Not-So-Amazing China Debuts for Spider-Man and Dark Knight


Image

By Robert Cain for China Film Biz

August 28, 2012

The hotly anticipated and—in Hollywood, at least—much protested head-to-head box office matchup between Sony’s The Amazing Spider-Man and Warner Bros’ The Dark Knight Rises kicked off on Sunday night in China to good, but not record-breaking, grosses.

After waiting out long delays in July and August for the end of China’s “domestic film protection period” (which was publicly acknowledged for the first time last week by a senior SARFT official), the two superhero movies opened to estimated first day grosses of $5.35 million for Spider-Man and $4.4 million for Batman, according to China.org. These are good numbers for Sunday-Monday debuts, but they fell far short of the $15.9 million first day record set by Transformers: Dark of the Moon in 2011, and the $11.6 million April, 2012 debut of Titanic 3D.

With the two films saturating the majority of China’s screens in wide release, including nearly all of the country’s IMAX locations, many theater managers were said to be disappointed with the results. Although I expect each picture will ultimately earn at least $50 million in Chinese ticket sales, each will likely under-index in China relative to their massive grosses in the rest of the world ($941 million so far for Dark Knight and $697 million for Spider-Man).

But expectations were high and probably over-inflated to begin with. As I’ve explained in articles in May and also last December, superhero movies simply don’t work as well in China as they do in many other territories. Liu Hui, manager of Beijing’s UME International Cineplex, noted that the previous Spider-Man movies by Sam Raimi also didn’t set any records in China, and Christopher Nolan’s prior ‘Dark Knight’ installments weren’t allowed to screen there. “China doesn’t have that deep tradition and huge die-hard fanbase of American comics. That’s why they didn’t make record money.”

Another key factor behind the less-than-thrilling grosses is the bunched releasing schedule that was forced upon the superhero tent-poles by SARFT’s extended summer blackout on Hollywood films. And with Prometheus opening on September 2nd and The Expendables 2 following on September 4th, the heightened competition for Chinese moviegoers’ attention may not allow for any new records until the logjam of major films is worked through later in the fall.

Image

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


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


Image

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.

Pixar’s Persistent China Drought


Image

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.

Image

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.

Studio Report Card: The Widely Varied Performance of U.S. Distributors in China


by Robert Cain for China Film Biz

June 18, 2012

Hollywood’s studios are all benefitting from China’s box office boom, but they’re not benefitting equally. Some have been much more effective than others at getting their films into Chinese movie theaters, and their financial results from China distribution have varied widely. The top grossing major studio, Paramount, has over the past couple of years earned more than four times as much from its China releases as the sixth place studio, Universal.

Hollywood needs to pay close attention to how it’s doing in China, and to invest time and energy to figure out how it can do better there. While there are certainly other important territories, none comes close to matching China’s torrid growth and rapidly swelling global importance. The analysis presented below provides what I hope is a valuable snapshot, and a few useful insights, about where American distributors stand in China today.

To conduct this analysis I reviewed the box office results of the more than 60 American films that were released in China during the nearly 18 month period from January 1st, 2011 through June 10th, 2012. These included both revenue-sharing ‘quota’ films and ‘flat fee’ imports. I classified each film as belonging to a single U.S. distributor—a task that was not as easy as it sounds, because quite a few films are released by one company in the U.S. and by an entirely different company in China. My test was to assess, as best as I could, which company was receiving the distribution receipts from China, and to assign that company as the American distributor of record for the purposes of this study.

During the 18-month study period, Sony, Paramount, Warner Bros and Disney each exported 7 or more films to China, while Fox placed just 4 films there and Universal only 3. The ability to obtain quota slots has been a key factor separating the most financially successful studios in China from the least successful ones.

Image

Also important, of course, is the relative box office drawing power of each American studio’s films with Chinese audiences. On that score Paramount was also the leader with an average of $59 million per release, while Sony brought up the rear among major studios with barely a third of that figure, at $23 million per release.

Image

Another useful measure to examine is China indexing, that is, the share of total worldwide box office earned by each company’s films in China. This figure tells us how ‘China friendly’ each company’s slate has been; the higher the number, the greater the China appeal. By this measure Twentieth Century Fox, with its out-sized China release of Titanic, led the way. Had it not been for Titanic, Paramount would have led on this score too.

Image

When the studios started making the films that are the subject of this study, it’s unlikely that any of them were thinking much about China. But the world has changed in the past two years. Given China’s rapid emergence, all of the studios will need to fully incorporate China into their strategies for developing, producing and distributing their global films. While the film genres, their stories, and their overall suitability for China are all important, of equal or even greater importance are the studios’ continued access to distribution, and the effectiveness of the marketing and releasing of their films. Toward this end, co-producing movies with Chinese partners will become an increasingly important tactic for American companies to enhance their standing and to exercise greater control over their results in the PRC.

