China’s Looming Toon Boom


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Boonie Bears one sheetBy Robert Cain for China Film Biz

March 30, 2014

Back in the early 1990s, at the request of film critic Michael Medved, I researched and then published a strategic and statistical analysis demonstrating that Hollywood’s studios were distributing too few children’s, family, and animated feature films. My analysis was picked up by the industry trades and the national press, where it attracted quite a bit of attention and stirred up controversy.

In a matter of days I received calls from the heads of Disney, Fox, Sony Pictures, the MPAA and Blockbuster, and within mere months after that most of the major studios had established new family divisions and ramped up their production of animated features and PG-rated family films.  In the years since, these genres have consistently accounted for the studios’ very highest-grossing and most profitable films.

Recently, spurred by intuition, I decided to take a closer look at the situation in China’s film market. After delving into the numbers and the trends, it quickly became clear to me that China’s distributors would profit by distributing more quality films aimed at the family audience.

In fact, if my intuition is correct, family features, and animation in particular, ought to be among the fastest growing segments of the PRC’s film business over the next 3-5 years. Despite heavy investment and rhetorical support from China’s federal and provincial governments, these types of films currently capture a much smaller share of the market in the PRC than they do in North America. But I believe this is beginning to change as the Chinese audience broadens both geographically into the third and fourth tier cities, and demographically to families with children, and as marketing to these audiences improves.Animation Share of B.O. 2009-2013

Source: Pacific Bridge Pictures research

Animation is off to a rousing start in the first quarter of 2014, clearing $186 million in revenue in just three months, which puts it on pace to easily beat the previous full-year record of $261 million that was set last year. Given the line-up of animated features still to be released through December, I expect the cumulative gross for animation in 2014 will run to around $400 million. This would put animation’s share of China’s full-year gross at about 8.2 percent, up from 7.3 percent last year.

The first-quarter spoils have gone not just to imported big-budget Hollywood pictures, but increasingly to home-grown fare like The Boonie Bears, ranked third among animated films so far this year with a Chinese record-breaking $40 million gross, and Pleasant Goat: Meet the Pegasus, ranked fourth with $14 million in box office. It’s worth noting that both of these movies are spin-offs of popular Chinese children’s TV series.

Top Grossing Animation Q1 2014

Highlights for the rest of 2014 include the recently opened Dreamworks’ pic Mr. Peabody & Sherman, which is well on its way to a China gross of at least $24 million, Blue Sky and Fox’s Rio 2, opening on April 11, South Korea’s Koala Kid (aka The Outback) opening in early May, and Dreamworks’ How to Train Your Dragon 2, expected to open in August. Mr. Peabody‘s stronger-than-expected results will make it China’s third highest grossing non-sequel, non-spinoff animated release to date after The Croods and Frozen.Average BO per animated film 2009-2014

Source: Pacific Bridge Pictures research

Since China’s film authorities allow only 5 or 6 Hollywood animated films to be imported each year as revenue sharing “quota” films, it will fall to locally produced features to drive most of the family market’s future growth. And there are signs that China’s animation houses are getting ready to play their part. Although technical capabilities and story quality have been lacking in prior Chinese releases, the tide is turning with several new films in development based on screenplays by talented American writers, and funding and services from top Chinese animation houses.

Indeed, I’m so convinced of the scale of this opportunity that I have personally initiated two new animated film projects for China, one in partnership with a multiple Oscar winning animation producer and with a theatrical release commitment from a major Chinese distributor, and a second that has attracted Chinese investors even before the treatment is finished.

If, as I expect, animation’s share of the Chinese market rises to match that of North America, by the end of this decade the PRC will become the world’s biggest audience for animated feature films, with $1.5 billion and more in annual revenues. And that’s not kids stuff.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

 

Who is La Peikang and How Did He Get Here?


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La Peikang

By Robert Cain for China Film Biz

February 11, 2013

There’s a new sheriff in town and his name is La.

OK, that didn’t quite have the gravitas I was going for. The point is that China’s New Year’s holiday week is over and the dominant organization of China’s film industry, China Film Group, has a new Chairman, La Peikang (喇培康).

La’s appointment to the PRC’s top film job signals a new direction and some interesting potential changes in the years ahead, both for Chinese filmmakers and distributors and their overseas counterparts. Namely, La’s extensive international experience overseas and in China’s co-production bureaucracy point to a likely increased focus by CFG on international cooperation and expansion.

