Exhibs welcome opportunity; producers share worries

BEIJING — When asked about the impact of the French Revolution, China’s late Premier Zhou Enlai, Mao Zedong’s trusted lieutenant, allegedly replied, “It’s too early to tell.”

In fact, he was talking about the 1968 riots in Paris, but the point remains: The Chinese take a long and thoughtful view on burning issues.

So while Hollywood is upbeat about China’s February decision to change its film quotas, reaction in China varies greatly, depending on who you ask. Theater owners are very upbeat, filmmakers are split — will this mean unnecessary competition, or a boost to moviegoing habits? — and Hong Kong industryites are watching things closely.

One local filmmaker tells Variety that the move is “a wake-up call for the Chinese film industry.” And indeed, many in the biz are trying to meet the challenges of the new rules, and looking to the ways the decision can help streamline the biz in China, and boost new formats and distribution.

The decision, announced last month, will increase the quota of foreign films allowed to enter the Mainland from 20 per year to 34, of which 14 will be 3D, Imax or animated. Perhaps more significant to Hollywood, a foreign film company’s profit-share will rise from 13% to 25%.

Many in China hope that an influx of films will spur a more spirited fight against piracy.

Feng Xiaogang, China’s most bankable helmer (“Aftershock,” “If You Are the One 2″) has been energetically posting on Weibo (the Chinese version of the banned Twitter) about the issue.

“The more Hollywood Tigers there are, the more Chinese filmmakers are created,” Feng wrote.

The new rules would force the government to crack down on piracy, he adds. “Otherwise the Hollywood Tigers will get angry with you. Stopping pirates also helps us. And finally, for the audience, this is good news. Survival of the fittest — who’s afraid of that?”

Feng’s comments mirror those of Motion Picture Assn. topper Christopher Dodd, who said the agreement would “complement efforts to fight movie piracy and help protect the jobs of workers in both countries, whose livelihoods are dependent on a healthy entertainment industry.”

Imax topper Richard L. Gelfond sees the decision as a milestone for the global movie consumer.

“We are pleased that the new agreement highlights Imax and allows for even greater flexibility to bring Imax films into China within a structure that fosters more growth and collaboration,” he says.

Hollywood, naturally, is thrilled, and as for what the Chinese biz thinks, it depends on who you ask. The skyrocketing exhibition business is excited, needing more product to fill screens. But among Chinese filmmakers, who have become used to having their output protected against Hollywood tentpoles, talk was more mixed, with many uncertain over the increased competition.

Of keen interest to the domestic biz is the news that China will allow another distributor to release imported pics. Currently only two companies are allowed to distribute foreign films on a revenue-sharing basis, the state-run giant China Film Group and Huaxia Film Distribution, a smaller distrib, which is also state-run.

“I think the rise in the number of imported films might result in more private film corporations qualifying to distribute foreign films in the Chinese market,” says Wang Changtian, president of Enlight Media, a private production shingle listed on China’s Shenzhen stock exchange.

Theater owners, too, see opportunity in the rising foreign quota. Yuan Xin, vice president of leading theater operator Stella Mega Intl. Group, told local media that more foreign pics would mean more income for the chains, and more choice for auds — and perhaps a dropoff in auds for local pics.

“The box office for domestic movies will definitely be impacted, which means Chinese moviemakers have to work their butts off to improve their competitiveness,” he says.

In an online survey on China’s website giant Sina.com , 35.6% believed the new rules were good news, while 21.3% believed the agreement was an opportunity to promote domestic production. Less than 10% felt shocked, and thought the challenge for domestic movies would be immense.

China’s B.O. swept past $2 billion for the first time in 2011, according to the government’s film bureau, a 29% hike on the previous year. The Chinese biz has grown by more than 25% every year since 2003.

“Transformers 3″ took in $170 million here last year, while the previous year, “Avatar” did $210 million in the territory, so clearly there is demand for Hollywood product. This is a market adding eight new screens a day, and by the end of last year, the number of screens in cities nationwide had exceeded 9,200, up 33%, while the number of cinemas increased 29% to 2,800. Of the 803 cinemas that opened last year, 90% were equipped with digital projectors. China needs movies.

Albert Lee, head of Hong Kong-based Emperor Motion Picture, which is doing the majority of its business now in mainland China, sees a potential weeding out companies that aren’t as strong.

“China is critical for the survival of the Hong Kong industry, and anything happening to (China) affects Hong Kong,” Lee says. “It will help eliminate fly-by-night companies, and the surviving ones will have a stronger foundation.”

As much as the rise in quotas will affect some aspects of the biz, others will remain unchanged.

Foreign filmmakers face the same rigid — and opaque — standards of control and censorship that Chinese filmmakers do, and if a Hollywood pic doesn’t meet those sometime abstruse rules, it won’t be admitted.

Moreover, many filmmakers say privately that if it appears the domestic market is suffering badly, the government will simply stop the entry of foreign films, finding something wrong with the content.

Despite the urgency of the policy, it remains to be seen when the changes will come into effect.

It’s unlikely to come before the summer — after all, it took three years for the government to make changes on restrictions for importing and distributing films, DVDs, music, books and journals after the World Trade Organization ruled in 2009 against China and its policies.

The changes in the quota rules are aimed at meeting these requirements, and some insiders claim that judging by Hollywood’s reaction, China shouldn’t expect further demands from the West at the global trade body.

While the West has been urging China to tamp down on its booming housing market and economy, the new policy may put the brakes on the wild growth of the film production sector. Simply put, there are too many small shingles making too many movies (791 local films were released last year; only a handful made money).

“As the Chinese market opens up, the movies that will be destroyed are by filmmakers who rely on luck, who try to manipulate the market using so-called stars,” writes “Tokyo Trial” helmer Gao Qunshu on Weibo. “This will improve the overall level of Chinese films. While it may bring temporary pain to Chinese films, in the long term, it is a good thing.”

Shanghai Film Group prexy Wang Tianyun believes the new rules will be an engine for growth, forcing Chinese films to become more competitive.

“It puts pressure on domestic films,” Wang says. “After all, the only way to really empower Chinese films is to go to the international market.” What: Biz is split over new China import rules.

The takeaway: It’s competition for some, but could spur filmgoing and help step up an anti-piracy push.

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