Capital controls and an unexpected box-office slowdown in the past year have sent industry players in China scrambling to find new ways to exploit the world’s second-largest film market, experts said Tuesday.
“This has been a pivotal year for Chinese film,” said Joe Austin, Beijing-based representative of talent agency WME | IMG China. “China is a huge experiment at the moment.”
Producer Janet Yang said the uncertainty of the past year had pushed companies into different, sometimes conflicting directions.
“The 2013-2015 period saw exponential growth box office growth. In 2016, that was not so. Now there is a question about how big this market will become,” Yang said. “Some companies are betting on the Tier 4, 5 and 6 cities. Others are punting on the higher quality end of the market. Some are betting on the streaming market.”
China and Hollywood are increasingly counting on each other to shore up their positions, Yang said.
“Chinese companies want investments in global films, to hedge their bets. Hollywood studios are going into local production in China,” she said. “Both are trying to become more complete.”
Yang and Austin spoke Tuesday at the Winston Baker-organized Film Finance Forum, one of the events at the Shanghai International Film Festival.
The capital controls introduced by the Chinese government in November 2016 have had a partial slowing effect, said Bennet Pozil of East West Bank. The capital controls “were not about punishing the entertainment industry, but about protecting the Chinese currency. They have acted like a time-out for the industry,” Pozil said. “I thought we’d see more onshore deal making, but actually we are not not seeing that.”
Austin said that Chinese companies are eager “to be more involved at the creative stage now and are not content to just be investors. They are more interested in finished and packaged film sales. And the quality of Chinese films is improving quickly. Actors are making a ton a money in China at the moment.”
The rapid evolution of the industry has also encouraged some sectors within it to forge ahead with their own models, different from what’s seen in the West, Austin said. That is most true in the distribution and exhibition sector, where online is the dominant marketing medium, unlike in the U.S., where television and traditional advertising remain paramount.
“In North America, we don’t have WeChat or the same [online] ticketing systems as in China,” Austin said. “China has such brilliant technology these days. I don’t carry cash any more.”
But Jeffrey Chan, COO of Bona Film Group, said that more money remaining in the domestic Chinese market does not necessarily translate into higher quality of product. “There is too much capital chasing too few assets,” Bona said. “Everything has become pricier, but with same elements. And some products are not performing as well as expected this year.”