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.

Wanda’s New Summer Slate for AMC Theatres


Image

by Robert Cain for China Film Biz

June 15, 2012

While waiting and wondering what changes the new Chinese owner Wanda Group might bring to AMC Theatres, I’ve been imagining a future news story that might go something like this:

With its acquisition of the AMC movie theater chain well underway, Wanda Group on Thursday revealed its new plans for the giant American cinema circuit. Contrary to its earlier assurances, Wanda’s senior management outlined several major modifications it has planned for the 5,048 screen chain’s management and operations. Key changes include:

Staffing

Effective as of today, all 21,000 AMC employees will be replaced with lower-cost Chinese substitute workers. Taking advantage of President Obama’s new EB-50 immigration program which allows for bulk purchasing of Green Card work visas for $50.00 each, Wanda has arranged for the immediate relocation of 21,000 displaced cement factory workers to staff AMC’s 350 cinema locations. Because none of the new workers speak English, cinema patrons will be asked to converse in Mandarin, Cantonese, Hokkien, and 16 other Chinese dialects when purchasing tickets and concessions, when asking for directions to bathrooms, or when otherwise interacting with AMC employees.

Concessions

Cinema-goers will be relieved to know that the popcorn, Butterfinger bars and Jolly Rancher candies at AMC’s concession stands will not be replaced with rice balls, dim sum, and other Chinese snacks. Instead, under the direction of China’s Ministry of Agriculture, and to help relieve pricing pressures due to this year’s surplus Chinese soybean crop, concessions will be stocked entirely with soy-based candies and food products. Delicious new items will include buttered or unbuttered soycorn (popped soybean kernels, delicious when dipped in soy sauce!), Soy Duds candies, Soynut M&Ms, and Reese’s Soy Butter Cups. Depending on the results of this coming autumn’s crop, additional millet and turnip-based snacks may also be added to concession menus.

Programming

AMC’s patrons will still be able to look forward to the usual mix of action, comedy and fantasy fare that typically fill movie screens in summer, but this year there will be a slight twist. Having anticipated the AMC acquisition for the past two years, Wanda Group has been hard at work producing its own slate of summer blockbusters, which it will begin to roll out in the coming weeks. Here’s a sampling of films coming soon to a theater near you:

“Titanic 2” – In this $1.2 billion budgeted sequel to the beloved 1997 film, a team of Chinese scientists sets out to prove that the Titanic could—and should—have survived its ill-fated crossing, if only it had been designed and captained by Chinese experts. To achieve total authenticity, writer-director James Cameron raised the original Titanic from the ocean floor and had it rebuilt in the Guangzhou shipyard according to exacting Chinese specifications. The film features Kate Winslet playing Rose II, the morally correct granddaughter of her Titanic I character; the modern-day Rose II would never dream of exposing her breasts to a strange man. This time it is the iceberg that sinks to the bottom of the Atlantic, and Rose II passes up on the chance to cavort with a poor young ne’er-do-well, saving her virginity instead for a rich man who drives a BMW.

“Bo Xilai: Hero of the People” – This epic tale of selfless heroism tells the real, true story of Bo Xilai, friend, patron and benefactor of Wanda-AMC chairman Wang Jianlin. Bo, played by martial arts master Jet Li, is portrayed as the great communist hero he really is, selflessly fighting for the great Chinese proletariat through his daring acts of generosity and sacrifice. Actress and businesswoman Zhang Ziyi plays herself as the brilliant, $1 million per night financial adviser who engineered China’s economic miracle. Once you’ve seen this movie you’ll leave the theater convinced that any reports you may have heard of murder, corruption, blackmail, prostitution, or perjured testimony were all just a really, really big misunderstanding.

“Red, Red Dawn” – China and North Korea unite in a military rescue mission to emancipate America from the evils of capitalism. The heroic armies of the PRC and the PRK overwhelm the puny defenses of the American one percent, and liberate the enslaved American workers who welcome their rescuers with tears of elation and spontaneous singing of “The Internationale.” Then everyone joyously joins hands and marches to the farms of Iowa for collective re-education.

“Screw You, Richard Gere” – A scintillating series of academic discussions–set to a Philip Glass score and background images shot at Guantanamo–exposes the fallacious theories of such CIA-backed “activists” as Richard Gere, Christian Bale, and Sharon Stone, and their absurd notions about “human rights.”

