Paramount Pictures to receive $1bn investment from two Chinese film companies

Paramount Pictures has struck a $1bn (£810m) joint investment deal with Shanghai Film Group and Huahua Media. The three-year deal between the Viacom subsidiary and the two Chinese companies was announced by Paramount Pictures Chairman and CEO Brad Grey, Shanghai Film Group Chairman Ren Zhonglun and Huahua Media Chairman Wang Kefei.

The deal follows the trio's meeting in Shanghai in November to finalise the terms of the transaction.

As part of the deal, the Chinese companies will jointly finance 25% of all films made by Paramount over the next three years, but there is an option to extend this to a fourth year, according to an unnamed source familiar with the situation.

The deal is expected to benefit the cash-strapped US studio and give it stability as it attempts to grow. It comes at a time when its parent Viacom, is undergoing a turnaround under its newly appointed CEO Bob Bakish.

"This will give Paramount the wherewithal to build the slate and produce as a major studio should 15-17 movies a year," Grey was quoted as saying by Reuters. "You really can't operate a major studio with that," he added, referring to the low figure of eight films a year it was producing in recent times.

The current agreement follows Paramount's failed deal with China's Dalian Wanda Group Co in 2016. The US studio had then come close to selling a 49% stake in it to the Chinese firm but the deal did not go through after failing to get support from Viacom board members.

Paramount is hence said to have now pursued a financing deal instead of a stake sale. This could help it to increase the number of movies it produces, according to another unnamed source.

"We've been dealing with China for over a decade, but it was very clear how acute their appetite was," Grey was quoted as saying by The Wall Street Journal.

Apart from helping to produce more films, the deal will benefit Paramount in terms of distribution. Both the Chinese companies are expected to help distribute and market Paramount features in China.

Chinese firms that invest in a movie are also expected to help studios in selling tickets in their country. This is cited as the reason for almost every major Hollywood studio going in for a co-financing deal with a Chinese company.

Such co-financing deals are, however, not new. Sony Pictures Entertainment signed a marketing pact with Wanda in September 2016.