HOLLYWOOD -- Warner Bros. is ending its run in mainland China's multiplex biz. Decision comes following frustration with regulatory changes concerning foreign investment in the country's entertainment sector.

Move will affect six theaters operated by Warner Bros Intl. Cinemas, including three in which it holds a controlling stake, two others under construction and a planned complex in downtown Shanghai that was supposed to become the city's version of Hollywood's Walk of Fame, the company said in a statement issued in Shanghai on Tuesday.

``While we are disappointed that we must stop our investments in cinemas due to significant regulatory changes of foreign investment in the Chinese cinema industry, we remain committed to our other businesses in China, including local-language film production, a homevideo joint venture, consumer products and studio stores - all of which have different legal structures, business models and regulatory requirements,'' a Warner Bros. spokesman in Los Angeles said.

Regulations on ownership were toughened late last year after a period of temporary relaxation. New rules prevent foreign companies from owning a majority stake in a cinema venture, stipulating that ``Chinese mainland investors must own at least 51% or play a leading role in their joint ventures with foreign investors.''

WBIC will sell its stakes in the affected theater developments, but a Warner spokesman said it's currently unclear whether properties will be picked up by the joint venture partners or third parties. ``What's important is that we have finalized discussions with all our partners to ensure that the cinemas we have created together continue providing improved consumer movie experience to the Chinese public,'' he said.

The modern plexes have tended to become leaders in their local markets. Local sources report that revenue from the company's mainland theaters last year totaled RMB120 million ($15 million), or 6% of a mainland market estimated at $250 million in 2005. Chinese theatrical market is estimated to be growing at some 25%-30% a year on a combination of multiplex building and rising ticket prices. WBIC estimates that current year growth is 35%.

Despite the potential offered by a market expanding at that speed, WBIC has finally run out of patience with rules it viewed as preventing it from controlling the businesses in which it was investing. ``The significant regulatory changes have made a big impact on our business in China. After looking at all the possible solutions in the past one year, WBIC has no other options than to stop its investments in cinemas in the (China) market,'' the Warner spokesman said.

In an experimental relaxation that began in 2003, foreign investors were allowed to own 75% stakes in cinemas that would be built in cities that the Chinese authorities considered to be underscreened. Through separate joint ventures, WBIC took a 51% stake in a plex in Nanjing and acquired a majority share in two others, in Chongqing and Guangzhou.

WBIC hoped that the regs would become permanent and be extended nationwide if operations went well. But last December, shortly after China issued the `Several Opinions on Foreign Investment in Culture Industry'' advisory, WBIC prexy Millard Ochs warned that the group would reconsider its Chinese investments if it could not get the control it needed (Variety, Jan. 30).

This summer WBIC was still optimistic that the deadlock could be broken and relocated its international multiplex design function from Glasgow, Scotland, to Shanghai.

September saw another warning from Ochs about regulatory issues, even though local real-estate developer Shimao announced that it had signed a memorandum of understanding with WBIC to redevelop Shanghai's Wangjing department store into a major entertainment complex (Variety, Sept. 7).

``We are hopeful that an environment can be created that will allow our international cinema business to return, but in the meantime, we believe that our partners and other market participants will be able to build upon our legacy,'' company said Wednesday