CNCAC

Hollywood acquisitions to be channeled through Hong Kong company

HONG KONGChris Lee, the former head of Columbia TriStar Pictures, producer of “Superman Returns” and “Valkyrie,” is to become president of China Railsmedia Group, one of the components in a chain of companies that will operate China’s second film import and distribution license.

The Hong Kong-based company will imminently change its name to China National Culture Group, a move that reflects both its new role and its close connections with China National Culture & Arts Centre (CNCAC), the mainland Chinese state-owned enterprise that expects to receive the second license.

Currently China allows only one firm, another state-owned company, China Film Group, to operate as a gateway for imports of foreign films that can enjoy full revenue-sharing release. The country currently has a quota of 34 films per year which can be distributed this way.

At an event on Thursday in Hong Kong, China Railsmedia/CNCG held a briefing for senior members of the Greater China film industry and a signing ceremony to officialize its connections with i-Marker, an intermediary company that struck an exclusive co-operation deal with CNCAC in September last year.

“It is being done this way because we have larger resources than i-Marker,” Bondy Tan, board director at China Railsmedia/CNCG, told Variety after the ceremony. “We have a large management team and will be finding the right films [to import]. We are already in the film marketplace, we are in Hollywood and we will be talking to producers.”

Speaking to Variety after the event, Dong Zhenwu, senior partner at Beijing’s Juntai law firm, said that CNCAC will receive the second distribution license in the near future, meaning the “the second quarter of the year, early to middle of the quarter.”

Responding to recent industry talk that the license has not yet been activated and that CNCAC may not be alone in hoping to receive the permit, Tan explained: “This is a very Chinese process. It is definitely happening, but it is likely that not everyone has been informed of the details yet.”

“It is simply not possible that the license would be issued directly to a private sector company, this is a cultural sector,” Tan said. He added that there is no prospect either of more licenses being granted in the foreseeable future, nor an expansion of the import quota. But he also described as “too sensitive” the arcane political reasons why CNCAC should pact with a Hong Kong firm for movie acquisitions and finance.

The event was attended by more than 100 executives from major Hong Kong film studios, industry financiers, the vice chairman of the Hong Kong Trade Development Council, talent agents and even a leading casting director. It was held at the Four Seasons hotel, where some 30 local companies had sent wreathes and messages of goodwill traditionally offered in China at the launch of a new business venture.

“We will offer better financial terms to Hollywood,” Tan said. “What is holding back Hollywood in China is a hole in the distribution system. We want to fill that hole. It is to our mutual benefit that this happens.”

Documents that accompanied the event showed that China Railsmedia/CNCG will “raise all necessary funds for the business,” and “share 50% of the net profits” over an initial 10 year period. It is required to “establish strategic partnerships with [mainland Chinese] cinema circuits; form a professional team responsible for developing competitive film selection plans and strategies;” and “collaborate in the set-up of strategic partnerships with world class Hollywood and international studios.”

Lee was on the podium, but had a figurehead role at the Thursday event. “My job today was not to say very much beyond that I am a fourth generation Chinese American, and that these are exciting times,” Lee said to Variety after the event.

The expected issuing of a second license represents a seismic shift within the Chinese film distribution sector.

Having a single importer and distributor for foreign films has been a diplomatic sticking point in relations between China and the U.S. After protracted negotiations with the U.S. Trade Representative, the Chinese government last year agreed to increase the annual import quota for revenue sharing films from 20 to 34. But the US failed to dislodge China Film Group as the sole licensed importer.

(A second company, Huaxia Film Distribution also handles some foreign film releases in China, but it operates under China Film Group’s license and offers no competition to CFG.)

While the likely arrival of CNCAC on the scene will be welcomed by the Hollywood studios, it still falls short of the American studios being allowed to set up and operate their own film releasing mechanisms as they do in most other countries.

All films imported will also have to pass pre-release censorship and be approved for release in a system where there are no ratings certificates. All films released in China must be fit for audiences of all ages and sensibilities.

The CNCAC is a major state-owned enterprise that reports directly to the Ministry of Culture. It currently has no role in the film industry, but is the preferred channel for most incoming foreign music, theater and touring events that enter China. It was formed in 1987 and is headed by Lu Changhe.

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