AFM: Producers Looking to Work With China Need to Study the Market First

Going in to a key industry seminar at last month’s Tokyo Film Market, the premise seemed to be that everybody wants to co-produce movies with China. Even the Japanese were prepared to put aside the centuries of political, military and cultural rivalry if that meant they could get a piece of a marketplace that has overtaken their own.

China is now the second-largest theatrical B.O. market after North America.

Producers, politicians and film industry regulators the world over are in a hurry to improve their access to China. And this year alone the governments of the U.K., Netherlands and India have all signed bilateral co-production treaties with the Middle Kingdom.

But the reality of international production with China is harder than the glib talk of foreign film financiers might suggest. For a start, the market is narrower than might be supposed. “Almost all of the major co-productions to date have been with Hong Kong, meaning 16 or 17 of the top 20 highest-grossing co-productions,” says Rance Pow, principal at consultancy Artisan Gateway. “And by genre, action and drama are dominant.”

Pow’s statistics, covering 2006-14, show 203 Hong Kong-China co-productions, and 24 Taiwan-China co-productions — compare that with four between France and China and just one involving the U.K.

Those productions within the Greater China region reflect not only the commercial filmmaking expertise of Hong Kong, but also the language and cultural preferences of Chinese audiences. In a typical year, Chinese-language movies — including co-productions — account for 55% of the box office, while nearly all of the remaining 45% goes to imported Hollywood movies, leaving just a small slice for other imports or co-productions.

That is important because the logic driving any co-production with China is fundamentally about market access. European co-productions have been propelled by access to soft money or a need to find multiple funding sources for a big-budget picture, while China has little in the way of subsidy that is available to foreigners. And these days, in China, there is no shortage of production finance.

“You have to think in terms of what you can do for the Chinese market,” says veteran producer Shan Dongbing, who now heads Foye, the film production arm of giant conglomerate Fosun Intl. “That should probably mean global projects or quality ideas and intellectual property.”

For many companies looking at China, co-production is viewed as a means to skirt the country’s import quotas, which allow 34 revenue-sharing films per year and some 30 flat-fee titles access to distribution in Chinese theaters.

The limits are likely to be expanded in the next few years, albeit with caveats and restrictions. But that should not dampen the co-production push for foreign producers working with financially committed local partners who understand the regulatory complexities and nuances of the audience’s tastes making the co-production of Chinese qualifying films an imperative for many years to come.

Adapting to China’s regulations and censorship requires a long-term commitment and high degrees of flexibility on the part of foreigners. Korean companies have been among the most successful. Over a period of years they have learned to be less protective of their intellectual property and less demanding about backend payments. These days CJ, Showbox and NEW are all active as co-producers in China, with Chinese remakes of Korean properties the favored recipe. Many have also involved Korean directors, such as Oh Ki-hwan on 2013 hit “A Wedding Invitation,” pictured. (They have also been helped by a huge Chinese appetite for Korean music and TV drama, and a carefully cultivated crop of Chinese-speaking K-pop stars.)

Such flexibility may be harder for others. Japan’s domestic “production committee” system, where anywhere between six and a dozen firms are stakeholders, may be just such an obstacle, as it tends to produce slow and conservative decisions. “Kung Fu Yoga,” a rare China-India co-venture now shooting in Dubai, has recently suffered the withdrawal of its Indian partner Viacom 18. “Things didn’t work out as planned,” Viacom 18 said in a statement. “But we are optimistic about more such partnerships in the future.”

European and American firms may also find it particularly hard, unless prepared to make a corporate commitment, rather than a picture-by-picture approach. Examples of Western companies becoming embedded in the Chinese production scene include Legendary Pictures (now in post-production on Zhang Yimou’s “The Great Wall”), DreamWorks Animation (currently making “Kung Fu Panda 3” in Shanghai) and Village Roadshow Pictures Asia (“Mountain Cry,” “Man of Tai Chi”).

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