Monthly Archives: July 2012

China’s Leading Movie Production Companies

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by Robert Cain for China Film Biz

July 29, 2012

With their import quotas, foreign film blackouts, and other methods of market management, SARFT and the PRC government have made it abundantly clear that protection of local films and producers is a major Chinese policy goal.

Since Chinese protectionism is unlikely to go away, U.S. and other foreign producers who seek to participate in China’s booming film business will need to start engaging more with local Chinese companies.

There are several thousand licensed production companies in China (more than 1,500 in Beijing alone), so outsiders need systematic ways to narrow their lists of potential collaborators down to manageable size. One such method is to measure companies by their respective market shares. That’s my purpose here.

I’ve listed below China’s top production companies by their market share during the first 7 months of 2012. In calculating market share I’ve attributed each Chinese language film to a single production company, even though in some cases there were as many as 15 production companies credited on a single film. In such cases I’ve attributed credit for the film only to the company that received the first position credit. Co-productions with foreign companies are attributed to the mainland Chinese partner.

ImageSource: Pacific Bridge Pictures research

Here’s more detail on the top five:

Ningxia Film Group

Ningxia Film Group is the official government owned production company of Ningxia Autonomous Region, a tiny northern Chinese province that borders Inner Mongolia. The company landed at the top of this list by virtue of a single film, Painted Skin: The Resurrection, the only film it has ever produced. Ningxia’s President, Hong Yangtao explained that he had only one chance at making a movie: “We shot this film to survive.” His strategy for producing and launching Painted Skin 2 has resulted in mainland China’s most successful film ever, so it’s very possible that Ningxia may avoid the fate of becoming a one-hit wonder.

China Film Group

With all of its financial strength, distribution clout, and government influence, it’s surprising that China Film Group’s production division has managed only a 3 percent share of its home market this year, far less than any one of the Hollywood studios have captured in China. The Beijing-based company is a government-owned behemoth that is far more influential in the distribution sphere, where it has played a role in releasing 19 of the top 20 grossing films of 2012. Under its Chairman Han Sanping, CFG is preparing for an upcoming IPO.

Huayi Brothers

China’s most powerful independent (i.e., non state-owned) entertainment conglomerate, Beijing-based Huayi Brothers is a diversified company engaged in film and TV production, distribution, theatrical exhibition, and talent management. Huayi Brothers trades on the Shenzhen stock exchange at a market capitalization of US $1.5 billion. The company’s Wang Brothers are skilled at attracting top directors, and they consistently rank among China’s market share leaders. If any Chinese company can challenge Hollywood’s studios for market dominance in China, Huayi Brothers is certainly a top contender.

Bona Film Group

Like Huayi Brothers, Beijing based Bona Film Group is also an independent, publicly traded company engaged in both production and distribution of films. Trading on the US NASDAQ exchange, Bona’s current market capitalization is US $345 million. Under President Yu Dong the company has been a reliable supplier of blockbuster hits in recent years, and usually captures at least a 10 percent share of the domestic market. Bona is one of the more internationally-oriented Chinese companies, with interests in Hong Kong and the United States, and is now 20 percent owned by News Corp. Look to Bona to be one of the next producers of a crossover hit that breaks out internationally.

Enlight Media

Under CEO Wang Changtian, Enlight Media rarely mis-fires in its production and distribution of feature films.  Squarely focused on the action and romance genres, Enlight usually places several films in China’s top 20 grossers, and currently has in release the country’s fourth highest-grossing Chinese language film, The Four. Enlight is also a major player in China’s TV series production and distribution businesses. Under the leadership of its CEO Wang Changtian, the publicly traded, Beijing-based company has achieved a market capitalization of nearly US $1 billion.

Companies that didn’t make the top 15 ranking above but that are worthy of mention include Shanghai Toonmax, Stellar Pictures, Xiaoxiang Film Group, Henan Film Studios, DMG Entertainment, and Dadi Films.

Too many production companies are competing in China for scarce resources—and for even scarcer quality scripts. If the PRC’s film regulators are serious about making their domestic industry more competitive, they should focus less on protectionist measures and more on encouraging consolidation and cooperation among the industry’s disparate players.

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.

Chinese Films Light Up the Box Office During Hollywood ‘Blackout’

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by Robert Cain for China Film Biz

July 18, 2012

After being pummeled for nearly 6 months by foreign competitors, China’s filmmaking community has made the most of this summer’s ‘Hollywood blackout’ period, bouncing back with record grosses for several Chinese language films in early July.

