Hidden Dragon: Hollywood’s Tenuous Tie with China

November 18th, 2013 Film, Film Features, Metro

As hundreds of millions of Chinese people come into money and need somewhere to spend it, Hollywood’s stepping into the breach with mixed results, writes Drew Turney.

What’s making the biggest impact on Hollywood movie studios right now? Diva-like star demands? The rising costs of marketing? Zombies?

Grady Smith is an Entertainment Weekly writer with his eye on the next big thing in Hollywood – China. ‘The potential of the Chinese market is the biggest thing that’s driving studio motivations right now,’ he says. In a long-stagnating North American market, Hollywood knows not only that it can’t ignore the enormous buying power of the rapidly emerging Chinese middle class, but also that actively courting it is the only path to growth.

Western economies – the traditional market for Hollywood fare – haven’t grown very fast since the late 1990s, even aside from the financial carnage of the 2008 global financial crisis. Meanwhile, the costs of making and selling movies have skyrocketed. A US$200 million budget was the stuff of scandal back when Titanic (James Cameron) was made in 1997, but today no self-respecting midyear superhero blockbuster would cost much less. And marketing costs have risen even faster. According to conventional wisdom, publicising a global-release movie costs as much as making it. That means your US$200 million extravaganza has to make US$400 million to break even (after the exhibitors take their 50 per cent of box office receipts).

Hollywood is in a perfect storm of what economics writer Naomi Klein calls ‘the Western lust for access to the Chinese entertainment market’ in her book No Logo.  Box office revenue reached US$2.7 billion in China in 2012, outstripping predictions and rising by 37 per cent from 2011 to overtake Japan as the second-biggest movie market in the world.

So with box office takings increasing ever so slightly around the world, Hollywood needs to either entice a race of movie-loving aliens with disposable income to arrive on Earth, or appeal to the burgeoning rich from one of the emerging economies like Brazil, India or – the holy grail – China.

Content management

One of the first things affected will be broad-release, tentpole films. Back in 1997, we saw Richard Gere in Red Corner (Jon Avnet) and Brad Pitt in Seven Years in Tibet (Jean-Jacques Annaud) – films critical of the Chinese judicial process and supportive of Tibet, respectively – but you’ll likely never see movies that criticise China or support its enemies costing more than a few dozen million again. Rule number one of marketing is to avoid insulting the customer, and in the blockbuster stakes north of US$100 million, China is automatically a customer.

Content that appeases a foreign market is nothing new. Klein claims that Disney’s Mulan (Tony Bancroft & Barry Cook, 1998), which centres on Chinese characters, served its purpose in making Chinese authorities receptive to a US$2 billion Disney theme park in Hong Kong  – even though the film flopped.  More recently, the remake of Red Dawn (Dan Bradley) – which was filmed in 2009 but not released until three years later – was given a pre-release makeover such that the invaders were changed from Chinese to North Korean. But perhaps the most high-profile example is Iron Man 3 (Shane Black, 2013) and its much-publicised China-only scenes, which proved that there’s a right and wrong way to adapt a product for local release. ‘There was a lot of negative reaction to the Iron Man 3 scenes shot in Beijing and product placement that just felt forced,’ says BoxOffice editor Phil Contrino. Those hoping to ‘buy’ Chinese appeal, he says, would do well to remember that the 3D re-release of Titanic was one of the biggest hits in China of recent times, and Avatar (James Cameron, 2009) is still the most successful Hollywood film released in China to date. Neither film had anything specifically tailored to China, Contrino points out, adding: ‘Hollywood is still best at making universal stories and that’s what they need to focus on instead of going after easy solutions to reach Chinese moviegoers.’

Disney chairman and chief executive Bob Iger thinks that a smart local sensibility rather than a standardised global rollout of properties is critical. Speaking at a business forum in Chengdu in early June, he said Disney had to ‘be very careful’.

On one hand the Disney brand and what it stands for is of interest to the culture and to the people in the culture. But, it’s very, very important that … in that market it feels like, for instance, China’s Disney. It can’t just be the Disney that exists in carbon copy form somewhere else in the world.

DreamWorks Animation seems to have done it better than anyone else, with the announcement of a licensing agreement for its characters to appear at a Macao resort from July 2013. Shrek (2001, 2004, 2007 & 2010), How to Train Your Dragon (Dean DeBlois & Chris Sanders, 2010) and others may be global properties, but accompanying the characters from these films are those from what’s been one of DreamWorks’ biggest money-spinners in China, Kung Fu Panda (Mark Osborne & John Stevenson, 2008).

