Market Insight

Wanda joins tax credit world to push studio take-up

October 19, 2016

David Hancock David Hancock Director – Research and Analysis, Cinema & Home Entertainment, IHS Markit
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Wanda joins tax credit world to push studio take-up Dalian Wanda is to offer a tax credit system for overseas and Chinese producers using its upcoming production facility in Qingdao, in conjunction with the local government. The film fund will subsidise up to 40 per cent of production costs via rebates for producers. The fund will be worth a total of $750m over a five year period, or $150m a year in subsidies to productions. The rebates will apply to a wide range of applicable expenditure including post-production. The project needs to fit into a ‘qualifying project’, but the nature of this has not yet been defined . The goal is to attract productions not deter them so it is likely to be a fairly broad definition, which fits a Hollywood studio production template. The aim is to attract at least five films a year with budgets in excess of $100m, as well a number of smaller (Chinese) films.


Our analysis

The world is not exactly short of tax credit systems for film production. Every US state has a version of a tax credit or financial incentive system in place, as do most Australian states, Canadian provinces, Western and Eastern European countries, some Asian and Latin American countries, some Middle Eastern countries, some African countries and some Caribbean countries. Some countries have also set up post-production systems in order to keep the post-production activity in the country. Producers have a wealth of options when it comes to choosing locations. Some systems are better than others, some countries are better than others at hosting and facilitating film productions, however not many of these systems are backed by the production studio which is being built by Dalian Wanda, a group that is building an influential network of film and cinema-related companies (see previous items).

The tax credit system being proposed is on the generous end of the scale and requires a minimum $4.5m expenditure in the Qingdao region. This suggests that Wanda is serious about attracting the largest productions to the studio, which will be necessary to make the whole venture to work.

Given the size of the studio complex, it will need a high and steady volume of companies using the location. Wanda has confirmed that companies such as Lionsgate with China Media Capital backed Infinity Pictures, Arad Productions, Arclight Films, Kylin Pictures, Base Media, Beijing Dirty Monkey Culture Industry Development, Juben Pictures and Wanda subsidiary Legendary Entertainment have already signed on to use the facility when it opens fully in 2018.

Digital Domain is exploring the opportunity to establish its first motion capture stage in Asia at Wanda Studios.

The process of choosing a location is not a one way decision. One of the key elements in choosing  a location is the skillset of the local film industry, and China is some way behind in this area. The domestic industry is already learning from the links being created between China and Hollywood, and this studio should significantly enhance the skills base of Chinese film professionals which is also an aim of the venture.


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