Variously described by those who know him as “serious,” “educated and academic,” “quietly effective,” “well-liked” and “outward looking,” La could scarcely be more different than his predecessor, Han Sanping.

In the role he held for ten years, Han Sanping was a hustler, a mover-and-shaker who presided over the massive rise of China’s film industry from its status as a tiny backwater with a mere 0.7 percent share of the global box office in 2003 to its emergence as the world’s most dynamic movie territory, with a 10 percent (and rapidly rising) share of the worldwide pie in 2013.

I remember the early days of his tenure when Han Sanping would show up in Hollywood unknown and barely acknowledged, begging for meetings with studio execs, agents, movie stars, anyone who would pay attention. Most dismissed him in those days as unworthy of their time, because China was so negligible as a territory, let alone as a potential source of financing. But Han’s “Baqi” (覇气) loosely translated as “lord’s air” or “domineering spirit,” drove him to oversee the incredibly rapid modernization of the Chinese market, with the construction of 16,000 new cinema screens and a corresponding 2,700 percent increase in domestic box office receipts. Nowadays, thanks largely to Han’s contributions, China is on everyone’s mind, and it would be difficult to find a serious agent or executive who doesn’t know his name.

Given the legacy that Han created, La will find that the tables have turned and that studio heads and movie stars will eagerly, if not desperately, court his favor. Those who meet him will experience a completely different breed of Chinese movie czar. In contrast to Han’s bulldog approach, La is a more sophisticated executive, a fluent English and French speaker who is apparently viewed by China’s leaders as the right person to lead their country’s movie business to maturity and, they hope, to increasing global influence.

Before his appointment was announced, few anticipated that La would be the one to win the top job. It’s not that he lacked credentials—he was Deputy Chairman of the SARFT Film Bureau, and he had previously run an important CFG subsidiary, the internationally focused China Film Co-Production Company. But other candidates were more in the public eye, perhaps because they were more effective at outwardly promoting themselves.

When it came down to it though, it was La’s connections, his political skills, and his perceived loyalty to his Chinese Communist Party bosses that ultimately allowed him to prevail. He was chosen for the job by the Party’s ultra secretive, extraordinarily powerful Organization Department (中国共产党中央组织部), China’s political king-making office. Richard McGregor of The Financial Times described the Organization Department’s status thusly:

“To glean a sense of the dimensions of the Organization Department’s job, [imagine] a parallel body in Washington…that would oversee the appointments of every US state governor and their deputies; the mayors of big cities; heads of federal regulatory agencies; the chief executives of General Electric, ExxonMobil, Walmart and 50-odd of the remaining largest companies; justices on the Supreme Court; the editors of The New York Times, The Wall Street Journal and The Washington Post, the bosses of the television networks and cable stations, the presidents of Yale and Harvard and other big universities and the heads of think-tanks such as the Brookings Institution and the Heritage Foundation.”

This Organization Department controls more than 70 million party personnel assignments across the country, and it is no small matter to win their approval for senior party roles like La’s. Although, as McGregor wrote, “their vetting process takes place behind closed doors and appointments are announced without any explanation about why they have been made,” it’s not difficult to imagine intense lobbying, backbiting, mudslinging, and all manner of political fisticuffs. And La would have had to pass intense scrutiny– the Organization Department has access to dossiers and background checking capabilities that put the CIA and NSA to shame.

So don’t let La’s quiet, academic demeanor fool you; he’s undoubtedly as tough and effective as they come in China’s political bureaucracy. And that’s saying a lot.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Warner Bros’ Stellar Year in China


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By Robert Cain for China Film Biz

November 21, 2013

Having already clinched bragging rights as the top-grossing Hollywood studio in China this year, Warner Bros further cemented its lead with the excellent rollout of Gravity on Tuesday.  With nearly $10 million in ticket sales in its first two days of PRC release, and what I’m estimating will be at least a $70 million final tally, Gravity should push Warners’ 2013 total in China to around $325 million.

This will mark the first time I can remember when Warners will have won the China box office crown. It will also reflect an impressive 80 percent revenue boost over Warners’ respectable, albeit distant second-place finish to Fox in 2012. With such box office hits as Pacific Rim, Man of Steel, The Hobbit: An Unexpected Journey and now Gravity, Warners will average about $54 million in ticket sales per picture.

