Tencent, PCCW invest in Hollywood studio to bolster film archive
Los Angeles-based STX Entertainment to use funds to expand international operations as well as television, music and digital initiatives
Tencent Holdings and PCCW are investing in a Hollywood film studio and distributor, gaining access to a movie archive and production schedule that can add content to their streaming video and pay-television businesses.
In a regulatory filing on Friday, PCCW said that it had taken an equity stake in STX Filmworks, the film division of STX Entertainment, for US$25 million. Tencent’s investment is currently undisclosed.
The two Hong Kong-listed companies led a round of investments in STX Entertainment, the distributor of Bad Moms and Free State of Jones, valuing the studio at US$1.5 billion, and giving it US$700 million of fresh investments and credit line to fund its growth, according to a person familiar with the financing plan.
STX will use the fresh funds for initiatives beyond movie production, a source with knowledge of the matter said. These include the expansion of STX's television and international operations, as well as its capabilities across music and digital media businesses.
Tencent and PCCW have sealed separate agreements with STX to distribute its content on different platforms.
The investment by Tencent deepens its push into the entertainment industry, adding to the company's dominance in video games, social media and messaging businesses in China. Tencent established a venture earlier this year with Huayi Brothers Media Corp, one of China’s largest home-grown movie studios and distributors. QQLive, Tencent’s video streaming platform, already broadcasts programmes of major Chinese TV networks including films, variety shows, sports and animation.
“We believe in an open platform strategy to partner with media companies to create and distribute premier content globally,” Tencent president Martin Lau Chi-ping said. “We look forward to partnering with them to capture the many opportunities the evolving media landscape presents.”
PCCW’s investment in STX builds on its efforts to add global content to its Hong Kong pay-television business. The STX alliance “represents an important milestone in expanding PCCW’s strategic investments into compelling content creation, not simply for audiences in Hong Kong but also for international audiences,” PCCW media group managing director Janice Lee said.
STX will provide original, first-run Hollywood content to PCCW. They will also develop regionally tailored programming together for PCCW to distribute across its TV, digital channels and over-the-top streaming video services in Hong Kong, Southeast Asia and India.
Founded in 2014, Los Angeles-based STX also received new investments from Hong Kong-born Dominic Ng, the chairman and chief executive at Nasdaq-listed East West Bank in California. Ng will join STX’s board of directors.
Chinese private equity firm Hony Capital, owned by Hong Kong-listed Legend Holdings, also participated in the latest funding round for STX. Legend is the controlling shareholder of Lenovo Group, the world’s largest supplier of personal computers.
Hony’s chairman John Zhao Huan said STX is “successfully bridging the US and Chinese media and entertainment markets – the two largest in the world”.
“By making China a foundation of its strategy and structure from inception and building the right relationships in the region, STX has put itself in an unparalleled position to unlock content opportunities for talent and brands in China,” Zhao said.
Hony was one of the founding investors in STX in 2014, along with US businessman Robert Simonds and Bill McGlashan, the managing partner at the growth division of TPG. Global private investment firm TPG provided seed capital to STX through its TPG Growth investment fund, which has more than US$7 billion in assets under management.
STX said it is currently on track to release 12 “star-driven, wide-release films” per year and has plans to release as many as 22 television shows.
Free State of Jones, co-produced by Huayi Brothers and distributed by STX, is a movie about an American Civil War-era rebellion against the Confederacy, starring Oscar winner Matthew McConaughey.
STX last year signed a deal with Huayi Brothers to co-finance the production of at least 18 movies over a three-year period.
“Whether it’s through television, apps, video games, social media, film or any other medium, we’ve created the only company with the infrastructure, reach and industry expertise to incubate, generate and distribute content for all platforms, on a global scale,” Simonds, the chairman and chief executive at STX, said.
Additional reporting by Zen Soo