With a 4-week, SARFT imposed ‘blockade’ barring new foreign releases at China’s theaters starting the week of June 25th, China/Hong Kong co-pros like Painted Skin 2 and The Four, and local Chinese film Caught in the Web have stepped up in admirable fashion to reclaim lost turf.

Most impressive has been Huayi Bros’ Painted Skin 2, which just crossed the $100 million mark and is now a lock to set a new record as the mainland’s highest grossing Chinese language film ever. Also strong is Enlight’s action co-pro The Four, which logged a $13 million opening this past weekend, the third best debut in 2012 for a Chinese language film after Painted 2 and the Taiwan/China romancer Love. And Chen Kaige’s romantic drama Caught in the Web notched the best full-week tally for a mainland picture since Guns ‘N Roses bowed back in April.

 

The Hollywood cease-fire will end on July 27th, when Ice Age: Continental Drift opens wide, but the aforementioned Chinese successes have underscored several realities of the PRC movie market that may not have been apparent as recently as June:

  1. Chinese audiences still want to see Chinese movies. China may not yet be able to compete head-to-head with the best—or even the middling—Hollywood offerings, but it’s clear that large audiences will turn out for the right movies that feature Chinese faces, themes, and stories. Formulas that are working exceptionally well include sequels or new installments of past blockbusters like Painted 2; and re-teamings of director-actor ensembles that created recent hits like The Four’s writer-director Gordon Chan and actors Deng Chao and Collin Chau, who had together made the 2011 hit Mural.
  2. Blackouts are a big, and increasingly costly, fact of life for non-Chinese suppliers. More blackout periods will follow during the October National Day/Golden Weeks holidays and during December/January, and SARFT could conceivably extend these periods to allow the local film industry more breathing room to develop and connect with audiences.
  3. Hollywood’s studios need to evolve their China strategies if they are to remain contenders there over the long term. The majors’ collective market share fell from 80 percent in mid-June to 3 percent last week, as SARFT showed them who’s boss in the PRC. To avoid being squeezed out through market manipulation tactics, American companies must become more ‘Chinese,–more locally entrenched–in their approaches.

At the risk of repeatedly stating the obvious, the optimal way for foreign producers to hang on to a share of the Chinese market is by ramping up their co-productions.  China is not a laissez faire market; the regulators will do what they can, within the limits of the law and WTO rules, to ensure that Chinese content retains a major share of moviegoers’ cultural diets. Foreigners who remain complacent about China risk losing their place at the table.

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.

Interview on Hollywood’s China Aspirations

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July 14, 2012

“China Business Review,” the magazine of the US-China Business Council, recently published a feature story written by Editor Christina Nelson titled “Hollywood’s Script in China: Three experts discuss China’s rapidly evolving film industry and opportunities for US entertainment companies.“  In addition to attorney Mathew Alderson of Harris & Moure, pllc, and Brent Reynolds of distribution company Q Global Entertainment, I was also interviewed for the article, which reviewed recent developments in China’s film industry and in the U.S.-China film trade.

With the author’s permission I have re-published below the segment of the article in which Christine and I discussed co-production, piracy, and the challenges and benefits of producing in China.

There has been a lot in the news about Hollywood studios doing co-productions in China. Is there actually an uptick in this trend, and why would a film studio decide to pursue a co-production?

Cain: There’s certainly been an uptick in talk and announcements. The reality is there have been very few real US-China co-productions. You can really count on one hand the number that have been done in the last three or four years. What people tend not to know or talk about is that there’s a huge co-production business in China with companies from other places like Hong Kong, Taiwan, and [South] Korea.

The reasons for doing a co-production are pretty clear. There’s still a—and I think there will be one for a while— quota on the import of films into China. Even with the increased number of slots that are expected to open up this year, [the Chinese government is] still restricting the number of films that can get in. So doing a film as a co-production is a way of getting around the quota. If films qualify as approved co-productions then they are treated just like any domestic production with open access to distribution. And the other important reason is the economics are better. You get a better share of the box office.

Are American companies trying to model themselves after companies from Hong Kong and Taiwan that have done co-productions before?

Cain: No, in fact I’m not sure how aware they are of the existing, pretty successful approaches. Particularly in Hong Kong and Taiwan, there’s such a cultural affinity and understanding. They speak the same language, and it’s easier for them to work with each other. They also, in my experience, come with more of an attitude of meeting the Chinese producers at least halfway and making an effort to understand what their needs and the needs of the marketplace are. They really tailor their films and their approach to be successful in China. The Hollywood studios are still trying to figure that out.

Are we going to see more Chinese characters or plotlines that fit with Chinese traditions of storytelling in Hollywood films?