Producing alliances

Hollywood’s also signing a gaggle of co-production deals – everything from name-brand talent showcasing the culture to production and distribution partnerships.

Paramount is taking an approach similar to Marvel’s China-centric Iron Man 3 with its forthcoming Transformers sequel (Michael Bay, due for release in 2014). But rather than tack on a few ill-advised scenes that add nothing to the plot, the studio has teamed up with two major Chinese media companies to create ‘a major presence’ for the film. As part of the agreement, Bay will be assisted in choosing filming locations and actors in China and given access to post-production facilities. The film will also be heavily promoted to an enormous local customer base.

Meanwhile, everyone else seems to be getting in on the action. Jackie Chan has committed to two films with Chinese studio Huayi Brothers. Keanu Reeves’ company has partnered with Shanghai to develop and finance its projects. Legendary – the powerhouse behind Chris Nolan’s Batman trilogy (2005–2012), Pacific Rim (Guillermo del Toro, 2013), Man Of Steel (Zack Snyder, 2013) and a host of other blockbusters – and Pinewood Studios UK have both signed production deals with Chinese studios. Perhaps most bizarrely, a Chinese–American co-production of Arabian Nights has been given the go-ahead to be filmed in China.

Time Warner is looking even further: it has signed an agreement with China Media Capital to stake a claim in the growing media sector, which will see an explosion of digital devices (and accompanying content) in the Chinese market. If that eventuates, China might finally break the back of the niggling problem behind delivering movie content to people’s iPads and mobile phones, thereby unravelling complicated rights and licensing issues and ushering in the long-talked-about and near-mythical ‘iTunes for movies’.

Soft power

All this adds up to one thing. Like no other demographic or group outside the contemporary North American film market that the US movie industry was built upon, China has Hollywood over a metaphorical barrel. But it’s not just the sheer number of consumers (Smith estimates that an average of ten movie screens a day are opening across China). Still the model of centralised and unopposed government control, China’s leadership is in a unique position to tell Hollywood bigwigs what to do in exchange for all that action.

Firstly, China itself is doing better because of the new climate in the cinema industry, no doubt helped along by the incredible growth in the local exhibition sector. Chinese-made films took 70 per cent of the total box office in the first three months of 2013 – around twice as much as the same period in 2012 and quite a change from fifteen or so years ago, when there was hardly a Chinese film industry to speak of. Yet this certainly affords Hollywood opportunities for a bigger toehold. After all, American movies are doing better in China all the time. ‘Kung Fu Panda 2 [Jennifer Yuh, 2011] was a far bigger hit overseas than it was in North America,’ Contrino says, ‘and I think it’s safe to say Kung Fu Panda 3 will be much bigger in China than it will be in North America.’ This is the ‘new reality’, as Contrino calls it. ‘Even before China’s market passes North America’s, you’ll see a handful of movies a year do better in China. What’s more important, North America or overseas? If they’re releasing films overseas first, you know the answer.’

Another unwitting strategy that China might be adopting is to buy Hollywood directly. Few other nations have access to the kind of capital necessary to enter the volatile, potentially crippling field of tentpole movies. Bruno Wu, co-owner of Sun Redrock Group and the man whom many in America call ‘Mr Chinawood’, investigated the possibility of buying Summit Entertainment (owner of the money-spinning Twilight franchise and now owned by Lionsgate) in 2011. When asked by Deadline Hollywood whether he’ll partner with an American studio for productions, he said ‘I think we will probably have to’.

The most tangible example of Chinese money coming directly to America is the 2012 purchase of AMC Entertainment (owner of the AMC cinema chain) by Dalian Wanda Group. According to Dalian Wanda’s chairman, Wang Jianlin, the company has earmarked US$10 billion for further investment in the US.

Cause and effect

But just like the scientific method teaches us, the observer is likewise affected by the experiment, and China itself is changing, meeting American interests halfway. A US$800 million tax-free arts and entertainment hub is being built in Beijing to try and give the local industry a shot in the arm. China is also courting American filmmakers just as much as studios are courting China. In Rian Johnson’s 2012 sci-fi hit, Looper, lead character Joe (Bruce Willis) moves to Shanghai, falls in love and reaches middle age before being sent back in time to confront his younger self (Joseph Gordon-Levitt). Yet in the first draft of the script, Joe acts on a lifelong dream to move to France. What led to the change? During filmmaker Kevin Smith’s SMovieMakers podcast, Johnson explained that Beijing’s DMG Entertainment gave him a great deal to film there.  Thanks to that deal and several pre-sold territories, Looper was almost in the black before a single camera even began rolling.