Second place in the studio derby this year will go to Disney, whose Marvel superhero offerings Iron Man 3 and Thor 2 will account for around $175 million of that studio’s $250 million annual take.

Sony and Fox will finish third and fourth, respectively, with Fox falling off precipitously from its record-holding $376 million China gross in 2012. Sony had only one strong release with Skyfall back in January, but it was able to get more films into China than any other studio and in aggregate managed to cobble together more than $200 million in gross revenue. Although Fox got solid results in 2013 from The Croods (a Dreamworks animated picture) and Wolverine, it couldn’t match the huge numbers of last year’s Titanic 3D, Life of Pi and Ice Age 3 and wound up with less than half of last year’s gross with around $176 million.

Universal and Paramount, the two studios with the least active presence in China, received the fewest import quota slots and grossed the least among the majors, with about $159 million and $129 million respectively.

At last week’s box office, U.S. films captured the top three slots, although two of these were buyout films. Thor: The Dark World and Escape Plan won the top two spots for their second week in a row with $24.9 million and $13.3 million, respectively. New entry Red 2 picked up $5.9 million in its first three days, enough to handily beat the $4.9 million that Red collected during its entire run in 2011. Total nationwide box office was $54 million for the week, a 57 percent increase over the same period last year.

Box Office week ending 11-17-13

U.S. films will see another week or two of relative prosperity before the year-end Chinese tent-poles move in and grab all the spoils in December and January. Look for big results from The White Storm, which releases on November 29th, followed by big December debuts from No Man’s Land, The Four 2, Firestorm, Personal Tailor and Police Story. By year’s end, Hollywood movies will land only 2 of the top 10 spots at China’s box office in 2013, down from 7 last year and 6 in 2011.

In aggregate, U.S. distributors will manage only a meager 5 to 6 percent increase in their China sales this year, a mere fraction of the 60 percent gain that Chinese language films have enjoyed. Hollywood has let yet another year go by doing little more than lobbing movies into China from across the Pacific, and it has paid the price with a precipitous drop in market share.

Meanwhile, aggressive non-Chinese players like Australia’s Village Roadshow and Korea’s CJ Entertainment have stepped into the breach with highly successful Mandarin language co-productions. And local Chinese players are rapidly growing in competitive strength, as exemplified by Huayi Brothers’ massive increase in its stock market capitalization to $5.2 billion from only $1 billion a year ago. Many of these companies have established beachheads in the U.S., and it won’t be long before their growing financial strength in China will enable them to compete effectively with the stodgy U.S. studios and further erode their diminishing dominance of the global film market.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Sly and Arnold’s Career Re-birth in China


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By Robert Cain for China Film Biz (Bennett, Janet and Thomas, this one’s for you)

November 14, 2013

Long before they reach retirement age, most action movie stars naturally slide (or sometimes plummet) into box office obscurity. At 67 and 66 years of age, respectively, Sylvester Stallone and Arnold Schwarzenegger have valiantly fought this trend, but they are long past their peak box office years in most places around the world.

But not in China. PRC audiences have embraced these two senior citizens and breathed new life into their action movie careers. In a land where the young are taught to treat their elders with respect, Schwarzenegger and Stallone’s recent film offerings have gotten lots of love from China’s teenaged and twenty-something filmgoers.

Take the pair’s current action-thriller, Escape Plan. In its first 10 days of release the picture has already grossed more in China, with nearly $26 million, than it will earn in its entire North American run. It nearly won last week’s box office crown against the far costlier Thor: The Dark World, with a 128 million RMB total versus Thor’s 129 million, despite Thor’s huge advantages of a bigger screen count, higher 3D ticket prices, and a rare day-and-date PRC release. Escape Plan will wind up with around $35 million in China, making it the highest grossing buyout film this year.

In fact, between them Sly and Arnold have appeared in 5 films that have each grossed more than 100 million RMB at China’s theaters, an exceptional record that is matched by few Chinese stars.  Their core audience in China has no doubt grown up watching the pantheon of Rocky, Rambo and Terminator movies on TV and DVD, and is now finally getting their chance to see their movie heroes on the big screen.