Cain: I think there’s an awareness in Hollywood that they need to figure out how to cater better to the Chinese audience. What I’ve been hearing is there’s been more activity around US-China co-productions. I don’t know what the result is from those conversations. But generally speaking, I think the studios are at least at the point where they now understand how quickly China is growing, and how important it’s becoming. You can’t ignore the numbers because they’re growing so fast. How that’s translating into effective action, I’m not sure. I haven’t seen very much of it yet.

Is piracy still a big industry concern? If so, what can you do about it as a foreign company?

Cain: There’s been a huge amount of pressure applied for many years. It is still a concern. It’s interesting that where online piracy is also a big problem at least there is a lot of spending and legitimate acquisition of film titles by online distributors. So where there was no money coming back to the studios from that, at least there’s some revenue stream [from online sources] and it’s one that’s growing from China. So much of the viewing in China has shifted from physical media to online—that change is happening really quickly.

What is it like to work with a Chinese company to make a movie? What are some of the challenges and benefits of doing this?

Cain: I’ve really enjoyed the experiences I’ve had working with the Chinese producers and crews. I can’t really say I’ve had any more problems or challenges than I’ve had elsewhere. The difficulty in working there is the infrastructure for making films is still at an early stage of development, and the talent pool is not very experienced yet. There are great film-makers and great writers, but there just aren’t many of them. It’s hard to find people at the level of skill and professionalism that you’re accustomed to finding here in Los Angeles. And that goes all the way down the line, sourcing cameras and equipment and sound stages. But that’s changing; there’s been a lot of investment in China so it’s getting better. It’s an issue that’s going to go away as they make more films there and get more experience. The opportunity, of course, is just to show a part of the world that people are eager to learn about and understand. They are also phenomenal locations. I made a couple of productions in Beijing and Shanghai, and they are really spectacular locations. Just having access to such a big and growing market is a real plus.

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.

SARFT’s Toothless Censorship Salvo

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By Robert Cain for China Film Biz

July 12, 2012

In the past few years China’s streaming video sector has grown into a huge, nearly censorship-free entertainment zone, the platform of choice for hundreds of millions of viewers who have turned away from the watered-down, propagandized—and for many, unwatchable—fare that fills the PRC’s broadcast airwaves. China’s equivalents of Youtube, Netflix and Hulu comprise a multi-billion dollar industry that thrives on offering genuine entertainment, replete with the sex, violence, swearing, and other sins and vices that offend the Chinese Communist Party’s (CCP) notions of what is ‘appropriate’ for its citizens.

It came as no surprise, then, when China’s morality watchdog, the State Administration of Radio Film and Television (SARFT), proclaimed this week that websites must henceforth pre-screen all videos—particularly made-for-web dramatic series, ‘micro movies,’ and user generated content—before making them available online. In its “Notice on the Further Strengthening of Regulations on Online Dramas, Micro Films and Other Online Audiovisual Programs”, SARFT expressed its concerns and its rationale for tighter controls:

“In recent years, online dramas, micro films and other online audiovisual programs have developed rapidly as a new form of online culture. But problems of vulgarity, tastelessness and dramatization of violence and sexuality have appeared in some programs, some are full of vulgar language, and some intentionally pander to base interests . . .”

SARFT goes on to say that it holds site administrators responsible for violations of its policies, and that it expects these administrators will remove “all violence, pornography and some swearing.”

SARFT’s pronouncement, which was articulated in a published series of answers to reporters’ questions, was not so much a statement of new policy as a reiteration of an old one. Everyone who can click on a web video link knows that salacious content is prohibited, and the providers of such videos are well aware that they have been trafficking in contraband. But the rewards for distributing such populist content have been so bountiful, and the risks so minimal, that web vendors have seen no reason to curtail the flow of illicit entertainment. Without it, they wouldn’t have much of a business.

As I see it, SARFT’s proclamation is really a giant admission of failure and frustration that it has become impossible for the censors to do their job, that the task of policing video on the internet is just far too big. As David Bandurski wrote for the University of Hong Kong’s China Media Project, “It remains to be seen how SARFT intends to enforce these regulations, particularly in the case of user-generated content. “If followed to the letter, [compliance] would require massive resources.”

The tension between the CCP’s desire to shut out all undesirable content, and the general population’s desire to access information and entertainment, has clearly reached a critical point. Although SARFT justifies its regulations by citing the concerns of unnamed “netizens” who had urged it to take action to protect young people’s mental health, a review of China’s blogging sites in fact reveals a heavily negative reaction to the SARFT pronouncement. As a reporter for Guangzhou’s Southern Metropolis Daily newspaper vented on Weibo: “You even want to concern yourself with the number of flies in the latrine! What is there that you don’t want to control? There’s not a single thing you can manage properly! And you still think the world will stop spinning if you don’t control it.”

