Coproduction challenges a hurdle for Hollywood and int'l pics

China’s increased film quota is opening up more doors for independents.

But navigating the murky Chinese regulatory world may start getting even harder.

In February, China raised its annual cap on imported films. The move seemed to benefit the major studios, who would presumably look to import more films, but could also be a boon for high-profile independent fare. Several of the 34 films now allowed into China come from outside of the U.S. This year, at least five films fit that bill, including EuropaCorp’s “Taken 2″ and Working Title’s “Anna Karenina.”

But co-productions, which can ease distribution and return higher box office, continue to be a challenging hurdle. In August, China’s State Administration of Radio, Film and TV said it would crack down on what it considers inappropriate use of the co-production status.

“I have to imagine that with the studio focus on the larger films and the franchise films, there are probably going to be way few stories that really have the organic DNA for a Sino co-production,” said Steve Saltzman, partner in the entertainment practice at Loeb and Loeb.

“That will obviously make it a little less competitive for the independent sector that’s focusing on co-production opportunities. You’re not competing for the same releases, you’re not competing for the same capital, but you’re still going to need projects that have a real reason to qualify as Sino-co-productions and not just be shoe-horned into that,” said Saltzman.

Some observers say that SARFT’S pledge was spurred by the Security and Exchange Commission’s recent probe into potential breaches of the foreign corrupt practices act in China, as well as director Shane Black’s remarks that “Iron Man 3″ — originally billed as a co-production — would have little to do with China.

Last year, just five films got official co-production status, according to regulating body China Film Group. Those included “The Great Magician,” “A Simple Life,” “Tokyo Newcomer,” “Late Autumn,” “Joyful Reunion” and “Silent War” — none of which came from U.S. companies. Next year could see as many as 13 co-productions, according to estimates from research center EntGroup consulting, up from just five from 2012.

“If you think you’re going to get around the quota by doing co-productions that are tentpole movies, that’s just not going to happen,” said one studio executive who recently met with SARFT officials. “You’re not going to create a movie in China that’s called ‘Batman’ and shoot it in China and think you can get it around (their) quota system.”

But sometimes the distinctions amongst co-productions, domestic Chinese films and imports are unclear.

“Looper” made waves when it played in China despite reports that it had been denied a co-production status. But “Looper” made it in largely due to the fact that its production company DMG is a Chinese company, with 900 employees in China and headquarters in Beijing. That means that the film could be considered domestically Chinese, which can provide the same benefits as a co-production.

A similar strategy has not yet been ruled out for “Iron Man 3″ after rumblings that the film may not play in the country as an official co-production, sources said.

Films that get co-production status enjoy similar benefits to domestic Chinese films — a potentially higher share of the revenue being one of the biggest. But the task of clearing Chinese censorship and regulatory hurdles sometimes makes getting a film into the country as an import more appealing.”In theory, they would recoup a greater share of the revenue, but the process of (co-production status) seems to have been daunting,” said Jonathan S. Landreth, managing editor of ChinaFile, a new online magazine from the Asia Society’s center on U.S.-China relations.

Landreth spoke after Tuesday’s U.S.-China Film Summit at UCLA where bizzers discussed challenges and opportunities for breaking into China. Chinese B.O. should exceed $2 billion this year, with 60% from international films.

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