×

China: Hollywood Studios Still Face Headaches

Amid massive opportunity, China remains a reluctant partner despite increased access for their movies, and a territory that continues to grow

With more and more foreign films now being allowed into China, and potential revenues that can be earned having risen to 25% (from as little as 13%), one might think that doing business in China is getting easier for Hollywood.

But that’s simply not the case.

The U.S. Trade Representative had to intervene when China Film Group — which distributes Hollywood movies in China — tried to pass on a national value-added tax by withholding money on revenues earned by American films that played in the territory. And while that dust-up seems to have been resolved, plenty of other tensions remain.

A recurring migraine is the selection of release dates, determined by China Film Group and industry regulator the Film Bureau. The Hollywood studios maintain they have little advance notice of dates, that slots change suddenly, and that many movies don’t fulfill their potential because they are intentionally programmed in close proximity to each other.

And even though the studios now conduct marketing alongside China Film, the murkiness of release dates makes it is difficult to build sustained promotional campaigns, which in turn makes media-buying tricky.

SEE ALSO: Chinese Hit ‘Tiny Times’ Taps Internet Generation Via Audience Research

Moreover, the Film Bureau still appears to be operating blackout periods, in which foreign films are not allowed to open. While this year’s summer blackout was comparatively limited, the studios expect October and December to be largely out of bounds for their films. December sees the release of at least three big Chinese films — “Police Story 2013,” starring Jackie Chan in the sixth film of the franchise; Feng Xiaogang’s “Personal Tailor”; and “The Monkey King” with Chow Yun-fat.

The job of the studios’ Beijing offices remains, crucially, a lobbying effort, trying to persuade China Film and the Film Bureau which pictures to pick for import. And although the quota has expanded from 20 revenue-sharing movies per year to 34, with the additional titles being in 3D or Imax formats, gaining entry into China does not appear to be getting much easier.

China Film seems to be intent on cherrypicking movies that do well at the U.S. box office rather than choosing evenhandedly among all of the studios’ offerings.

And China’s government organizations aren’t the only ones that have been dogging the studios. In April 2012, the U.S. Securities and Exchange Commission sent a letter of inquiry to 20th Century Fox, DreamWorks Animation and Disney regarding their dealings with the Chinese government. The SEC was probing the possibility of bribes paid to Chinese officials by the Hollywood companies looking to secure distribution. But there has been little further movement in the investigation.

SEE ALSO: PHOTOS: China’s Top 20 Films Since 2012

Slowly, other distributors and rights owners are grabbing small pieces of the pie in China. Bona Film (now 20% owned by 21st Century Fox) is releasing Summit’s “Red 2” and Constantin’s “Mortal Instruments,” and Huayi Brothers Media will distribute QED’s “Fury.” Legendary Pictures, IM Global and Lionsgate are among the larger independents also seeking Chinese deals on specific titles.

Whatever the situation, it rarely pays for foreign players to complain too loudly. That’s never more true than in the case of Hollywood, which experienced a bumper year for its films in China in 2012, with $100 million grosses for the 3D reissue of “Titanic” and for “Mission: Impossible — Ghost Protocol” and $90 million performances for “The Avengers” and “Life of Pi.” By year end, foreign films had amassed a 55% market share, with Hollywood accounting for all but 6% of that total.

This year, Hollywood’s China returns have been less triumphant. Although more titles have entered, and overall market size has grown, Hollywood’s revenues slipped, and first-half market share tumbled. That may reflect the paucity of effects heavy sci-fi movies and animation that Chinese audiences still feel nobody does better than Hollywood. “Skyfall,” “Iron Man 3” and “The Croods” were the standouts in the first half of the year. And helping the biz stage something of a second-half revival have been “Pacific Rim” ($110 million), “Fast & Furious 6” ($66.5 million) and “Jurassic Park 3D” ($29 million in its first week).

Tantalizingly though, China remains a mega-market in which profits can never seem to be maximized.

More Biz

  • Andhadhun

    Booming Digital Lifts Eros Indian Film Distribution Giant

    Eros International, India’s largest and most controversial film distributor, says that its digital revenues now outstrip conventional theatrical and syndication revenues. Its Eros Now streaming platform claims 18.8 million paying subscribers. The New York-listed company reported annual results that were distorted by multiple adjustments to presentation. Reported revenues in the year to end of March [...]

  • The dark Manhatten skyline, seen from

    StubHub Refunds $500,000 to Customers Shut Out by New York Blackout

    Saturday’s blackout in New York had an outsized effect on the city’s nightlife, with Madison Square Garden and the entire Broadway district seeing multiple shows cancelled due to the the power outage. As a result, StubHub has refunded more than $500,000 worth of tickets for cancelled events. According to a statement from the company, the StubHub [...]

  • Weapons Cache

    D.A. Files 64 Charges in Bel-Air Weapons Stockpile Case

    The L.A. County District Attorney’s office has filed 64 counts against Girard Saenz, the man who allegedly kept a stockpile of more than 1,000 weapons at a Bel-Air home linked to the Getty family. Saenz is accused of illegal possession of assault weapons, transferring handguns without a dealer license, possession of short-barreled shotguns, and possession [...]

  • 9-1-1: Angela Bassett in the series

    Fox Sees Primetime, Sports Ad Gains As TV Upfront Wraps

    Fox Corporation is the latest to benefit from stronger-than-expected trends in TV ad spending, as the company notched strong gains in advertising commitments for its next cycle of programming – its first since selling off a large chunk of its media assets to Walt Disney. Ad demand was stronger than many executives anticipated, according to [...]

  • BMI Promotes David Levin to Senior

    BMI Promotes David Levin to Senior VP of Licensing

    BMI today announced that David Levin has been promoted to Senior Vice President of Licensing, effective immediately. In his newly expanded role, Levin is responsible for all of BMI’s domestic licensing and revenue generation, encompassing radio, television, digital media, cable, satellite and general licensing.  Levin, who will oversee teams in New York and Nashville, reports [...]

  • Warner Music Group Logo

    Warner Music Acquires Musical Theater Indie First Night Records

    Warner Music Group has acquired First Night Record, an independent record label for West End and Broadway musical theatre cast recordings. The company will be overseen by WMG’s Arts Music Division, led by President Kevin Gore. First Night co-founder John Craig will join the Arts Music team under a multi-year consulting agreement to identify and record musical theatre productions in [...]

  • Woodstock 50 to Hold Open House

    Woodstock 50 to Hold Open House for Local Residents Before Permit Review Tuesday

    If nothing else, the producers of Woodstock 50 are persistent. After two permit applications to hold the troubled festival at the Vernon Downs racetrack in Upstate New York were rejected by the town of Vernon codes office, the producers and venue owner Jeffrey Gural today invited the local community “to embrace the Festival’s spirit of [...]

More From Our Brands

Access exclusive content