5 billion syndicated loan to secure funds for future acquisitions and other expenses, according to people familiar with the matter. They also said the loan is being arranged by five banks, Australia & New Zealand Banking Group, Bank of China, Citigroup, HSBC Holdings and Mizuho Financial Group.

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Laurie Burkitt and Kane Wu contributed to this article.

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(END) Dow Jones Newswires

November 07, 2015 02:47 ET (07:47 GMT)

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