Market offers juicy prize, but odds are stacked against success for all
The company was in business with Jiang, Zhang Yimou and Feng Xiaogang some 15 years ago when Columbia Pictures Film Production Asia was set up in 1999 in Hong Kong to make Chinese-language pictures for a waiting global audience.
The unit was quietly shuttered in 2005 when it emerged that the business model was not quite right and the global market was not ready for Hollywood-stoked Chinese fare.
The same fate almost certainly beckons for some of the new Sino-U.S. ventures that have been announced in the past fortnight, but as of now it is unclear which will succeed.
This time around there are many more companies willing to wager that they can get it right. And the bets are going in both directions.
- The March 17 deal between Bruno Wu’s Seven Stars Entertainment and London- and North American-based Content Media, will see money and content flow both East and West. Content will acquire Wu’s film, TV and sports unit Alive Group, while Alive will release Content’s shows in China.
- Earlier this month, Disney revealed that it has partnered with state-owned, but somewhat free-wheeling, Shanghai Media Group to develop and produce action, adventure and fantasy films for the Chinese and international markets.
- Hollywood producer Robert Simonds (“Happy Madison”) said that he too is working with SMG on a $1 billion, 10-films per year slate of movies. His initiative is backed by TPG, a U.S. financier with a large Asian exposure, and Hony Capital, a Chinese investment firm with connections to SMG.
- Luc Besson’s Paris-based EuropaCorp revealed that it is working with Shanghai-based Fundamental Films on a picture called “Warrior’s Gate.”
- Wanda Cinema, part of China’s enormous property-to-movies group, called up the U.K.’s Pinewood Studios to help design its studio, festival and museum complex to be built in the coastal city of Qingdao. Pinewood is also involved with Wu’s Seven Stars.
- Going in the other direction, Huayi Brothers Media, China’s largest private-sector entertainment company, told the Shenzhen Stock Exchange that it is to invest $120 million-$150 million in former Warner Bros. chief Jeff Robinov’s new Media 8 company and its upcoming slate.
- And Jeff Berg’s Resolution talent agency received a capital injection of undisclosed size from Chinese venture capital firm Bison Capital Holdings. The firm has holdings in AirMedia, China’s leading operator of out-of-home advertising platforms. Bison’s founder Xu Peixin has a stake in NASDAQ-listed Bona Film Group.
- Meanwhile, Sony confirmed that it is backing Chen Kaige’s martial arts actioner “The Monk” and a Chinese remake of “My Best Friend’s Wedding,” both with New Classics Media. That is in addition to the previously announced involvement in Jiang Wen’s “Gone With the Bullets,” and acquisition of North American rights to Zhang Yimou’s “Coming Home.”
The strategies behind each deal differ slightly, but each is predicated on the apparent need for the world’s two most financially significant film industries to work together.
The Chinese film market has become too large for Hollywood – studios or independents – to ignore.
Looking the other way, from a Chinese private-sector point of view, involvement in Hollywood brings prestige and a potential for profit on a different scale from incremental international sales for any home-grown movies.
“The internationalization of the Chinese market does not mean Huayi will abandon China. China is still the most important market for us, but the international markets have a a potential that is measured in the billions,” said Huayi Brothers co-CEO, James Wang.
From the perspective of the Chinese government, Hollywood represents an outreach to global minds that no Chinese-language film has attained since “Crouching Tiger, Hidden Dragon” in 2000 and “Hero” in 2003.
But the potential for disappointment remains significant.
Since the early days of Columbia Pictures’ Asia unit, the Chinese theatrical market has grown 30-fold to represent a $3.3 billion business, and given the scale of multiplex construction on the mainland, looks set to continue huge growth for several years to come.
That is enough to tempt Sony back to China for a second bite, and for Disney to persist despite not getting the TV “landing rights” it previously sought for the Disney Channel.
But it is also remarkable how few U.S.-China co-productions and co-venture movies have worked despite more than a decade of trying. Rob Minkoff’s 2008 independently made “The Forbidden Kingdom,” with Jet Li and Jackie Chan onscreen together for the first time, is a high point with $127 million worldwide and $52 million domestic for the Lionsgate release; while Sony’s 2010 effort by Harald Zwart, “The Karate Kid,” grossed $182 million worldwide and a whopping $176 million domestic. Some Hollywood studios have cut their budget horizons and gone more local.
Disney tried “The Magic Gourd” (2007), “Trail of the Panda” (2009) and “High School Musical China: College Dreams” (2011) without covering itself in glory.
Fox Intl. Prods. has fared slightly better as a co-venture partner on “Hot Summer Days” (2010), “Love in Space” (2011) and “The Butcher, the Chef and the Swordsman” (2010), all of which were targeted at the domestic Chinese and possibly Asian export markets.
More expensive co-venture pictures such as “Looper” and “Iron Man 3” were global hits but they caught the eye of China’s film regulators, who saw in them attempts to get around the country’s strict co-production rules. These make minimum stipulations about Chinese content, talent and locations.
Chinese censorship, while always a gray and fluid area, remains in place and any U.S. films seeking Chinese nationality through a full co-production will be obliged to follow Chinese rules, which effectively gives a Beijing bureaucrat final cut.
But the recent spate of deals has prompted several commentators to suggest that the potential rewards in China are now so vast that Hollywood is prepared to quietly bend the knee to the Middle Kingdom’s regulators.
In a speech on Dec. 30, China’s president Xi Jinping spelled out what would be expected. “China should be portrayed as a civilized country featuring a rich history, ethnic unity and cultural diversity, and as an Asian power with good government,” Xi said. It should also be shown to “safeguard international justice, and make contributions to humanity,” said the state-run news agency Xinhua in summary.
Other observers see practical reasons for caution.
“It is very difficult to have a U.S.-Chinese co-production where both parties are equals. Both understand the potential of their own markets and pull the production in that direction,” says John Chong, veteran screenwriter and producer at Hong Kong’s Pegasus Motion Pictures.
Yet Chinese regulations require the China party to have real ownership of a movie if it is to qualify as a full co-production.
Huayi’s Wang hints that the pictures emerging from its Robinov deal may not fit that mold. “Although Huayi Brothers is an investor in Studio 8, the specific films, screenwriters, directors and producers will be from Hollywood. We want to work in accordance with Hollywood rules.”
“Audiences don’t like co-productions. They can smell them a long way off,” another Chinese executive told Variety. “And what is the point of making Chinese content in English? The Chinese public doesn’t like it and that doesn’t work for international audiences either.”
Disney describes its pact with SMG as involving “U.S.-based action, adventure and fantasy writers will team with locally based Chinese writers and filmmakers to develop stories and scripts that bear all the hallmarks of Disney films and feature authentic Chinese elements fit for local co-production and aimed at the international market.”
On the evidence of the past 18 months, the Chinese audience tastes may well be becoming more locally focused. In 2013 local films surged – delivering high return on investment for a number of low-budget efforts. Hollywood’s gross plateaued at $1.46 billion last year, despite an increase in the import quotas.
Hollywood studios correctly point out that the Chinese authorities rig the theatrical market through selective imports, restricted release dates and designated distribution channels, to ensure the success of Chinese titles. But changing patterns of success may also reflect the spread of new theaters into second- and third-tier cities, where TV personalities count for more than foreign stars,
As demographics change, a younger cinema-going public is more easily wooed by carefully censored Chinese social media.
Half a dozen Chinese companies, armed with strong audience analysis skills, access to their own distribution and promotion platforms and equipped with sound finances, are also becoming significant competitors and have lifted the success of Chinese-made movies.
Those same attributes may make them interesting partners as Hollywood beats on China’s door.