‘Warcraft’ Secret Weapon Tencent May Hold the Real Keys to China’s Movie Market

The tech conglomerate, which recently invested in STX, is a marketing and social media force without comparison in the U.S.

Robert Simonds STX tencent
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“Warcraft” may have been a box-office dud in the U.S., but it was one of the highest-grossing Hollywood movies ever to play in China. Some of that was the game‘s built-in fanbase — China has about half the world’s players — but there was another factor: the power of Tencent.

The Chinese media, entertainment and tech conglomerate recently made a major investment in Robert Simonds’ STX, part of a plan to expand the studio into fields such as digital content, mobile apps and virtual reality, giving its stars more avenues to make money in markets around the world.

It’s not STX’s first deal with a Chinese entertainment company — it inked an 18-film co-production deal with Huayi Brothers Media Corp last year — but it marks Tencent’s first equity investment in a Hollywood film studio.

Sky Moore, a partner at Stroock & Stroock & Lavan who’s worked on multiple U.S.-China entertainment deals, said locking down Tencent as a partner is massive for STX’s Chinese ambitions.

“Tencent has big time clout in China, big time financial resources,” Moore told TheWrap. “A lot of credibility. And for marketing, WeChat is huge.”

While China’s Dalian Wanda Group has dominated the headlines this year as it shelled out $3.5 billion for “Jurassic World” production company Legendary Entertainment and scooped up cinema chains around the world, Tencent might actually be the most powerful entertainment company in China when it comes to getting people to the theater (that Wanda, by far the country’s largest exhibitor, likely owns.) And as Moore pointed out, Tencent owns WeChat, one of China’s most popular — and arguably, its most commercially important — mobile app.

WeChat is built around a messaging app, but also includes other features, like video games and a payment system denominated in Chinese currency that can be used to transfer funds to other users and pay at many physical and online stores in China. WeChat has become such a driver of commerce in China, it’s even having a material effect on the Hong Kong insurance market.

With its integrated movie ticket booking platform, WePiao, WeChat processes a significant share of tickets bought in China, where convenient — and subsidized — online tickets are the most popular way to go to a movie.

While “Warcraft” was produced by Wanda’s Legendary, and — with Wanda’s help — premiered at a higher share of the country’s theaters than any imported film ever had, Moore said “Warcraft” owes a huge part of its $220.8 million box office gross in China to Tencent’s marketing might.

“Tencent gave it a huge sales and marketing push,” Moore said. “That was all Tencent.”

Wanda, owned by China’s richest man, Wang Jianlin, has made the biggest splashes of any Chinese entertainment company, having acquired AMC Theaters in 2012 and Legendary earlier this year. Recently, Wanda has been taking its competition to the theme park arena as well. Wang recently spent time in a TV interview declaring war on Disney and pledging to make Shanghai Disneyland Park unprofitable within 20 years.

Wang’s bluster and big swings have made Wanda the symbol of China’s grandiose entertainment ambitions, but Tencent hasn’t exactly retreated into the shadows. In fact, while Wanda accumulates theater chains and builds large-scale projects like theme parks, Tencent has continued to bolster its mobile suite of services.

Last year, Tencent signed a $700 million deal to stream the increasingly popular National Basketball Association in China, and in June, Tencent paid $8.6 billion for a majority stake in Finnish mobile game company Supercell.

Chinese audiences may see most of their films at Wanda theaters, but they all have Tencent in their pockets. That makes Tencent a quiet force in driving consumer behavior — and influencing which movies they want to see. Big-time clout in a small package.