With such a big, welcoming audience in China, Sly and Arnold are undoubtedly looking for more movie vehicles to propel their newly vibrant careers. So I offer a few ideas below, completely free of charge (just send me my participation checks when the profits roll in):

Not So Total Recall. This action flick kicks follows a geriatric man who goes for a virtual vacation but is tragically unable to enjoy the early-bird Chinese buffet because he’s forgotten to bring along his virtual dentures.

The Lost Action Hero. A young Chinese fanboy’s dream of teaming up with his favorite 80’s action movie hero turns sour when he finds the now enfeebled and amnesia-prone codger stuck on Beijing’s 3rd ring road, unable to find a way to exit and make his way back to the retirement village.

The Dependables – a team of elderly mercenaries are stymied in their attempt to eliminate a North Korean dictator when the dictator’s henchmen cruelly cut off their supply of adult diapers.

Stop or My Great Granddaughter Will Shoot – a once-tough detective’s life and work are disrupted by a Golden Week visit from his 6 year-old, pacifier sucking descendant, who embarrasses him by turning out to be a better crime-fighter than he is.

Rocky Rolls – 78 year-old Rocky Balboa comes back for one more title bout staged in the Forbidden City, fighting this time from his electric wheelchair. You’ll cry tears of nostalgia as you watch Rocky slowly glide up the steps of Beijing’s Temple of Heaven, arms raised in victory, in his wheelchair stair climber.

For the week ending November 10th, PRC box office totaled a solid $56 million, 43 percent better than the same frame last year. After the one-two finish of Thor and Escape Plan, Hotel Transylvania took in $3.5 million in its second week of release for a two-week cume of $9.3 million, quite respectable considering its status as a buyout film and its China release delay of more than a year.

Box office for week ending Nov 10, 2013

Russia’s Stalingrad crumbled against the Hollywood competition, dropping by nearly 70 percent in its second week. Although it debuted at number one in the prior week—making it the first non-Hollywood, non-Chinese movie to top the charts in China—the film has quickly faded and will fail to reach the 100 million RMB level.

The rest of November and December will witness a crush of new releases, more than in any previous year. On Singles Day (an unofficial holiday on 11-11) nine new domestic releases cannibalized each other, leaving nearly all of them with dismal results. November 15th will see Red 2 and Olympus Has Fallen open against each other, and early next week Gravity, Rush, and the Hunger Games sequel Catching Fire will all open within a few days of one other.

Although China’s box office results in November have so far fallen a little short of general expectations, the rest of the year should be flush with activity and the year-end tally should well exceed $3.5 billion.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China’s Monster Summer


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By Robert Cain for China Film Biz

August 22, 2013

The disturbing drought that plagued Hollywood’s movies in China through the first half of 2013 has been quenched, at least temporarily, by a string of box office successes that began in July. Chief among these has been Pacific Rim, a monsters-meet-robots spectacle that couldn’t have been more perfectly aimed at Chinese moviegoers. In its first three weeks of PRC release (as of Thursday August 22nd) the film has devoured $109 million in receipts, good enough for 2nd place this year among all Hollywood imports, and better by far than the $98.7 million the film has earned in North America.

While some might attribute Pacific Rim’s PRC success to its giant CG robots—the Transformers franchise is after all the highest grossing movie series in China’s history—I’d like to make the case that the film’s massive monsters are at least as responsible for scaring up Chinese ticket sales. Chinese audiences love a good monster movie as much as anyone, but the country’s strict censorship policies have restricted the homegrown monster movie quotient to practically zero. It’s a quirk of the Chinese film administration’s policies that monsters can invade China—or its theaters, anyway—from overseas, but they’re generally prohibited from breeding, hatching, or emerging from slimy lagoons onshore in the Middle Kingdom.

Further proof of my theory can be found in this week’s monster opening of Jurassic Park 3D, Universal’s reissue of the 20-year old Steven Spielberg dinosaurs-gone-wild classic. With almost $17 million in Chinese revenue in its first three days, the film ranks as the fourth biggest foreign opener of 2013 and is is well on its way to becoming the biggest grossing re-release of the past 12 months. Although the grosses for reissues tend to quickly fall off, the pattern so far suggests a final gross in the $30 million to $40 million range, which would make it China’s second highest grossing 3D re-release ever—albeit a far distant second—to 2012’s Titanic 3D.Top-grossing HW rel

The next ‘monster’ movie up is of a more kid-friendly variety, Pixar’s Monsters University, which is scheduled to open on Friday, August 23rd. China’s monster mania may help the film to break the Pixar curse, which has seen most of that animation studio’s films open poorly in the PRC and quickly fade away. With little family-fare competition I expect Monsters U to take at least $25 million in China, which would put it well above Toy Story 3’s $16.7 million gross in 2010, Cars 2’s $11.9 million in 2011, and Brave‘s dismal $4.7 million in 2012.

