Hollywood’s China Conundrum
Hollywood is intent on breaching the lucrative Chinese film market. In order to circumvent the Chinese government’s restrictions on foreign films in its domestic market, Hollywood players have been teaming up with local production companies. U.S. studios get a bigger cut of the box-office and the Chinese gain valuable insight on crafting films with a global appeal. But there are stumbling blocks. According to an article in the WSJ yesterday:
[Dan] Mintz [chief executive of DMG Entertainment] has been operating in China for many years. ”Back home, you’re really only concerned with one group of people—the consumer,” he explained in a recent interview. “In China you have to be good at handling the government and the consumer.”
Sounds like the Rules of the Game can be different in China, particularly when it comes to dealing with government censors. Though, I wonder if the experience in China similarly compares to how many U.S. filmmakers must contend with the MPAA ratings. For instance, the documentary “Bully” recently petitioned to have its “R” rating lowered arguing that it would otherwise restrict access to the film by its intended audience of school-aged children. I think in many respects, the story of Hollywood’s success has been defined by the restrictions put upon it and its ability to creatively push the limits of social and political censorship.
Also noted in the article was the uneven success of jointly produced films in the Chinese and American markets. There has been very little cross-over appeal. Movies that do well in China often don’t often find success in the U.S. and vice versa. Case in point, the Christian Bale headliner “The Flowers of War” which grossed $95M in China, but eked out $300K in the U.S.:
The film was picked up by distributor Wrekin Hill Entertainment, released in the U.S. in January and grossed roughly $300,000 in American theaters. Wrekin Hill Chief Executive Chris Ball says the film sold out during its one-week Academy Award-qualifying run last December, but “fell flat” after opening in January. He attributes the falloff to piracy, mixed reviews and the film’s powerful, but difficult story.
“People are trying to design projects for success globally, but producers today really have to make a judgment call about if their films can really appeal to both the Chinese- and English-speaking markets,” says Stephen Saltzman, a Hollywood lawyer who has handled several Chinese film deals.
Disney’s Dreamworks is partnering with the Beijing-based DMG entertainment to produce “Iron Man 3”. As noted in an article in The Washington Examiner:
The DreamWorks’ deal, announced in February, is for a joint venture studio based in Shanghai that is 45 percent owned by DreamWorks and 55 percent owned by its Chinese partners, capitalized at $330 million.
There is a sense of uncertainty that seems to pervade all this deal-making. In reference to the spate of recent joint ventures, Jeffrey Katzenberg was quoted as saying:
“The goal lines are moving all the time. Everyone is wondering how it plays out.”
The quandaries that U.S. studios are grappling with in China sound similar to those that their contemporaries in other industries have been dealing with for decades. China offers an alluring and lucrative marketplace, but not without significant risks particularly to Hollywood’s long-term hold over the global film market. From the Examiner article, the following observation was made:
Entertainment lawyer Schuyler Moore says he has warned clients not to be overly optimistic in dealing with the country, and says it will take a year to see how China implements its new movie policy. Moore believes China’s new openness is aimed mainly at boosting its own cultural industries.
“In the long term, it’s no different than China trying to make aircraft and cars and everything else. Their goal is to have the expertise so they can displace Hollywood,” he says.