To allay any potential concerns AMC moviegoers may harbor regarding these changes, new AMC Theatres CEO 姚明 offered the following reassurance: “不用担心, 只是享受电影 和 基于大豆的小吃.”

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.

Hollywood’s Colonization of China’s Box Office


by Robert Cain for China Film Biz

May 30, 2012

Men in Black III opened last week in China to a stellar $25 million box office tally over 3 days, marking the second biggest opening weekend in China this year after Titanic 3D’s massive $58 million April debut.

Men in Black’s first place showing also marked the 19th week in a row that a Hollywood film placed first at the Chinese box office, and the fourth week in a row in which at least the top three films were American.

The last time a Chinese movie topped the charts was the second week of January, when The Great Magician (actually a Hong Kong-China co-production) had no foreign competition, as there weren’t any Hollywood films at all in wide release at the time.

In fact, the last time a newly released Chinese film opened in first place in China was when The Flowers of War (also a Hong Kong-China co-production) did so in mid-December, 2011. Again, there were no Hollywood films in wide release at that time. To find the last time a purely domestic Chinese film topped the box office we must go back to mid-November, 2011, when the romantic comedy hit Love Is Not Blind was champ.

For the year so far, the 12 Hollywood films that were released wide have taken a 64 percent cumulative share of China’s national box office. The roughly 50 (depending on how they’re defined) Chinese-made films have taken a cumulative share of only 17 percent. But if we count only from February onward, when Hollywood films were actually in release, Hollywood’s share was 77 percent. 

Image

(Click on chart to view larger image)

 While this trend of increasing Hollywood dominance bodes well for the American studios, it also raises the question of what Chinese filmmakers, and the Chinese government, intend to do about it.  With the import quota now increased from 20 films to 34, it’s a dead certainty that, at least in the short term, Hollywood’s dominance of China will continue, and very likely increase.

Of course, Chinese distributors and government movie tax collectors are reaping a huge bounty on all these American films, but anyone taking the long-term view must realize that things can’t continue this way for very long. The State Administration of Radio Film and Television (SARFT), China’s powerful government overseer of media, is bound to speak out against the accelerating influence of “western cultural values” among the populace. The political implications of Hollywood’s colonization of China’s movie theaters are far too vast to be ignored by anyone, least of all SARFT.

If and when it decides to act, SARFT can adopt one of two approaches in response to the American cultural ‘invasion.’ It can either choose what I call a constraining strategy, or it can go with an empowering strategy.

Under the constraining strategy, SARFT would limit Hollywood movies’ access to China’s distribution channels. Although China is legally committed under WTO rules to allow foreign films into the country, there is no law that says what kinds of films must be imported, how long they must be made available to audiences, or whether they must be allowed access to the best quality venues and distribution networks.

So, for example, SARFT might decide to allow fewer Hollywood blockbusters into China, and choose instead to release more documentaries, or more movies from India, or Iran, or North Korea. This would be a perfectly legal, WTO-compliant method of reducing Hollywood’s dominance. Or SARFT could also limit the number of theaters each film release would be allowed, or perhaps it could even designate that certain ‘quality’ theaters be reserved for Chinese films, while Hollywood films would be ‘ghettoized’ to lesser theaters.

Although this sort of approach wouldn’t be good for anyone (except possibly the North Korean film industry), it’s not hard to imagine SARFT adopting some of these tactics because they would be relatively easy to implement and they would have an immediate impact. Sure, China’s theater owners and moviegoers and Hollywood’s studios would raise a stink, but China’s government has repeatedly demonstrated its willingness to withstand and even ignore pressure from foreigners and from its own citizens alike.

The downside of this constraining approach is that it would only mask, but not solve, the fundamental problem, which is that Chinese films are unable to compete with American ones. For SARFT to solve this problem it would need to think more creatively and more constructively, and commit to what I call an empowering strategy.

The empowering strategy would take the long-term view of creating value, as much as possible, for everyone involved. The highest goal of this approach would not be to limit Hollywood’s market share, but to maximize China’s, by empowering its film industry. This approach would reduce the burden of censorship, allowing Chinese filmmakers a broader palette of storytelling options to put them on more equal footing with filmmakers in Hollywood and the rest of the world. It would subsidize and support China’s artists and visionaries with story development and filmmaking grants. And it would provide bridges, rather than obstacles, for the world’s best filmmaking talents to come and work in China and help develop the country’s next generation of writers, directors, producers and other filmmaking artists. 