Last week’s box office saw Pacific Rim win its third week in a row, the first time that’s happened for a Hollywood film in 2013 (the China/Hong Kong co-pro Journey to the West won 5 straight weeks in February and March). Tiny Times 2, the sequel to July’s teen girl-oriented hit Tiny Times, ran up its total to $44 million with a $17 million second place finish. And Fan Bingbing’s romantic comedy One Night Surprise from writer-director Jin Yimeng (Sophie’s Revenge) took third with $15 million, proving the rom-com genre’s continuing strength with Chinese audiences.Box office for week ending Aug 18, 2013

Bona’s boxing flick Unbeatable took fourth place with $9 million on generally positive reviews. Rounding out the top 5 was Wanda Media’s disappointing release  The Palace, which managed just $7.4 million in its first 7 days despite the huge opening screen count allocated by its sister company, theatrical exhibitor Wanda Cinema Line. This marks Wanda’s second flop in a row after Man of Tai Chi. Wanda is new at the feature production game, and with its deep pockets the company presumably has the staying power to get enough at bats to eventually generate some homeruns.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Keanu’s Big Swing and a Miss in China


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By Robert Cain for China Film Biz

July 8, 2013

Nearly a decade in development and more than two years in production, Keanu Reeves’ directorial debut, Man of Tai Chi, was supposed to accomplish several ambitious goals:

  1. Enable Reeves to make the leap from actor to respected film director.
  2. Propel Reeves’ friend and Matrix kung fu mentor Tiger Chen to his own breakout as an action star.
  3. Establish a China beachhead for Reeves and enable him to make more movies there.
  4. Earn lots of money for the film’s investors, who include China Film Group, Wanda Media, Village Roadshow Pictures Asia, and Universal Pictures.

But the tepid audience response to Man of Tai Chi’s opening in China last weekend spells disappointment for everyone involved.  Although Reeves may still have a directing career ahead, his first film now appears more hindrance than help in advancing him toward that goal. I haven’t yet seen the movie so I can’t comment on Reeves’ directing capabilities, but the trailer has an odd direct-to-video feel to it and, according to Weibo chatter, lacks appeal for many in its targeted demographic.

At a reported $25 million budget, the picture will need to do a much better job drawing audiences in the U.S. and other territories if it is to turn a profit.  Wanda is said to have put up a substantial percentage of the negative cost in exchange for Chinese distribution rights, and turned over some 60 percent of its 1000+ screens to the picture. In hindsight that looks to have been a costly decision; given its $2.87 million nationwide total for the 3-day weekend, Man of Tai Chi will likely finish with less than $10 million in theatrical gross receipts over its entire China run. Wanda would have been better off allocating more of its screens to local hits Blind Detective and Tiny Times, or to the popular Warner Bros release Man of Steel.

Wanda and its partners in Man of Tai Chi  made a bet that audiences would turn out for Reeves because of his Chinese heritage and his track record as an action star with a genuine martial arts pedigree. My feeling is that the core moviegoing audience may simply be too young to know who Reeves is, and so he didn’t draw as well as had been hoped.

The U.S. market probably won’t offer much support, as the film still doesn’t have a scheduled release date there. According to The Hollywood Reporter, Weinstein Company’s Radius division picked up U.S. rights at Cannes with intentions for a fourth quarter U.S. release, but has not yet announced any firm plans. Universal’s decision not to handle the film despite having invested in it suggests they lack confidence in its North American prospects.

In Reeves’ and his backers’ defense, their task was not an easy one; few recent action or martial arts films have been successful both in China and abroad. Here’s hoping  Man of Tai Chi finds better luck in the global market.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Value Creation vs. Value Capture in China’s Entertainment Market


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NYT Room For Debate

by Robert Cain for China Film Biz

June 2, 2013

Over coffee in Hong Kong last week I received some sage advice from my friend Cole Sirucek, a former investment manager for Singapore’s Temasek fund and now a successful entrepreneur. “Mind the difference between value creation and value capture when you do business in China,” he advised.

