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Exclusive: Alibaba is making a huge play to bring Chinese movies to America

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Melody Hahm
·West Coast Correspondent
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Alibaba (BABA) may not have a meaningful retail presence in the U.S., but the Chinese e-commerce powerhouse is finding other channels to enter the American market. Alibaba’s film division is teaming up with media company STX Entertainment to bring a highly anticipated movie to U.S. theaters.

Yahoo Finance has exclusively learned that California-based STX Entertainment will be distributing “Peppa Celebrates Chinese New Year” in time for the Lunar New Year.

After the film’s trailer debuted earlier this month, it quickly lit up Chinese social media. The Mandarin hashtag #WhatisPeppa (#啥是佩奇#) was viewed more than 1.45 billion times on popular messaging platform Sina Weibo.

SHANGHAI, CHINA - JANUARY 22: Peppa Pig toys are on display inside the Peppa Pig-themed pop-up store to welcome the Chinese New Year, the Year of the Pig, on January 22, 2019 in Shanghai, China. Chinese New Year, the Year of the Pig, will fall on February 5 this year. (Photo by Wang Gang/VCG via Getty Images)
SHANGHAI, CHINA - JANUARY 22: Peppa Pig toys are on display inside the Peppa Pig-themed pop-up store to welcome the Chinese New Year, the Year of the Pig, on January 22, 2019 in Shanghai, China. Chinese New Year, the Year of the Pig, will fall on February 5 this year. (Photo by Wang Gang/VCG via Getty Images)

“I got a phone call from Alibaba a week and a half ago — shortly after the marketing materials for Peppa in China had gone super viral… And it was clear to us that the virality was extending far beyond. It was clearly also being seen and paid attention to the Mandarin-speaking population in the U.S. It was something you virtually couldn’t miss,” STXfilms chairman Adam Fogelson told Yahoo Finance.

Stories rooted in Asian and Asian-American culture have been gaining immense mainstream popularity in the United States. Warner Brothers’ “Crazy Rich Asians” was a bonafide box office success, becoming the top-grossing romantic comedy in a decade. Pixar’s “Bao,” a short film about a dumpling that comes to life, is nominated for an Academy Award.

“The increasing appreciation for and interest in Chinese culture, the fact that the story of a family dynamic during the holiday, and the entry point of Peppa, which most American audiences are familiar with, creates a dynamic where there certainly could be — not on the Marvel level of course — broad interest,” said Fogelson. “Depending on what happens in the first week or two, anything is possible. Our first goal was to make sure that Mandarin speakers in the U.S. would have access to the film while the movie was playing in China.”

‘An important film for Alibaba Pictures’

Initially, Fogelson felt it would be “virtually impossible” to orchestrate a U.S. release within a few weeks, but he was ultimately convinced that he could “absolutely pull it off” after watching the film himself.

“‘Peppa Celebrates Chinese New Year’ is an important film for Alibaba Pictures so finding the right partner to help us introduce the film to American audiences was essential,” said Wei Zhang, President of Alibaba Pictures. “Having already established a strong relationship with STX, we knew their innovative marketing strategy and distribution capabilities aligned perfectly with our goals to get this wonderful story in front of the right audiences across the U.S.”

It’s a completely global amalgamation, given “Peppa Pig” is a British cartoon that’s ubiquitous among American households with children. The film opens in China on February 5, the first day of Chinese New Year (and the first day of the Chinese zodiac Year of the Pig). STX will release the film on February 6 in 65 theaters across 32 U.S. markets with high concentrations of Chinese-American audiences like Los Angeles, New York, and San Francisco. It will be in primarily early showtimes to target children and family viewing, and it will be subtitled in English.

Spanish language and Bollywood films have had successful runs in the U.S. But the target demographic for “Peppa Celebrates Chinese New Year” is still very narrow, with about 3.4 million Americans, or about 1% of the entire U.S. population, speaking Mandarin at home. Of course, a significant number of Americans speak Chinese as a second or third language.

Still, given the short notice and niche potential reach, Fogelson said this collaboration isn’t as much for financial gain as it is about building upon STX’s relationship with Alibaba.

“The profitability of this partnership in the United States is likely to be limited. But there’s no downside. This is not a financial rationale or justification. Historically speaking, the films that have been released in the Mandarin language in the United States gross from a couple hundred thousand to a few million dollars. But the primary purpose of this was to continue this relationship and for both of us to deepen our ties in working together,” he said.

‘A big interest in China exporting its films’

The idea to target Chinese speakers in the U.S is still a nascent one. And STX, just under five years old, has quickly become a heavy hitter in Hollywood, especially because of its understanding of China.

Founded by film producer Robert Simonds and Bill McGlashan, a managing partner of private equity firm TPG, the company is backed by highly influential Chinese investors including Hony Capital and Tencent Holdings. PCCW, Southeast Asia’s largest internet and cable services provider, and Liberty Global, the world’s largest distribution platform, are also behind the company. STX Entertainment even had plans to go public on the Hong Kong Stock Exchange, but scrapped its IPO late last year.

Fogelson, who served as Chairman of Universal Pictures prior to joining STX, said the company is well-positioned given Hollywood’s increasing appetite to grab the Chinese viewer.

"We likely have more announced projects with Chinese companies than all other Hollywood studios combined. It's not because we are required to work with each other; we choose each other. The U.S. has successfully exported content to China for decades and now we’re seeing a big interest in China exporting its films. Alibaba coming to STX with this project is the beginning of that process. And it’s something we’re uniquely positioned to do given our deep experience working with all the giant partners in China,” he said.

This can be an edge for STX as Chinese content creators pursue new markets, particularly amid a stagnant domestic economy, where growth has slowed to a 28-year low.

“In these dynamic times, we can be an authentic bridge — both from a business and cultural standpoint because we have pre-established our desire to be great partners with Alibaba, Tencent and others. We have only seen the amount of conversation increase and we see it as a strategic advantage."

Alibaba Pictures and STX currently have several projects they’re co-producing and co-financing, including a multifaceted Ugly Dolls collaboration, which includes an animated feature film, a TV series on Hulu, games, and dolls. They’re also co-producing sci-fi and live action films like “Steel Soldiers” and “Warriors” that draw on themes that resonate with both Chinese and American audiences.

The news of this partnership comes a day after Alibaba posted revenue growth that was its slowest in three years.

Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm. She hosts Breakouts, a monthly interview series for Yahoo Finance featuring up-close and intimate conversations with today’s most innovative business leaders.

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