More recently, the Cultural Assets Office of the Beijing Municipal Government announced the 2013 Beijing International Screenwriting Competition for American screenwriters, where the winners get an unparalleled opportunity to get their script made and China gets the cream of American writing talent.  To Contrino, this is part of a dedicated push by China to learn how to do things as good as Hollywood. ‘China is making its goal to be less dependent on American movies to fill [its] box office,’ he says.

They’re getting very good at making films that connect with Chinese audiences. There used to be a lot of stuffy, historical epics because they’re obsessed with their history, but now they’re making these stories about average Chinese citizens the same way Hollywood makes movies about average Americans.

Such moves already seem to be working. The US$500 million hit Man Of Steel was knocked off the top of the Chinese box office after one week by local film Tiny Times (Guo Jingming, 2013), a coming-of-age movie for teenagers.

The dark side

Hollywood falling over itself to entice Chinese ticket-buyers gives Chinese media companies and development funds a unique opportunity to call the shots. But the other major player is a government that is openly conservative and oppressive by Western standards.

There were raised eyebrows across Hollywood when Quentin Tarantino’s violent western Django Unchained (2012) was suddenly pulled from release on its first day of screening. Nobody involved – from Chinese censors to distributor Sony – has been very forthcoming about why the film was so visibly yanked; the usual explanation is ‘technical reasons’.  The news came after reports Tarantino had already edited and altered graphic scenes of splattering blood to meet censorship standards. About a month after the movie’s abrupt withdrawal, the State Administration for Radio, Film and Television (SARFT) let Sony release Django Unchained and it grossed a paltry US$2.75 million across China.

So while ‘tailoring’ and ‘editing’ are innocuous words to describe what might be going on, what about less palatable terms along similar lines such as ‘homogenisation’? Hollywood has long been accused of chasing the lowest common denominator to appeal to the most lucrative sectors of the audience. What happens when it has to play to a State-approval process that takes a dim view of sex and violence – two of the biggest selling points of the movies?

Green-lighting only movies that will meet official Chinese standards in order to gain acceptance into its marketplace might be good business sense. But might it cause studios to squeeze edgy or challenging material even further out of the system? Grady Smith believes the earning potential of the international box office will cause a homogenisation of film. Contrino agrees, arguing that digital technology will only make it easier for the studios to roll out localised versions for certain markets. ‘This will definitely change the way Hollywood thinks about the movies [it’s] making, in particular the scenes that are in those movies,’ he says. ‘[Studios] might go in thinking, “When we send this movie to China we’re just going to axe this, this and this scene.”‘

None of this is to say China doesn’t have more overt control over content as well. The Arabian Nights production mentioned earlier was given the go-ahead only after SARFT cleared a script synopsis submitted by the film’s producers. ‘China is in a position where it’s pushing back and asserting its power in Hollywood,’ says Smith.

All this adds up to China falling short of the licence to print the money that Hollywood is hoping for. Many have already grumbled about hidden agendas, double standards and erratic official behaviour that is making business difficult. The recent example of Life of Pi (Ang Lee, 2012) was a rude shock for executives with yuan signs in their eyes. As a result of a landmark agreement struck by US Vice President Joe Biden last year, the number of Hollywood films released in China would increase in exchange for a guaranteed 25 per cent of box office revenue going to the studios. Distributor 20th Century Fox looked forward to its US$23 million slice after Life of Pi made US$93 million in China, but the Chinese government suddenly announced a new tax that would reduce Fox’s share to barely US$2 million.

‘The China film group is still run by their government,’ Smith says.

American movies don’t always have the easiest time over there – some films are randomly pulled, Batman and Spiderman are forced to open up against each other, and of course China never says it’s an aggressive move but it certainly seems to be that way. But you’ll never hear anyone in Hollywood say it because they don’t want to offend anyone there.

Nevertheless, the gulfs between the cultures, styles of government and business climates of Hollywood and China aren’t likely to discourage studio heads from doing their damnedest. ‘What Hollywood likes is the same as what Hollywood has always liked,’ according to Smith. ‘Money.’


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