It’s a distinction that many in Hollywood tend to overlook. It’s fairly easy to create value in China with American entertainment content and ideas. But capturing that value and repatriating it to one’s own bank account remains a difficult challenge.

When the New York Times’ Hilary Howland asked me to write an opinion piece on U.S.-China entertainment trade, I thought value capture would be an interesting topic to explore. The Times published my op-ed essay today, and I’ve provided below a slightly longer version of the same piece.

Capturing the Value of American Movies in China

Transnational trade and investment between America’s and China’s entertainment industries revolve around four fundamental sources of value.

  1. Access to American content, particularly (but certainly not limited to) globally commercial “tent-pole” films, popular television programs, and reality show formats.
  2. Access to American creative and managerial talent, with their proven abilities to generate content and profitably exploit it.
  3. Access to China’s very large, rapidly growing market, soon to be the world’s biggest source of entertainment revenue.
  4. Access to production capital, with America’s investment capacity in relative decline and China’s on the rise.

American legislators, investors and entertainment industry managers must recognize the difference between value creation and value capture. America’s entertainment sector is by far the world’s greatest creator of value for distributors and audiences around the world, and it has traditionally succeeded in capturing much of that value wherever it has operated. Roughly fifty percent of all global filmed entertainment revenue currently goes to American companies.

But whereas Americans have been extremely successful in creating value in China, capturing that value has proven a much tougher challenge. With its protectionist policies, its lack of business transparency, and its indifference to intellectual property rights, China returns to American content owners not more than twenty percent, and probably less than five percent of all the value U.S. content generates there.

This value loss has serious long-term implications for U.S.-based entertainment companies. Until recently Chinese exhibitors and distributors needed American content to build up their domestic industry. American movies brought in the ticket revenues that built China’s movie theaters, and ad dollars from American TV shows helped develop China’s digital distribution infrastructure. But the Americans have missed the opportunity to leverage the value they’ve created, ceding profits and market power to Chinese suppliers who have not only amassed huge amounts of investment capital, but who have also gotten better at creating their own successful content, dramatically reducing their need for American programming.

Unfortunately for the Americans, they need China now more than ever. As our domestic market matures we must increasingly look overseas for growth. And no market offers better growth potential than China: in the next four or five years China will surpass the U.S. in absolute revenue, and by the middle of the next decade it will dwarf the American market.

U.S. government regulators should bear in mind the principle of value capture as they evaluate cross-border transactions. China prohibits U.S. investors from owning entertainment distribution companies in the PRC, effectively neutering their ability to capture value there. U.S. rules present few such prohibitions to Chinese investors, so it is entirely conceivable—and even probable—that more and more of the U.S. entertainment production and distribution infrastructure will come under the control of Chinese owners.

China treats entertainment as a strategically critical industry, and the U.S. should too, by insisting upon more fair and balanced value capture policies.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

No Climbing, No Dabbling in China’s Movie Biz


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By Robert Cain for China Film Biz

May 8, 2013

I spotted the sign shown above as I was exiting Shanghai’s Pudong airport last week, and although the signmaker’s translation skills are sorely lacking (the bottom sentence should read “Please don’t play in the water.”), the message stuck with me as an appropriate one for those looking to earn their fame and fortune in China’s movie business.

No climbing, no dabbling. Precisely! Understand the hierarchy, especially the government culture, don’t try to overstep your bounds, and don’t dabble because things are moving so fast here that if you fail to move and adapt quickly you’ll get left behind. It’s a culture that Hollywood’s studios generally abhor, and for that reason they’re mostly opting out of the China boom, leaving the money and opportunity to entrepreneurs and risk-takers.

And there’s so much money and opportunity, even (perhaps especially) for foreigners who respect the rules. From small private startups to the biggest state-owned enterprises, China’s film industry is awash in cash, hungry for success, and eager to partner with people who possess know-how and international access.

In my recent China travels I’ve met a 30ish entrepreneur who has poured at least $25 million of his own money into a state-of-the-art post facility; a former government employee who controls an enormous production facility and sizable production fund; and countless others who are prepared to fund movies and entertainment ventures if they can only find investable projects.

