Can Hollywood re-enter the Dragon?

China wants studio know-how, but barriers remain

To say that Hollywood’s infatuation with China is growing is to say the Great Wall is pretty big. Better to borrow the line from Jolson, so appropriate in the early stages of a different filmic great leap forward: “You ain’t heard nothin’ yet.”

The Year of the Dragon looks set to see even more U.S. coin pouring into the booming China market, after a flurry of big-money deals in the last few months. Some of the highest-profile players in Hollywood now have a significant presence in China, including the studios and prominent indies, such as Legendary, Relativity and Village Roadshow. Los Angeles-based film financier Endgame Entertainment last week climbed aboard China’s new state-backed film fund aimed at enabling co-production between China and the U.S.

Each of these shingles has a different strategy to cracking this thorny market, but what they all have in common is a strong partnership with a local Chinese entity — the kind of co-production strategy that can gain exemptions from the government’s foreign film limits and offer China something it prizes: locally produced English-language films that can play all over the world.

But even good planning doesn’t always succeed. Legendary saw its entry into China delayed when its local partner got cold feet due to shaky financial markets; Relativity wound up catching heat by being too well-connected.

Getting the right elements in the right order, and exercising due caution, are essential to succeeding in China, because streets that might be paved with gold are also fraught with peril.

Nansun Shi, who produces Tsui Hark’s films via Film Workshop, and is executive director of Asian pic sales outfit Distribution Workshop, is one of the biggest movers in the Hong Kong market. She understands the pitfalls and rewards in operating on the Mainland, and urges prudence.

“Many U.S. companies have been knocking on doors in China in the last few years,” Shi says. “Unless these U.S. companies already have a special relationship with some entity in China, it is still best to go through Hong Kong companies who understand both sides.”

Familiarity with the market carries weight. Village Roadshow’s Chinese unit, Village Roadshow Entertainment Group Asia, has a slate with a strong Chinese flavor, including romantic comedy “My Lucky Star,” produced by and starring Chinese thesp Zhang Ziyi, and Stephen Chow’s “Journey to the West,” a version of the “Monkey King” story.

Former Warner Bros. China exec Ellen Eliasoph is the head of Village Roadshow Asia. Eliasoph has 25 years’ experience in the region, and her staff, which includes Ming “Beaver” Kwei as executive veep of development and production, and Lizhi Chen as veep of marketing and distribution, has plenty of international know-how.

Dan Mintz, the CEO of Los Angeles- and Beijing-based shingle DMG, which is overseeing a $300 million fund to bring co-production tentpoles to China, believes relevance and access are key to making things work in China, where he has been working for more than 18 years.

“We look for a very defined Hollywood element (in our projects). It needs to be something that isn’t patronizing — red lanterns, that kind of thing,” Mintz says. DMG has produced Chinese B.O. winners, including top-earning domestic production “The Founding of a Republic” in 2009, and “Go Lala Go!” and has distributed Hollywood blockbusters on the Mainland, such as the “Twilight” franchise.

Being in China for a long time has given DMG an advantage when it comes to taking a project through the necessary government hoops.

“It’s not just about getting an OK and a stamp, it’s also about how relevant (a project) is to China and if it can help the box office, and not just appease people who need to tick boxes,” Mintz says. “It’s the left-right of money and content.”

The rewards, already lucrative, are only getting bigger.

Box office in China swept past $2 billion for the first time last year, and the local biz has grown by more than 25% every year since 2003. James Cameron’s “Avatar,” for instance, made $210 million in China. It’s a boom driven by massive expansion in the number of cinemas, as the growing middle classes add cinema to their lifestyle options.

This month, Chinese investment companies Harvest Alternative Investment Group and Sun Redrock Investment Group teamed to form Harvest Seven Stars Media Fund, a private equity fund that says it’s “targeting” a goal of raising $800 million. The focus of the fund is to source and distribute primarily English-language films produced by Hollywood that will be released not just in China, but globally, says Sun Redrock founder and media entrepreneur Bruno Wu.

But entering the Mainland with a good business plan isn’t always enough.

Legendary East, Legendary Pictures’ Hollywood-China co-production entity, suffered a setback in December after a key investor, Hong Kong’s Paul Y. Engineering Group, put its $220.5 million investment on hold due to shaky financial markets.

The original goal had been to make one or two big-budget movies a year starting in 2013 that were aimed at global auds but also commercially viable in China.

Legendary East was to produce pics with Chinese shingle Huayi Brothers, enabling Legendary topper Thomas Tull to bypass Chinese government restrictions that put an annual 20-pic limit on foreign films able to enter the country (as well as a low — roughly 15% — cut of revenue). But as funding froze, Huayi Brothers ankled the deal.

Legendary East is planning to return to the market when the money situation loosens.

And while issues like censorship continue to be a concern for Western filmmakers, cultural and political fallout can come from all sides.

Relativity Media inked a strategic partnership with Huaxia Film Distribution Co. and SkyLand (Beijing) Film-Television Culture Development, and teamed with SAIF Partners and IDG China Media to launch the first Chinese-American distribution company, SkyLand Entertainment.

Then, in October last year, Relativity came under fire from human rights groups for shooting a new comedy, “21 and Over,” in the city of Linyi where one of China’s most famous dissidents, blind “barefoot lawyer” Chen Guangcheng, is being held.

What angered human rights activists was the way in which Relativity boasted of its close links to the local Communist Party, which activists blame for the abuse of Chen, who has been held with his family for many months; thesp Christian Bale was tackled by hired thugs as he tried to visit Chen.

Many say that ultimately, the best way into China is to simply arrive with a good story to tell that fits the market.

“We have fostered good relationships (in China), but you have to become good partners,” says multihyphenate James D. Stern, CEO of Endgame Entertainment, which cooperated with DMG on Rian Johnson’s “Looper,” featuring Joseph Gordon-Levitt, Bruce Willis, Emily Blunt and China’s Xu Qing.

“There are stories that will resonate and you can get a deal done. You have to have an organic situation there and it has to work.”

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