When Legendary Entertainment signed a partnership deal with Warner Bros (NYSE:TWX) in 2005, both companies needed each other to pull off franchises like “The Hangover” and “The Dark Night.” Now, just before that contract is set to expire, Legendary East has announced a deal with China Film, the country’s state-sponsored movie arm. It’s safe to say Legendary has bolstered its hand significantly, and will use its new-found power to negotiate a much better deal this time around.
The announcement, which came Thursday, means that whoever works with Legendary Pictures on its next projects will be able to operate in China with privileges only a few studios enjoy. The multi-year deal penned by Legendary East allows producers better distribution access, an easier go at censorship requirements, quicker notice of script approval and — most importantly — an exemption from its films being counted as part of Chinese quotas. Under current laws, only 34 foreign movies are allowed to be shown on China’s screens every year.
By co-producing with China Film, Legendary and whatever big studio signs with it will be able to sidestep many of the difficulties involved with the Chinese market. Only Sony (NYSE:SNE) and Twentieth Century Fox (NASDAQ:NWS) currently have a foothold in China, so Warner Bros may see China productions as imperative for keeping on top of their game. Universal Studios (NASDAQ:CMCSA) would also have a major interest in getting on board with Legendary as it pushes into the biggest market outside of the U.S.
According to Marc Graser in Variety, if Universal formed a partnership with as big a player as Legendary, it would have excellent material for its theme parks around the world, not to mention the Chinese production aspect. Of course, the other studios could make a move to sign the next deal with Legendary as a way to keep Time Warner out of it.
Whatever the outcome, Legendary has built the strongest possible position for itself as it plans to negotiate a new distribution deal at the end of the year. The makers of films like “The Dark Night Returns,” “Clash of the Titans” and “The Hangover” already had a lot to offer a major studio. Now Legendary has a foot inside the world’s second-biggest movie market. The price is going to be much higher this time around.