Recognizing that commercial filmmaking skills and business savvy are in short supply in China, most of these folks are happy to collaborate with–and in many cases finance–foreign professionals. Even the huge and stodgy China Film Group, the supposed dinosaur of China’s film industry, has aggressively embraced foreign talent, reportedly placing more than two-thirds of its upcoming film projects with international directors. One of the biggest budget films in China’s history, Beijing Forbidden City Film Company’s Wolf Totem, is in the hands of French director Jean-Jacques Annaud. It’s a sign of the heady times in the PRC that Annaud was granted approval to direct Wolf Totem even though he’d been previously banned for making the anti-PRC film Seven Years in Tibet.

One major way that foreign influences have seeped into China is the increasing prevalence and success of Hollywood-style storytelling in locally made films. Pictures like Lost in Thailand, Finding Mr. Right, So Young, Drug War and American Dreams in China have attracted giant Chinese audiences by co-opting western storytelling techniques, and in some cases adapting Hollywood hits to the local culture. This an encouraging trend, one that bodes well for skilled western writers and filmmakers who are willing to give China a go.

Of course there’s a catch to all of this. To play in China one must be willing to play by the rules. Here are a few to keep in mind:

1. Meet them more than halfway. Chinese investors tend to be more likely to place their capital at home than overseas. Co-productions are fine, whether in Mandarin or English, but don’t expect them to finance your quirky indie comedy or heartfelt drama unless it can shoot in China with Chinese elements. Chinese movie investors neither understand nor trust the foreign marketplace; most will only invest if they’re confident they can make their money back in China.

2. Brand name drop. If you want to get a Chinese investor’s attention, there’s no better way than to trot out some brand names with which you can claim some association. Can you get a major movie star involved? Are you or have you ever worked for one of the major Hollywood studios? Did you get a masters degree at Yale (or better yet, at Beijing University)? Can you work the words “Goldman” and “Sachs” into the conversation? Few PRC investors have the ability, or even the interest, to assess the quality of your screenplay, but a strong brand name they recognize will help you to swiftly cut through the clutter.

3. Be sensitive to the culture.  Just as in Hollywood, there are many cultural, social, and business rules that must be obeyed if you’re to have a reasonable shot at success. Too many foreigners show up with little understanding of how things work in China and reveal themselves as ‘barbarians’ who are best avoided.

4. Bring protection. China can be a rough-and-tumble place, and foreigners are often treated as targets for exploitation (and sometimes amusement). It’s best to have a local partner or ‘sherpa’ to guide you through the minefield. A great source of information and advice is the Harris Moure law firm’s China Law Blog.

Several friends recently asked me if I’d be attending Cannes this year, and I felt compelled to reply “What for?” The action is all in the East these days. Of my scores of Chinese film business contacts I’m only aware of two who bothered to attend the Cannes festival this year. Better to spend your time at the Shanghai Film Festival in mid-June, where you can participate in a relevant and rapidly growing scene. So don’t dabble, book your ticket and hotel room before everyone else squeezes you out.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

‘Iron Man 3’ – ‘So Young’ Duel Smashes Chinese Box Office Records. Are Hollywood’s Fortunes Turning?


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn.

By Robert Cain for China Film Biz

May 8, 2013

It’s happening so often in China these days that it’s difficult not to sound clichéd, but it was another record-breaking week at the national box office in the 7-day period ending May 5th.

So many records toppled that to list them all would fill up an entire column. To avoid making this article an overly long list, I’ll mention just a few.

First, at $148 million, last week’s cumulative PRC gross easily beat the all-time weekly record of $136 million that was set during Valentine’s Day week less than three months ago.

Although Iron Man 3’s $64 million 5-day gross fell about $10 million short of the all-time single week record that was set by last year’s Titanic 3D at $74.7 million—it did set new records for biggest midnight screenings total with $2.1 million, and biggest opening day with $19 million.

So Young, the Vicky Zhao directed romance, notched the biggest second-place weekly gross ever, with $53 million.

And The Croods became the highest-grossing original (that is, non-sequel and non-pre-existing franchise) animated film in China’s box office history, with a $36 million total as of Sunday.Box office week ending 5-5-13

So all of this is good for China and good for Hollywood, right?

Good for China’s producers and distributors, yes. For Hollywood, it’s hard to get too enthused. This past week was a positive blip in what continues to be a confounding and rather distressing trend for American studio films in China.

