Wanda’s Massive Studio Plans Leave Hollywood Anxious

Wanda Studios Qingdao China
Courtesy of Dalian Wanda Group

Wang Jianlin arrived in Hollywood last week with the pomp typically afforded a visiting head of state. At a gala event Oct. 17 at the Los Angeles County Museum of Art, Mayor Eric Garcetti proclaimed the chairman of the Dalian Wanda Group — China’s richest man — an “honorary Angeleno.”

“I’m glad this relationship is blossoming between Los Angeles and China,” Garcetti said.

But underneath the pronouncements of international amity lies a level of unease. Wanda is on a buying spree that has triggered alarms in Washington; Congress is taking a closer look at Chinese involvement in the entertainment industry amid fears of censorship and propaganda.

Some in Hollywood are on edge about Wanda’s rapid acquisition of major U.S. assets. The company already owns AMC Entertainment (poised to be the world’s largest exhibitor once it closes deals for Carmike Cinemas and Odeon & UCI) and media company Legendary Entertainment, and has its sights on acquiring a major studio. Additionally, Wanda has kicked up controversy in Beverly Hills with plans to build a major hotel and condo project.

james gilleard for Variety

In his speech at LACMA, Wang made it clear that he plans to do more than simply open his checkbook. Through an interpreter, he criticized the quality of Hollywood films, saying they would have to improve and add “Chinese elements” to appeal to the growing Chinese audience.

He boldly projected that China’s box office would grow at 15% a year for the next decade — surpassing North America as the world’s largest film market in 2018.

The centerpiece of the speech was the unveiling of the $8 billion Qingdao Movie Metropolis — a massive 408-acre studio complex scheduled to open in 2018. Wang announced a $150 million annual incentive program — jointly funded by Wanda and the Qingdao municipal government — that will subsidize up to 40% of a production’s costs. That stands to shake up the global incentives marketplace, as a big player enters into the hunt for productions.

It was only a couple of years ago that Garcetti pushed for a significent expansion of California’s film tax credit — to $330 million annually — in an effort to “bring Hollywood home.” Last week, he shared a stage with a man seeking to lure jobs to China.

“We have great need for talent, and the construction and operations of QMM will greatly increase Hollywood’s work opportunities,” Wang said. “Some technical talent may not find their way in Hollywood, but in QMM, they may find ways to make a better living.”

Jack Gao, a Wanda executive, touted the world-class amenities planned for Qingdao — shopping malls, a hospital, schools, a theme park — “everything one would need to support great filmmaking with a comfortable lifestyle.”

Following the speeches, representatives of a handful of film companies joined Wang, Garcetti, and Academy president Cheryl Boone Isaacs onstage for a “signing ceremony” — reminiscent of an international treaty — pledging their commitment to shoot at the new studio. The most notable company in attendance was Legendary, which plans to shoot the films “Godzilla” and “Pacific Rim” at Qingdao. But Hawk Koch, a former Academy president who serves as an adviser to Wang, said he has heard strong interest in Qingdao in meetings with five of the six major studios.

“They’re all excited,” Koch said. “They’ve asked good questions.”

Steve Dayan, secretary-treasurer of Teamsters Local 399, is not convinced that the studios will take up Wanda’s offer.

“What they announce and what studios or productions actually do are two different things,” he said. “Unfortunately, this is the reality of doing business in 2016. … Every jurisdiction that has a tax incentive is a potential poacher of jobs from Hollywood.”

The Qingdao incentive, which will cover up to $18 million per production, will be administered by a 10-member panel — five from Wanda, and five from the Qingdao government. Applicants will be considered on a first-come, first-served basis, Koch said.

Many details remain to be worked out, such as visa and customs issues and other bureaucratic minutiae. But to the extent that studios do redirect productions to China, the strategy would undercut the argument Garcetti and others made for expanding California’s incentive program.

“Even the most ardent supporters of production incentives argue there’s a real risk that governments could be engaging in a race to the bottom,” said Assemblyman Mike Gatto, who authored the California tax credit bill. “We did try to design the California credit to be so big that it was the final word on this type of thing.”

In Hollywood, there is a sense that “you get what you pay for,” Gatto noted. “There are differences in language, differences in trust and reliability for doing business over there. But if you’re paying people $5 a day, it’s very hard to compete.”

At the outset, Qingdao is likely to attract co-productions, which are granted automatic access to the Chinese theatrical market, said Kevin Klowden, executive director of the California Center at the Milken Institute.

“If you’re [working on] a movie that needs an English-language workforce, going to China is not going to be the safest bet,” Klowden said. “You become concerned about delays. The wrong things are purchased. Translations are poor.”

At first, Qingdao might be competing for productions most directly with inexpensive filming locations like Malaysia and Hungary.

“Let’s say in year four or five, if they’re successful enough to get a fully employed crew, then the quality and scale of the productions they can lure will go up,” Klowden said. “This is building something almost completely from scratch. It’s going to take a while to become a trusted filming location.”

Koch, who is advising Wang, was more bullish.

“I think studio blockbusters will show up. Some Chinese films will show up. I think it’s gonna be everybody,” he said.

A spokesman for Garcetti emphasized that the mayor is “taking strong action against the movement of jobs in the industry” by supporting the local tax credit expansion and streamlining municipal permitting. But he argued that strengthening Hollywood’s ties to China will create mutual benefits.

“The mayor believes that Qingdao is not a zero-sum proposition,” the spokesman said. “The production facility has the potential to create jobs on both sides of the Pacific by catalyzing the global growth of Hollywood films.”

Garcetti’s “film czar,” Ken Ziffren, agreed. “Whatever builds the production business is good. Even if a picture is produced elsewhere, we get the benefit of it.”

Wang, too, stressed that his operation is not adversarial. He contended that Qingdao will mean greater profits for Hollywood.

“Wherever there are competitive incentives, wherever filming may lead to greater profits — that is where filmmakers will go,” he said. “The emergence of QMM may bring more competition to the U.K., Australia, or Malaysia markets, but if Hollywood intends to shoot films elsewhere, they will. Your opportunities have not been curtailed…. Regardless of how we look at this, QMM is an opportunity, not a competitor.”