Something’s got to give. Either SARFT shuts down the Chinese Internet completely, a highly improbable scenario, or the CCP learns to make peace with the fact that it can’t possibly exercise control over every single human impulse of its 1.3 billion people.  With a new leadership regime set to take power starting this Autumn, we’ll soon see which way the PRC’s political winds will blow.

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 Box Office: An Excellent 2012 So Far

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by Robert Cain for China Film Biz

July 8, 2012

Thanks mainly to stellar attendance for Hollywood-made films, China’s box office racked up growth of 41 percent (as measured in US dollars) for the first half of 2012, with aggregate ticket sales of more than $1.25 billion through the weekend ending July 1. If China’s usual annual pattern of higher second-half ticket sales holds this year, the July-December period will account for around 60 percent of total revenue, and the year-end tally will exceed $3 billion.

China’s revenue growth continues to dwarf that of the U.S. and most other international territories. Even if the PRC’s blistering growth cools to just half of its current pace, it will supplant North America as the world’s largest box office market by 2020.

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Note: India is excluded due to lack of reliable data.

Through the end of June, 2012, 8 films crossed the $40 million box office threshold, as many as reached that level in all of 2011. Only one non-Hollywood picture, the Hong Kong-China co-production Painted Skin: The Resurrection, cracked the top 10 films, at number 7.

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Foreign films took more than two-thirds of all ticket revenue, a first-half record, and for 23 straight weeks from mid-January through late-June, Hollywood films topped the charts. But Chinese films will likely regain share in the second half, with Painted Skin 2 continuing its record-breaking run, and such highly anticipated releases as Feng Xiaogang’s 1942, Wong Kar-wai’s The Grandmaster and writer-director-producer-star Jackie Chan’s Chinese Zodiac coming to Chinese theaters later this year. Image

Action and adventure remain the top drawing genres, with more than 40 percent of revenues. But romance surpassed science fiction as the second most popular genre, as several love stories, most notably Titanic and Painted Skin 2, drew large numbers of moviegoers to theaters. Animation’s share has dropped from 15 percent in 2011, when Kung Fu Panda 2 set records and some very tough comps, to just 7 percent so far in 2012.

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Two unmistakable trends in 2012 are the emergence of the female moviegoing audience as a major force in China, and the failure of Chinese filmmakers to connect with their own domestic audience. Romances and romantic comedies captured 28 percent of ticket sales in the first half of 2012, up from just 7 percent in 2011. Even if we take the outlier Titanic 3D out of the mix, romance/romantic comedies still more than doubled their market share in 2012. Domestic Chinese films (excluding co-pros), lost nearly half their market share, dropping from 25 percent in 2011 to just 14 percent in the first 6 months of 2012.

The challenge for Chinese filmmakers is simple: make better movies, target them better to the tastes of Chinese audiences, and do a better job of marketing them. China is and will remain the greatest growth opportunity for producers worldwide. Everyone should study the success of Painted Skin: The Resurrection, and the rest of the top-grossing Chinese language films, for lessons about what Chinese audiences want.

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.

“Painted” Skins the Competition with Sophisticated Strategy and Superior Marketing

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by Robert Cain for China Film Biz

July 5, 2012

Bang the gong, break out the champagne, and set off some extra fireworks, because China finally has a bona fide, home-grown blockbuster hit.  Painted Skin: The Resurrection (画皮2, or Painted Skin 2), the $18 million sequel to the 2008 smash Painted Skin, last weekend became the first non-Hollywood film in nearly 6 months to beat out the foreign competition and place first at the Chinese box office, with a record-breaking gross of $47 million in its first 4 days.

Set in the late Qin-early Han period in China’s history, Painted 2 is an action-fantasy-romance based on a classic Chinese story about a female demon whose great desire is to become human, even though the transformation must come at great cost. “The Hollywood Reporter” called Painted 2 visually impressive, albeit uneven in its storytelling: “The result is a roller-coaster of a film that will divide audiences particularly along gender lines, having greater appeal for female viewers both because it is fundamentally a love story with a noble, long-haired, romantic hero, and thanks to the presence of four strong and powerful women characters who run the show.”