There’s no debating that Iron Man 3 is a solid success. Its PRC gross will roughly double the $60 million gross of the year’s second-best Hollywood release so far, Skyfall, and it will become the first Hollywood film in 12 months to reach $100 million.

But it still may not beat So Young, a melodrama from a first-time Chinese director with a production budget that was probably less than 3 percent what Iron Man cost. And So Young won’t even be among China’s top 5 grossers this year.

When you consider that Iron Man 3 is the biggest and best that Hollywood has to offer, that it enjoys the backing of a strong local partner in DMG and an unprecedented level of government support, yet it still struggles to beat a low-budget B-level Chinese language movie, you know something’s not working. Iron Man didn’t break the downward trend for Hollywood in China, rather, it’s the exception that proves the rule.

Chinese audiences like Hollywood movies, but they love Chinese ones. And that’s a major problem for Hollywood.

China’s box office is now up 41 percent year-to-date (36 percent in RMB terms) while North America is down by 11 percent. Chinese movies are getting better, and with $50+ million grosses now routine, they’re becoming much more profitable. Capital is attracted to ventures that offer profits, and Chinese movies, though tricky investments in some ways, are looking increasingly attractive.

Because Hollywood action movies like Iron Man remain extraordinarily expensive to produce, they need growth from overseas to compensate for their shrinking domestic market. China was supposed to be the solution to Hollywood’s math problem, but China isn’t cooperating. In the global market for film financing, U.S.-based projects are going to find it increasingly difficult to compete, unless they radically change their strategies.

Two strategic approaches that offer promising future prospects for foreign producers are:

1. Provide animated films and family fare. These genres have repeatedly gotten special dispensations from SARFT, enjoying prime distribution slots even during holidays and blackout periods.

2. Make local Chinese language films for low to moderate budgets. This is not easy, but at least it’s permitted, and as we’ve seen, a well-made Chinese film can generate windfall profits.

A third strategy, U.S.-China co-productions, remains extremely challenging, and it may still be a few years, if ever, before such productions become common. As Jiang Wei, general manager of Edko (Beijing) Films Limited, puts it:

“The Chinese film industry needs to grow for greater cooperation to be achieved. There is no real in-depth cooperation, in which staff from both countries work together, like what the English and Australian filmmakers have been doing in Hollywood. When China’s film industry grows as an equal partner and the box office becomes big enough, the Hollywood community will have to think of real stories involving Chinese culture and people who are real characters. Only then will real co-productions be possible.”

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China Swoons With ‘Iron Man’ Fever


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn.Wang Xueqi and IM3

By Robert Cain for China Film Biz

May 1, 2013

I didn’t dare say it until now as I’ve been holding my breath for my friends who handled the Chinese production and release of Iron Man 3, but “WOW!” Their picture has just set new PRC revenue and attendance records for midnight screenings with over $2 million, and initial reports indicate it has easily surpassed Transformers 3’s full opening day record of $15 million, with a nearly $20 million haul in its first-day plus midnight receipts.

And after so many disappointing PRC releases of Hollywood films in the first quarter, IM3 now appears likely to become the first U.S. film in 12 months, since Titanic 3D last April, to crack $100 million at Chinese multiplexes.

I’ve gone on record several times here with the opinion that So Young might beat Iron Man 3 in total China box office revenue. But now it’s a real horse race, and I may wind up eating my words.

Barely a year ago it was conventional wisdom that super hero films don’t play in China, because audiences didn’t grow up with the characters and weren’t familiar with their stories. And until recently this was true; the last Iron Man movie grossed only a fraction of what Avatar, Inception, and several Chinese language hits did back in 2010.

But Disney and Marvel have worked hard to edify the Chinese audience with films like Captain America, Thor, and especially The Avengers, and together with the invaluable efforts of their Chinese partner DMG they made Iron Man 3’s release into a major cultural event. Despite increasing their initial midnight screen count from 1,500 to over 2,300, there was scarcely a ticket to be had in most theaters, and commentary about the film has lit up China’s social media networks.China B.O. Perf of U.S. Films

The China-U.S. collaboration on Iron Man 3 faced numerous challenges and risks, and its success was far from a sure thing, but today’s box office results have vindicated the Disney/Marvel/DMG strategy. Congratulations to all involved for boldly and successfully pioneering new ground in the China-Hollywood relationship.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.