This sort of empowering approach may seem like a utopian dream, but in fact a strategy like this worked beautifully in China’s neighboring country, South Korea. Through the 1990s Korean films held only a 15 percent share of their domestic box office. But under a 5-year government-industry cooperative plan implemented in the mid 1990s, Korea eliminated many of its censorship strictures, invested in training and facilities, created a financial infrastructure that supports film production, and provided grants to writers, directors and producers to kick-start what swiftly became a world-class national cinema. By 2003 Korean films captured a 53 percent share of their domestic market, and Korea became recognized as a major filmmaking and cultural hub for the rest of Asia. 

There’s no reason why China can’t accomplish a similar feat. The entrepreneurial spirit needed to drive film production is already abundant in China. The country’s talent pool needs to be further developed, but it is ready and waiting, and there are plenty of qualified foreign experts willing to jump in and help them. And the money to support an empowering strategy is plentiful—far more money is skimmed by theaters off the top of box office receipts each week than would be necessary to support such a plan. The main thing currently standing in the way of China’s cultural competitiveness is the Chinese government.

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 Bona Films Takes Investment From Fox


Image

by Robert Cain for China Film Biz

May 14, 2012

Leading Chinese independent production and distribution company Bona Film Group has taken an undisclosed investment from 20th Century Fox parent company News Corp in exchange for a 19.9 percent stake in the company. Bona founder Yu Dong sold the stake directly from his personal holdings, at a price I estimate was around $75 million, given that Bona’s market capitalization is $386 million as of today.

On its face the tie-up looks like a good one for both sides (Bona’s ADR shares traded at new 52-week highs today), and it marks another significant advance in News Corp’s strategy to participate in content production and distribution in China. My contacts at Fox and News Corp didn’t wish to be quoted, but they pointed out that the Bona investment is merely one element in the company’s broad, ongoing China strategy. An element of that strategy that is of particular interest to filmmakers is Fox’s continuing support for and success with the Fox International Pictures division, which was the first U.S. studio venture to commit to consistently invest in Chinese language films.

Founded in 2003, Bona has established itself as one of China’s most important independent distributors. Bona holds a roughly 10 percent share of the Chinese theatrical market this year, as the distributor of such hits as Flying Swords of Dragon Gate, The Great Magician, and A Simple Life, and co-distributor of the family animated film Pleasant Goat and Big Big Wolf: Happy Year of the Dragon Chuang

Image

In my own dealings with Bona I have found them to be among the more professional and capable Chinese players. They are always on the lookout for film projects both for their domestic market and for international co-production, and the News Corp relationship will better position them to transact deals in both arenas. In a joint press release, Bona’s Yu Dong was ebullient:

“We are thrilled to receive this strategic investment from News Corporation,” said Dong Yu, Founder, Chairman and CEO of Bona Film Group Limited. “As one of the leading film distributors in China, we are committed to bringing the best quality Chinese films to broad audiences around the world. News Corporation’s extensive global reach, investment and distribution will help accelerate our strategy to expand our global footprint.”

Speaking for News Corp, Senior VP Jack Gao discussed his company’s rationale for the investment:

“One of Bona’s unique advantages is its vertically-integrated business model, which differentiates the Company from other film distributors in China,” said Dr. Jack Gao, SVP, News Corporation & CEO, News Corporation China Investments. “China’s film market is growing at a rapid pace, positioning the country to be the second largest film market following the United States, and Bona’s market leadership, compelling value proposition and tremendous growth potential make this an attractive opportunity for News Corporation.”

Given the natural strategic benefits that can be had between U.S. and Chinese media players, don’t be surprised to see more such investments and partnerships in the coming months.

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

To Bribe, or Not to Bribe: Is That Really a Question?


by Robert Cain for China Film Biz

April 29, 2012

The SEC doesn’t often make headlines in Hollywood, much less in China, but last week they dropped a bomb that made waves on both sides of the Pacific. Chinese and American film industry circles have been atwitter with talk over the SEC’s announcement that it is investigating all six of the major U.S. studios for possible violations of the Foreign Corrupt Practices Act (FCPA) with respect to their activities in China.

Although the SEC and the studios have all been very tight-lipped about details so far, the common presumption is that someone may have paid bribes to Chinese officials in order to obtain favorable business treatment.

If any such dirty dealings did take place—and I’m not saying they did, but it’s highly unlikely that the SEC is just fishing here—they would have most likely involved bribes or kickbacks to Chinese officials from an American company (or companies) in exchange for film import quota slots. Because China severely limits its number of Hollywood film imports, and because Hollywood films are doing bang-up business there—major Hollywood releases are now routinely cracking the $50 million mark at the Chinese box office—each quota slot represents a big, valuable chunk of business. It’s not hard to imagine six- or seven-figure “gifts” going to Chinese film officials for quota slot allocations.

