Update on Shane McMahon's Company: Partnership with Warner Brothers; Structure Called a "Shell Game"

In a statement issued from Beijing, Warner Bros. Entertainment announced China’s "first national Pay-Per-View and Video On Demand platform" in partnership with YOU On Demand Media, the exclusive 20-year joint venture partner of the pay-TV arm of state-run broadcaster China Central Television’s dedicated movie channel, CCTV-6.

Warner Bros. said CCTV-6’s pay TV arm, China Home Cinema and YOU On Demand’s platform will provide films such as the Harry Potter series to three million cable TV homes in China by the end of this summer, a number comparable to the subscriber base of top cable operators in the United States.

Sources claiming to be familiar with the Warner-YOD-CCTV-6 deal’s structure say that YOD’s contract is actually with a private Beijing-based VOD solutions company called Zhonghai, which, in turn, has a non-exclusive contract to source video content for the VOD unit of CCTV-6’s pay TV platform.

In China’s tightly controlled media landscape, it could be only a matter of time before media regulators in the ruling one-party government in Beijing crack down on any foreign entity trying to sell content directly into China, even through a series of middlemen.

“All the middlemen do not make things more or less legal in the eyes of the regulators. It just makes for a complicated scheme by which investors can be manipulated,” Dickinson said.

In a market where movie theater ticket sales soared 64 percent last year to $1.5 billion, there’s still very little revenue to be made from the Chinese home entertainment, undercut by pirated discs of Hollywood films costing less than $1 and free illegal Internet download.

“The real money in China is from a release in theaters, not the sale of DVDs and not television broadcast,” Dickinson said. Some analysts are more skeptical still. One, who asked not to be referred to by name for fear it would jeopardize business, referred to the Warner-YOD-CTV-6 structure as a “shell game.”

According to the source, who has consulted for multiple media entities both Western and Chinese over the years, YOD’s McMahon approached the Los Angeles-based executives of all the Hollywood studios several months ago, saying he’d secured a platform to distribute content in China, “bypassing their China people, who know how things work here,” the analyst said.

“This is an over the counter stock looking for a boost to its price by making an announcement,” the analyst said.

Shares of YOD, whose market capitalization is about $72.7 million, according to financial filings, have traded at less than 15 cents for the last year.

McMahon on Wednesday described the deal as "groundbreaking because we are going to be able to monetize content in the largest market in the world." He said it was difficult to leave the family business but the opportunity to be a licensed distributor of entertainment in China was too irresistible. "I didn't want to look back and regret not having done this." The deal took more than a year to come to fruition, said McMahon, and all the studios expressed interest with Warner being the most aggressive. McMahon said he expects other studios sign on as well.

Requests to speak with Warner Brothers and YOD were not met by deadline...More?

source: hollywoodreporter.com