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

By Robert Cain for China Film Biz

February 2, 2013

Over the years one of the most reliable truths of China’s film business has been that Hollywood action films sell. Bond films Casino Royale and Quantum of Solace, the Transformers movies, Avatar, Men in Black and other Hollywood action tent-poles have been the rock upon which China’s booming multiplex business was built. Even North American duds like Battleship, John Carter and The Mechanic could count on China to shore up their grosses and give them a measure of international respectability.

But during the past year Chinese audience tastes have broadened, and U.S. action films have experienced a lull in popularity that just might be the beginning of a decline.

Since January, 2012, three Chinese language action pictures have crossed the $90 million mark in the PRC, as have two dramas and a comedy, but only one American action film, Mission Impossible 4, has managed the same feat. And that was a year ago.

Since then, Sherlock Holmes 2, Spy Kids 4D, Wrath of the Titans, Ghost Rider 2, The Avengers, The Grey, The Hunger Games, The Amazing Spider-Man, The Dark Knight Rises, and Prometheus have all under-indexed in China. And the first Hollywood action release of 2013, Skyfall, has joined the club.

The trend is clear: since May, 2012, more than two-thirds of U.S.-made action films released in China have under-indexed. Chinese audiences have increasingly turned toward comedies like Lost in Thailand, to Chinese action films like CZ12, and to effects-driven fantasies like Life of Pi and Painted Skin: Resurrection.

The trend could turn back this month, with Tom Cruise’s Jack Reacher and The Hobbit set to open in a few weeks, but I expect another Chinese film, Stephen Chow’s action comedy Journey to the West, will out-earn both of them. And meanwhile Cloud Atlas, a decidedly non-action film, looks likely to strongly over-index in China and perhaps surpass its U.S. total of $27 million.

The challenges for Hollywood action tent-poles are threefold:

1. Oversaturation. In 2011 there were 14 Hollywood action films released in China. In 2012 there were 23. Audiences may simply be tiring of these movies, with the trend away from action tent-poles signaling a broadening in their tastes. Ice Age: Continental Drift and Life of Pi outgrossed all but two of these 23 films. In a year when China’s box office revenue rose 30 percent and the average U.S. film’s China revenue was up 27 percent, the average U.S. action film’s take rose by only 14 percent.

2. Market Manipulation. In its efforts to manage the market and maintain a face-saving 50 percent share for domestic films, SARFT’s ‘domestic film protection’ efforts seem to be targeting U.S. action flicks more than other foreign pictures. SARFT slotted The Dark Knight Rises and The Amazing Spider-Man  for release on the same day, and Oz: The Great and Powerful and A Good Day to Die Hard appear to be headed for the same fate. While China isn’t exactly turning these movies away, it does seem to be more ambivalent about them than, say, family-friendly fare.

3. Piracy. Virtually all movies are affected by theft and illicit distribution in China, but Hollywood action tent-poles seem to be targeted more than others. Franchise films like the Bond, Mission Impossible, Transformers and other pictures tend to be highly valuable to pirates because they have widespread pre-release awareness, and in many cases SARFT delays these films for censorship or ideological reasons, allowing pirates a head start for getting illegal DVDs, Blu-ray discs, and online copies of the films into general circulation.

For these reasons, Hollywood studios looking to maximize their revenues in the increasingly important Chinese market would do well to broaden their offerings so they’re not overly action heavy. Fox, by far the best performing studio in China last year, had the most genre-balanced slate, with Titanic 3D, Life of Pi, and Ice Age ranking as its top three performers. The studios that fell behind in China were far more action-oriented in their China releases. These distributors ought to consider following Twentieth’s example.

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.