In an about-face that highlights Hollywood's long-standing tensions with China, Time Warner Inc. is pulling out of an ambitious, four-year theater venture in the country because of tightened restrictions on foreign ownership.
The decision, announced Wednesday, came after its Warner Bros. unit tried unsuccessfully for more than a year to negotiate a compromise with the Chinese government over a July 2005 ruling requiring outside investors to cede control in ventures to their Chinese partners.
Warner's decision underscores Hollywood's frustrations operating in China. Although studio executives consider China to be the world's best growth opportunity for U.S. entertainment, they also are wary of expanding there, in part because of what they believe are burdensome government rules.
"We are disappointed that we must stop our investments in cinemas due to significant regulatory changes," New York-based Time Warner said in a statement.
For decades China had been off-limits to foreign companies but in recent years has attracted the likes of media giants Time Warner, Walt Disney Co., News Corp. and Viacom Inc. But since 2005 those companies have become increasingly frustrated by Beijing's reluctance to allow more foreign movies to be shown and grant licenses for television channels. Censorship and piracy also hamper foreign media.
Although hoping to one day return to the theater-building business in China, Time Warner said it remained committed to its other operations there that had different legal and regulatory structures. They include a local language film production, a home-video venture, consumer products operations and studio stores.
Warner Bros. International Cinemas operates four state-of-the-art cinemas with local partners, two with Shanghai Film Group Corp. and two with Shenzhen Investment Trust.
The 11-screen Paradise Warner Cinema City in a luxurious shopping mall in Shanghai's bustling Xujiahui area has been the highest-grossing theater location in China for the last three years, screening domestic and foreign movies. The Oliver Stone-directed "World Trade Center" begins showing today there at $9 a ticket.
Warner Bros. established its cinemas as a foothold in the fast-growing market. Warner eventually planned to increase the number of locations to 30, encouraged by an easing of rules in 2003 to let foreigners hold as much as 75% of cinema ventures in selected cities. But last year's change of heart by the government crimped its plans.
