U.S. Media Companies Are Inextricably Linked to China. Are Their Assets Anchors — or Hostages?

Godzilla vs Kong
Courtesy of Warner Bros.

China is set to host the winter Olympics in February, but the extent of American involvement is on shaky ground. There’s plenty of precedent for Olympic-scale strife — in 1980 and 1984, the U.S. and U.S.S.R. engaged in respective boycotts of each other’s Olympics — but this Cold War is raising complicated questions for a new age.

With China’s repressive policies in Xinjiang and Hong Kong, contentious territorial claims in the South China Sea and global trade imbalances among the topics that grate, a U.S. boycott of the Beijing 2022 Winter Olympics has been mooted (though the State Department denied any such undertaking earlier this week.)

If there is a boycott by the U.S. and other allies, however, athletes and governments won’t be the only ones forced to choose. As multinational consumer brands are currently learning, there are tough choices ahead for everyone when it comes to China.

Having things both ways — robust economic ties with China vs. a strong human rights position against its politics — is vastly harder now than it was in the 1980s or even just a few years ago.

As many as 100 Chinese celebrities last month rushed to condemn European fashion brands H&M, Burberry and Adidas for the companies’ decisions to cease using cotton from Xinjiang in their clothing products. Some stars tore up endorsement contracts and posted images of the shreds online. What H&M thought was corporate social responsibility in the west got the company boycotted and literally erased from online maps in the People’s Republic.

The economic might of China is vastly larger now than two decades ago when Richard Gere and Brad Pitt were shunned by China for, respectively, endorsing the Dalai Lama and appearing in “Seven Years in Tibet.” China’s box office last year was bigger than North America’s and, with a faster recovering economy, is on course to repeat that feat in 2021.

With calculated outreach policies such as the Belt and Road Initiative, ‘vaccine diplomacy’ and strategic acquisitions overseas, the Chinese government has thrown off Mao-era isolationism and enmeshed itself in global trade. Yet in other areas it has kept its own markets only partly accessible to western firms, giving it unequal leverage and influence. Film and TV are prime examples.

Some sources have told Variety that Hollywood films could perhaps double their China box office if they were allowed unfettered access to the Middle Kingdom. The lure of even half of China’s potential revenues, however, was enough to keep Hollywood studios from casting Gere in tentpole movies, in order to appease China, for some two decades.

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“Seven Years in Tibet” (1997) Everett Collection

For those media companies that have sought to venture into China, there have been numerous landmines — some foreseeable, others not.

The briefest flash of a contested Chinese map was enough to get “Abominable,” a Pearl Studio and DreamWorks co-production film, banned in Vietnam, Malaysia and the Philippines in 2019. With “Mulan,” Disney should have been able to weigh up the costs and benefits of filming partly in Xinjiang. But it’s unlikely the studio foresaw lead actor Crystal Liu (aka Liu Yifei) messaging her support for the Hong Kong police, who were at that moment getting rough with pro-democracy demonstrators in front of the free world’s news cameras.

Many Western film, TV and streaming companies have an only tenuous hold in China – the likes of Netflix and Amazon are locked out by license, censorship or compulsory data-sharing policies – and other content suppliers such as the NBA have been ejected from Chinese airwaves after perceived slights.

However, Disney, Comcast, Lionsgate and Nine Flags with their theme parks in mainland China are more deeply embedded. Their hard assets act like anchors — or hostages.

But in the Biden era, the toeholds of all western media concerns may become trickier to maintain. The new U.S. president may have inherited the Cold War stance of his ideology-free predecessor, and by inclination be more of a coalition builder, but that in turn risks deepening the divisions between the ideological and economic superpowers.

That’s because Biden does take a view on human rights and because his consensus-building efforts with Japan, Australia and Europe may be seen in Beijing as a hostile alliance.

Ultimately, in the west, economic and financial choices will need to be made.

For example, will Jackie Chan and Liu’s pro-authoritarian stances on Hong Kong make them pariahs in Hollywood? How will Netflix comply with a takedown order if any of its content is deemed to contravene Hong Kong’s National Security Law, which has global (not just city-wide) reach?

Moreover, will western news organizations attempt to re-populate their depleted Beijing bureaux, and will western media corporations such as Vivendi/Universal Music accept fresh investment from Chinese corporations and funds, or pursue China expansion through co-ventures? Will Chinese firms still be allowed to raise capital on Wall Street, or will Chinese finance of western movies still be acceptable?

And what are the chances, now, that the U.S.-China Film Agreement — which sets import quotas, revenue-sharing terms and distribution practices — might escape the Trade War swamp and get signed?

The consequences can cut two ways: if entertainment and media ties are further restricted or severed, China’s own corporate champions like TikTok, Alibaba, Tencent and Huawei may also be crippled. Chinese influence will be frozen or rolled back, and cultural perceptions damaged in both the U.S. and Europe.

But China’s stance on human rights has genuine appeal to less liberal governments in much of Asia, the Middle East and Africa. So, too, does China’s infrastructure building programs and leadership on the authoritarian concept of internet sovereignty.

As the Beijing Olympics draw closer, these complexities are thrown in sharp relief. Could NBC still broadcast an Olympic Games where the heroics come from nations antithetical to the U.S. and the medals go to China? In the year ahead, entertainment and media industries will need to prepare for some very uncomfortable choices.