Chinese gaming company Perfect World just picked up a few Oscars
Darkest Hour and Phantom Thread, two films that Perfect World co-produced with Universal Pictures, were big winners at the 90th Academy Awards
For any film producer from Hollywood, receiving an Oscar at the annual Academy Awards would be a milestone to kick off a round of celebrations.
Not so for Beijing-based Perfect World, which co-produced two of this year’s Oscar-winning films – Darkest Hour and Phantom Thread.
It was business as usual at the low-key entertainment conglomerate, with offices in the Chinese capital’s sprawling Chaoyang District, even as staff watched the live broadcast on Monday of those two films scooping up a combined three Oscar statuettes at the 90th Academy Awards.
Darkest Hour won awards for Best Actor as well as Best Makeup and Hairstyling, while Phantom Thread won for Best Costume Design.
Another film that Perfect World co-produced, Victoria & Abdul, had two Oscar nominations this year.
Those three films are part of a US$500 million slate that was forged in 2016 between subsidiary Perfect World Pictures and Universal Pictures. Under that deal, Perfect World will help fund the production of 50 Universal films over five years.
Chinese technology companies, including the likes of Baidu, Alibaba Group Holding and Tencent Holdings, have been investing heavily in content and other intellectual property – producing television series and films as well as operating subscription-based video-streaming platforms – as they race to carve out market share in the international entertainment industry.
They are following the lead of the major Hollywood film studios, which have built a sustainable business model by taking the films and other intellectual property they own into a range of revenue-generating activities, from theme parks to video games and video streaming services to licensed consumer merchandise.
Alibaba Pictures Group, the film arm of South China Morning Post owner Alibaba, became a minority stakeholder in Steven Spielberg’s Amblin Partners in 2016.
Other Chinese companies have snapped up trophy assets in Hollywood. The biggest of those deals was Chinese property and entertainment giant Dalian Wanda Group’s US$3.5 billion acquisition of Legendary Entertainment in 2016.
Having an award-winning film is widely expected to help burnish the credentials of these Chinese companies now involved in Hollywood alliances.
Michael Berry, a professor of contemporary Chinese cultural studies at the University of California, Los Angeles, believes it is still rare for a Chinese company to be part of the film awards season’s winners.
“For many years, an Academy Award has proved to be an elusive prize for Chinese filmmakers, Berry said. “Perfect World’s financing of prestige films provides an alternative access to the world of Oscar.”
At the 2017 Academy Awards, Chinese provincial broadcaster Hunan TV basked in the glow of international box-office hit La La Land after it took home six Oscars.
Hunan TV subsidiary TIK Films co-financed that musical romantic comedy-drama, which grossed US$446 million worldwide, under a multiple-film co-financing pact with Lionsgate Entertainment Corp.
Neither Phantom Thread or Darkest Hour – produced at a budget of US$35 million and US$30 million, respectively – became a global blockbuster. Phantom Thread and Darkest Hour grossed a global total of US$38 million and US$138.5 million, respectively.
Clayton Dube, head of the US-China Institute at the University of Southern California (USC), said a best picture award would have “certainly boosted either film’s net receipts, including later DVD sales, rentals and streaming franchise films”.
Perfect World is more than a film financier. It was founded in 2004 by internet entrepreneur Michael Chi Yufeng as an online video game developer and operator. It is China’s third-largest gaming company after Tencent Holding and NetEase, and the world’s 21st biggest gaming company by revenue, according to research film Newzoo.
Two years after graduating from the prestigious Tsinghua University, Chi founded Beijing Hongen Education and Technology Co in 1996. That company sold educational software to teach Chinese consumers how to use personal computers and learn English.
In 2007, Perfect World Games became a publicly listed company trading on the Nasdaq stock market. A year later, Chi established Perfect World Pictures.
In 2015, Perfect World Games went private and delisted from Nasdaq. Like other Chinese businesses, including Qihoo 360, the company planned to go public in China for a better valuation because of high market ratings for internet and entertainment firms on the mainland.
In 2016, Perfect World Games joined China’s A-share market through a back door listing with sister company Perfect World Pictures. The two firms merged and now trades in the Shenzhen Stock Exchange as Perfect World.
The company, with about 5,000 employees, has a market capitalisation worth US$6.8 billion. In its first-half earnings report last year, its gaming business made up 86 per cent of its total US$57 million revenue.
Apart from developing its own games, Perfect World is also the China distributor of several global hit video game titles, including Dota 2 and Counter-Strike: Global Offensive.
The company had previously acquired Seattle-based computer game developer Runic Game and video game producer Cryptic Studios from California.
A Perfect World spokesman said the Universal deal enabled the company “to spread our risks to finance 50 films running up to five years”.
On the mainland, Perfect World had also produced the romantic comedy Sophie’s Revenge, starring Zhang Ziyi, in 2009, and the Chinese hit Love Is Not Blind in 2011.
“Chinese companies are scrambling to invest in Hollywood studios as it is the best way for them to tap into the overseas markets,” said Eric Qiu, an analyst at CCB International. “It’s a way for them to diversify their portfolios instead of only focusing on domestic film productions.”
“Of course political uncertainties, including control on capital outflow, will always remain, but for now it seems Beijing does not mind that much for firms investing in the overseas entertainment and film industry,” Qiu said.
Another Chinese company represented at this year’s Academy Awards was Beijing-based Huayi Brothers Media Corp, a co-financier of Molly’s Game, which received an adapted screenplay nomination.
Chinese companies’ overseas investment plans, however, have been put under greater scrutiny by the central government since last year, as Beijing moved to stem record capital outflows and subsequent downward pressure on the yuan.
Entertainment and real estate transactions have been singled out as “chief target sectors”.
“Perfect World is not making big gambles and is learning how to identify quality projects,” said USC’s Dube. “Learning how to make prestige projects like Darkest Hour or Phantom Thread will be increasingly important as China’s population ages and audiences grow less enamoured over formulaic and special effects films.”
This year, Perfect Film will co-produce at least two franchise films with Universal Pictures – Mamma Mia! Here We Go Again and Jurassic World: Fallen Kingdom. The popular dinosaur franchise is already confirmed to be released in China.