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‘Transformers 4’: Why the Box Office Smash is a Turning Point in China

China looms over the film industry, representing its best hope for growth at a time when nimbler competitors such as television and online video are siphoning away attention and audiences.

The world’s second largest film market cast a shadow over the move business this week, pumping up the global grosses of “Transformers: Age of Extinction” by injecting a record-breaking $90 million into its opening haul. That crushes the previous high-water market of $64.5 million for “Iron Man 3” and nearly matches the $92.5 million that Chinese-made “Journey to the West” grossed in its first seven days of release.

PHOTOS: Mark Wahlberg, Michael Bay Bring ‘Transformers: Age of Extinction’ to China

In total, China contributed roughly half of the fourth “Transformers” film’s international gross and nearly matched its U.S. debut.

“It’s a turning point for the dynamic between Hollywood and China,” said Phil Contrino, vice president and chief analyst at BoxOffice.com. “This taps into a whole new potential in terms of what a movie can do when it opens at the same time in the U.S. and China.”

But “Transformers” wasn’t the only film demonstrating the profit potential of the People’s Republic and its population of 1.3 billion. Legendary Pictures announced that it was proceeding with a sequel to “Pacific Rim,” a film that was met with audience indifference stateside, but was rescued from financial disaster by Asian markets. In China alone, the monsters versus giant robots adventure picked up $114 million, more than it made in the United States. Were it not for that performance and the continued growth of the Chinese market it’s doubtful that “Pacific Rim 2” would ever make it to theaters.

There are lessons to be learned from “Transformers: Age of Extinction’s” Chinese performance, both in terms of the promise and the peril in dealing with a market that represents almost boundless potential, but is also fiercely protectionist and difficult to navigate.

The battling robots sequel more than doubled the Chinese opening of the previous film in the franchise, “Transformers: Dark of the Moon,” a testament to a massive infrastructural investment that has seen the Asian giant build theaters at a rate of 13 a day.

To pave the ground for its success, Paramount Pictures, the studio behind the franchise, made the important decision to make the film a cross-country production. It filmed parts of the adventure in China, while casting local actors such as Li Bingbing in significant parts.

“Paramount made the movie organically a part of China as opposed to gratuitously including Chinese elements,” said Greg Foster, chairman of Imax Entertainment, who saw the picture more than double Imax’s record for a foreign opening in China.

Paramount is hoping to apply a similar formula to other movies it releases and will continue working with Chinese partners on the upcoming epic, “Marco Polo.”

“When you work together you can get incredible results and that’s key to long-term success in China,” said Rob Moore, vice-chairman of Paramount Pictures.

But there were hiccups as well. The film’s Chinese opening was nearly derailed after Beijing Pangu Investment Co., a real estate developer who was brought on to the production’s Chinese marketing campaign, threatened legal action because it was upset by the way its signature Beijing Pangu Hotel was represented in the film. It got resolved in time for the film’s premiere this week, but not without causing some major headaches for all involved.

Not everyone will share in the success of “Transformers: Age of Extinction.” The phenomenal results for the film could have a chilling effect for other U.S. releases hoping to crack the market. The country’s strict quota system limits the number of foreign releases to 34 films annually. Chinese censors could delay the debuts of films such as “Dawn of the Planet of the Apes” and “Guardians of the Galaxy” that have yet to open in the country as a way of bolstering its local products, according to several knowledgable individuals.

For companies like Imax that straddle the divide between east and west, the answer is to be bi-cultural in the films that it displays.

“You can’t put all your eggs in the Hollywood basket,” Foster said. “You have to provide Chinese moviegoers and exhibitors with a complement of Mandarin and Hollywood titles. That’s the way to build a business.”

With many analysts predicting that China will eclipse the U.S. market for film by 2020 and with films such as “Transformers: Age of Extinction” nearly matching their domestic results at the Chinese box office, the country is no longer rising. It has arrived.

“It’s a new frontier,” said Paul Dergarabedian, senior media analyst at Rentrak. “Anyone whose not already chasing China, should be.”

In other words, Optimus Prime just kicked off a Mandarin Gold Rush.

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