Walt Disney to Co-Produce Iron Man 3 in China With DMG

Robert Downey Jr. stars as billionaire industrialist Tony Stark, also known as Iron Man. Photographer: Zade Rosenthal/Paramount Pictures via Bloomberg News

Walt Disney Co., the world’s largest entertainment company, plans to co-produce “Iron Man 3” with Beijing film studio DMG Entertainment as collaborations between Hollywood and Chinese studios increase.

The movie will have an investment of at least 1 billion yuan ($158 million), DMG Chairman Peter Xiao told reporters in Beijing yesterday. The Chinese company will invest in the production and help distribute it in China, Burbank, California-based Disney said today in a statement.

The partnership is the latest in a wave of U.S.-Chinese deals as Western operators look for a larger role in one of the world’s fastest-growing movie markets. The 2010 remake of ``Karate Kid,'' starring Jackie Chan and Jaden Smith, was produced by Sony's Columbia Tristar and state-owned China Film Group. While China limits the number of foreign films allowed into the country, pictures co-produced with Chinese partners can skirt the quotas. China also has adjusted the revenue-sharing formula, giving foreign studios a bigger share of ticket sales.

The agreement marks a milestone as “the first multibillion dollar franchise to be produced between Hollywood and China,” said Dan Mintz, chief executive officer of DMG. Chinese elements will be added to the film, he said.

The “Iron Man” movies are based on the comic book about an industrialist who dons an armored, jet-powered suit to fight villains. Disney bought the comic-book company Marvel Entertainment in 2009.

The portion of the movie produced in China will involve DMG as well as Marvel Studios’ production and creative teams, Disney said.

Audience Potential

The development of the Chinese market is important for Disney, and the U.S. company plans to add more China-related elements to its future projects to appeal to the local audience, Stanley Cheung, managing director of Disney in Greater China, said at a press conference in Beijing.

Chinese ticket sales rose 35 percent to $2 billion last year, making it the biggest market after the U.S. and Japan, according to the Motion Picture Association of America. By comparison, worldwide box-office revenue rose 3.2 percent.

“Titanic 3D,” a three-dimensional re-release of the 1997 James Cameron epic, grossed $58 million in China last week, the biggest opening the country has ever had, the Los Angeles Times reported yesterday.

“As the Chinese economy continues to grow rapidly and evolve, we are very excited to be” involved in China, Rob Steffens, general manager of operations and finance for Marvel Studios, said at the press conference.

DreamWorks Animation

DreamWorks Animation SKG Inc., creator of the “Kung Fu Panda” films, formed a venture in February with three Chinese partners to develop entertainment projects. Disney said on April 10 that it was joining with China’s Ministry of Culture and Tencent Holdings Ltd., China’s largest Internet company, to develop animation content.

Disney, which operates a theme park in Hong Kong and is building a second Chinese park in Shanghai, fell 0.5 percent to $41.66 yesterday in New York. The stock has gained 11 percent this year.

Shooting of the movie, starring a returning cast of Robert Downey Jr. and Gwyneth Paltrow, will start in May in the U.S. and begin in China in late summer, according to Disney’s statement.

The original “Iron Man” made $581 million at the global box office when released in 2008 and the second installment made $624 million, according to the statement.

Only $15.3 million and $7.9 million, respectively, came from China, according to Box Office Mojo.

‘Something of Theirs’

Working under a co-production agreement, Disney and DMG will be able start marketing the film earlier, run it for a longer period of time in theaters and keep a larger share of box-office revenue, according to Chris Fenton, DMG’s North American general manager.

“If the Chinese feel it’s something of theirs, it helps in every way possible,” he said. “It becomes relevant to them.”

China in February increased the number of foreign films it allows in the country annually to 34 from 20, according Howard Gantman, a spokesman for the Washington-based association. Studios will keep 25 percent of box-office receipts, up from 13 percent under the prior arrangement.

DMG funded “Looper,” a science-fiction film starring Bruce Willis, that is scheduled for release this year. The company has been looking to raise $300 million to invest in co-productions with U.S. studios. Movies with a qualifying percentage of Chinese stars, financing and shooting locations can avoid foreign quotas.

— With assistance by Stephanie Hoi-Nga Wong, and Chris Palmeri

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