Wu Unveils $800 Million Media Fund

Prominent Chinese mainland media entrepreneur Bruno Wu (吴征) has teamed with investment group Harvest Fund Management to launch a media fund that could pour up to $800 million into the film and entertainment industry.
The new Harvest Seven Stars Media Fund is an equal partnership between Harvest Alternative Investment Group and Sun Redrock Investment Group, which Wu founded.

The two partner companies will provide seed capital funding for Seven Stars and open it up to other backers. Harvest’s Lindsay Wright estimated that fund-raising may close in the third quarter of this year, though Wu indicated that the fund’s first three investment targets could be announced within the next 30 days and the first disbursements be made by May.

Wu described Seven Stars as operating as both a mergers and acquisitions fund and as a content investment operation. It may even operate the two businesses separately.

Seven Stars is being advised by the Beijing branch of leading Hollywood talent agency Creative Artists Agency.

Wu said that the company wants to be involved with content that can be distributed globally. While there is the possibility that some may qualify as Chinese co-productions, by virtue of investment, casting and shooting location, Wu said that much of it may consist of English-language content and that ‘tentpole movies’ could take pride of place. He gave Mission: Impossible IV and Sherlock Holmes as examples of the desirable titles.

Wu said that the m&a activity would focus on “niche dominant” media companies with steady, strong cash flow and strong distribution. Its investment could help such companies enter the Chinese market and its growth opportunities.

Industry sources say that Wu has considered making bids for both US mini-studios Summit Entertainment (which was recently snapped up by Lionsgate) and for Relativity Media (which last month saw billionaire Ron Burkle buy up most of Elliot Management’s minority holding).

On the film side, Seven Stars envisages investments directly in content and the building of a “centralised distribution platform.” Wu said that the East Asian film distribution market is not consolidated and has room for growth. “We’d like to become the good partners of the studios and independents,” he said.

Wu said that the priority focus on English-language, tentpole films reflects the reality that many Hollywood films work in China, but the “ex-China market is very slim” for Chinese films.

The attraction of making films that qualify as Chinese co-productions is twofold; first they escape China’s current quotas on film imports, second, they earn significantly higher rentals, of up to 44%, compared with 12%-17% for imported titles.

Wu said that Seven Stars was making good progress with its fund-raising and did not expect to suffer the fate of Legendary East Ltd, which in December cancelled its US$220.5 million Hong Kong cash call. “We are not seeing issues in the [investment] market,” he said. “We’re not a studio. We have a very strong business model, we have very good governance. In this case we’re primarily leveraging Harvest’s strong resources in China. It’s an entirely different ballgame.”

Wu said that his previous investment in Ku6 (formerly Hurray!), a Chinese online video distributor, would be kept as an arm’s length operation.

Wu, who is married to TV presenter-turned-businesswoman Yang Lan, has a long history of media investments and in 2009 was ranked by Forbes just outside the top 200 richest people in China.

Having studied in France, the US and Shanghai, Wu was chief operating officer of Hong Kong’s free-to-air TV channel Asia Television Ltd (ATV) in 1998-99. In 1999 he and Yang founded Sun Media Group, which is now China’s largest privately-owned media group with a portfolio that includes TV production companies and a stable of magazines. He was co-chairman of Chinese internet firm Sina Corp in 2001-02.