The Dangers of Counting Too Heavily on Foreign Dollars

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Well, so much for that. Just when it looked like the Dalian Wanda Group was going to keep spending money to purchase larger and larger chunks of Hollywood by dropping a cool billion for Dick Clark Productions, the deal fell apart and the production shingle was left adrift.

This, after word had filtered out that Huahua Media and Shanghai Film Group are holding back another billion promised to pump money into the desperately low coffers of Paramount Pictures. Apparently, there is some concern on the part of the Chinese about who, exactly, is going to replace Brad Grey. (Editor’s Note: The Tracking Board published last week that Paramount is closing to naming Michael De Luca as head of the film division under Jim Gianopulos.) That, on top of the fact that they weren’t thrilled with parent company Viacom’s move to get rid of Grey, as it seems the two Chinese conglomerates were the only ones who believed he was doing a good job.

While there hasn’t been any concrete news about why the money is being held up, and amid persistent rumors that it was the exit of Grey and his vice chairman Rob Moore — the latter of whom was at least partly responsible for facilitating the deal in the first place — without consultation that caused it, the fact of the matter is, that money doesn’t appear to be forthcoming anytime soon, which would be something of an issue for a faltering, cash poor studio.

Back in January, I wrote a series focusing on the influence of Chinese money in Hollywood. It was pretty long. About 10,000 words in all, actually, and in it, I talked about the fact that the real danger of the entertainment business taking so much cash from a specific source is not political or cultural but rather in counting too much on it. I won’t recap too much of the series, because you’ve either read it or, after this column, will surely return to it and do so, but suffice to say that there was a concern voiced therein about when, not if, the Middle Kingdom’s cash spigot was turned to the off position.

That time, it appears, has come, and sooner than a good deal of folks thought it would.

Now, it’s certainly possible that the reason for said discontinuation could have at least a little something to do with the combative relationship the Chinese have with the current administration, although the approval this week of 38 different trademarks with the president’s name on them — a move the government was forced to defend after the fact — would tend to poke a hole in that argument.

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More likely is that a government that is so intimately involved with the conglomerates doing all this investing has simply seen enough of its money spent outside the country. In fact, a friend of mine who lives in Hong Kong and whom I saw recently at a Bat Mitzvah suggested just such a thing, saying, “It’s always been all about money, and nothing else. The companies are intertwined with the government, yes, but the guys running it still want to get their money into America. That’ll continue until the government finally reins it in.”

I asked him when that would be and he laughed. “Soon!”

It might seem like it’s easy to say now, after the fact, but honestly, it wasn’t terribly hard to see this coming. First, towards the end of last year, there was a deal in place for MGM to come under Chinese control which fell apart, and then, the Chinese government tightened controls on the overseas use of its currency, which had to be seen by anyone paying attention as a pretty solid precursor for shutting down the works entirely. That’s why the smart companies made sure to have all the money from Chinese investors firmly in hand before the end of the year, if not sooner.

Which leaves Paramount out in the cold, and Dick Clark Productions entirely plum out of luck. That’s not to say that Paramount won’t eventually get the money, of course, but it certainly looks like it’ll be a while, if that time ever comes.

It doesn’t take Aesop to see there’s a moral to this story. When you find yourself dead set on selling yourself and your wares to someone, it’s probably best not to put all of your eggs into a single basket. Especially when said basket is located in an entirely different country.

The thing is, there have always been sources of money for Hollywood to tap, and that won’t change. When one source dries up — and there could still be deals coming out of China in the months to come, just don’t be surprised if they are fewer and farther in between — another one arises, it’s only a question of where and when.

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Where is that next source? Good question, and not one we’re going to answer here, but it would appear time for the industry to start looking.

There’s another aspect to this, and it shouldn’t be discounted too much. The fact is, Hollywood has been spending a lot of time and energy courting Chinese dollars over the last few years, almost to an obsessive degree, and the fruits of those efforts have begun resulting in people like Thomas Tull being kicked out of Legendary Entertainment, the company that he founded. This has set a small brushfire of low-level panic around town, as certain executives suddenly wonder about their own job security, but that most definitely falls under the category of Issues You Probably Should Have Seen Coming.

Richard Rushfield, who puts out a daily industry newsletter called The Ankler, has said that the only thing the town fears more than being bought up by the Chinese is not being bought up by the Chinese. He has a point, and now those fears are going to intensify, because the easy, readily available source of money that has helped to finance dozens of movies, TV shows, websites and even comic books is drying up.

Which means that those with contingencies in place are going to come out of this okay, while others, like Dick Clark Productions and Paramount Pictures, have already found themselves out in the cold, and winter is a long way from over.

Neil Turitz is a filmmaker and journalist who has spent close to two decades working in and writing about Hollywood. Feel free to send him a tweet at @neilturitz. He’ll more than likely respond.