Even though there were no new Hollywood releases last week to stand in the way of Painted Skin 2, the film’s box office performance was nevertheless impressive on many levels. Skillful packaging, an enlightened production approach, and solid marketing combined to generate the best opening day, best single day gross, and best weekend ever by a Chinese language film. In PRC box office history only Titanic 3D and Transformers 3 have opened more strongly than this new China-Hong Kong co-production. Chinese producers would do well to study and emulate Painted 2’s overall strategy, which included the following elements:

1. Astute packaging. The film features an array of top Chinese stars—Zhou Xun (The Great Magician, Flying Swords of Dragon Gate), Zhao Wei (Eternal Moment, Love), Chen Kun (Let the Bullets Fly, Flying Swords…), and Feng Shaofeng (White Vengeance)—who together deliver large, complementary fanbases across a wide range of ages and demographics. And director Wuershan, who last directed the martial arts comedy The Butcher, The Chef and the Swordsman, also brings a following as an emerging director to watch.

2. Adroit audience targeting. Painted 2 was developed to target female Chinese moviegoers, who are largely underserved and who had proven their attractiveness as an audience for films like Love is Not Blind (US $55mm gross) and Eternal Moment ($31mm). With its themes of romance and beauty, and with its story centered on two female friends, Painted 2 admirably filled a lucrative niche in the marketplace.

3. “Producer-centric” model. Painted 2 producers Pang Hong and Huayi Brothers chose to avoid the usual Chinese director-centric filmmaking approach, which places ultimate control and decision-making authority in the director’s hands, in favor of a more Hollywood-style approach. They executed a market-oriented strategy in their selection of director, their screenplay development, their choice of release date, and their investment and production management. The film’s success makes it a shining example of the advantages of the “producer-centered” model and its applicability in China, and it could have a long-lasting impact on Chinese film production.

4. Production Value—on a budget. With their $18 million budget, Painted 2’s producers had enough money to make an ambitious film by Chinese standards, but not enough to compete with the world-class effects and production values of the Hollywood films that have attracted—some would say ‘spoiled’—so many Chinese moviegoers of late. So they opted for what they termed an “Oriental Magic” look, an impressionistic visual effects style that allowed them, in the words of director Wuershan, to “make Harry Potter on a Black Swan budget.”

5. Sophisticated marketing. The marketing campaign for Painted 2 began when the cameras started rolling, with the release of a popular phone and ipad app that allowed fans to apply to their favorite photos the golden half mask worn by Zhao Wei’s character, Princess Jing. Additional tactics included wide distribution of teaser trailers in November 2011 and in March and May of 2012, high profile, buzz generating screenings at Cannes and the Shanghai Film Festival, outdoor advertising on the world’s largest LED screen (a 63 meter high screen on the side of a Shanghai skyscraper that was seen by as many as 1.5 million people every day), a 3D only wide release strategy on over 3,000 screens, and heavy social media promotion through Sina Weibo and other online platforms. The marketing team even took advantage of publicity regarding the reported on-set tensions between the two female leads, and of public speculation about who might be the mother of the leading actor’s illegitimate son. Finally, Painted 2 benefited from fortuitous release timing, opening at the beginning of a three-week window that will have no competing Hollywood releases, until the belated Twilight: Breaking Dawn – Part I opens in late July.

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After months of nail-biting over their shockingly shrinking share of the domestic market, Chinese filmmakers can breathe a little easier this week in the knowledge that all is not lost. The lessons of Painted Skin: The Resurrection are that, by using innovative approaches to producing and marketing their movies, and by selectively adapting Hollywood tactics to the realities of the Chinese market, producers in the PRC can regain their share of the Chinese box office.

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.

Pixar’s Persistent China Drought

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by Robert Cain for China Film Biz

July 3, 2012

Pixar’s newest release, Brave, the tale of a rebellious princess who turns her mother into a bear, had a bear of a time at the Chinese box office last week, clawing out just $3.1 million during its first 6 days of release ending June 24th.

While other studios’ animated feature films have prospered in China’s theaters, Pixar’s films have consistently underperformed there. Brave earned 60 percent less in its first week than Madagascar 3 did in its third, and the Pixar film also trailed far behind a poorly reviewed Taiwanese action film, Black and White Episode I, that opened against it last week.

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While non-Pixar animated films during the past 2 years have taken in an average of about 7 percent of their worldwide box office grosses from China, Pixar’s films have earned less than 2 percent of their worldwide grosses there during the same period. Every one of Pixar’s recent releases has lagged far behind other U.S. animated films.

 

Pixar’s poor performance cannot be explained by inferior distribution or marketing, since virtually all major Hollywood animated films are handled in China by the same two companies, China Film Group and Huaxia, often working together. Rather, there seems to be something about the Pixar stories, and the way audiences perceive them, that leaves Chinese audiences cold. Whatever the reasons, the performance gap is so striking, and so consistent, that Pixar and Disney will want to address their shortcomings in China if they are to compete effectively against their rivals.

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.