The SEC’s announcement could hardly have come at a worse time for China’s Communist Party. Already beset with the radioactive political and PR fallout of the sordid Bo Xilai scandal (which includes, by the way, allegations of massive government corruption and bribe-taking), the Party is likely to stonewall the SEC and probably deny, in its usual ham-fisted fashion, that any wrongdoing ever occurs in the People’s Republic of China. That the SEC chose to spring its very public press release during the middle of the Beijing Film Festival, China’s big annual showcase for its film industry, merely added salt to an already festering wound.

The controversy has cast light on an oft-considered challenge for U.S. companies doing business in emerging economies: How to compete without paying bribes in countries where bribery and corruption are de rigeur. Where, in fact, not paying bribes can be tantamount to not getting anything done at all. Is it really wrong—leaving aside the strictly legal issues—to pay bribes when bribery is an established, even expected, aspect of doing business?

Having lived and worked extensively in China, Russia, Mexico and the Middle East, all places where bribery is very much a part of the fabric of daily life, I have often been forced to confront these questions. Personally I find the abuse of public office for personal gain detestable, but I’ve often found my moral indignation to be quaintly irrelevant in the face of brutish demands for cash to win favor or resolve problems. And while I have never paid a bribe in 25 years of doing business in China, I can’t really claim that my hands are entirely clean.

For instance, In Moscow I once loaned my driver the equivalent of $120 in rubles to pay a traffic cop to write up a truthful police report so that she wouldn’t be blamed for an accident in which a cement truck had plowed into the side of her car. In a business emergency in Kiev I paid the stationmaster a 150 percent ticket premium to secure a berth on a “sold out” train when I knew full well that the train was nearly half empty. The situation was all too clear: no bribe, no ticket. And in a truly frightening incident in Moscow I paid three armed cops $150 to persuade them not to gang rape my assistant in the back of their police van.

In China I’ve always been able to read potential bribery situations as they develop and extricate myself before I’m confronted with such problems. In southern China back in the late 1980s when I was asked to give “tea money” or to “take tea” I knew that was a coded request for a bribe. Upon hearing such proposals I would tell the would-be bribe receiver to take a hike. Needless to say, I didn’t always get what I wanted.

The penalties for violating the FCPA are stiff, at least on paper: fines of up to $5 million and up to 20 years in prison. But in practice, in the 35 years since President Jimmy Carter signed the FCPA into law, the SEC has yet to actually send any FCPA lawbreakers to jail.  Hollywood studio executives who might currently be under investigation needn’t worry much about personal repercussions; the SEC tends to prosecute and fine corporations, without ever naming the individuals who committed the crimes.

Given the risks and rewards, the decision matrix for an American corporate executive in China would seem to dictate paying bribes. The personal upside, in the form of enhanced business opportunities and bonuses, appears to far outweigh the personal downside of one’s company receiving a fine. Given this mix of motivations and disincentives, it’s likely that at least a few Hollywood executives have taken the risk and engaged in proscribed activities to benefit their businesses in China.

Still, at the risk of appearing naive or idealistic, I would urge anyone considering taking such actions to reconsider. For one thing, the SEC could well take a harder line on FCPA violations in the future. And engaging in bribery can be a slippery slope leading to unanticipated consequences. This kind of activity tends not to remain secret for long–after all, there must have been a whistleblower who brought the SEC’s attention down on the studios.

Although not always as expeditious as cold, hard cash, I’ve found that polite persistence, resourcefulness, and even stubbornness, can be effective ways of cutting through what might otherwise turn into bribery scenarios  in China. Very often if one person is an obstacle, it may be possible to find another who will be more honest and honorable in their dealings. And sometimes the deal just might not be worth the trouble. Letting people know that you won’t negotiate with financial bullies can often be all that’s needed to keep your business dealings in China aboveboard.

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.

Lionsgate to Receive Chinese Co-Financing on 10 Films– Or Maybe Not


By Robert Cain for China Film Biz

February 23, 2012 from Tokyo, Japan

(Note: In order to protect the interests of a business partner I have modified this article to remove all references to the name of an investor and his fund.)

I have word directly from a Chinese investor that his fund struck a deal on Wednesday morning with Lionsgate to co-produce a slate of 10 films over the next three years. The fund says it will invest 50 percent of the total production costs in a ‘portfolio’ of Lionsgate movies, primarily in the action genre, with a wide range of budgets.

The investor, who wishes to maintain anonymity for himself and for his fund, told me the news in person in a meeting on Wednesday afternoon in Beijing.

He also told me that his fund will invest in a low-budget movie to be directed by Michael Bay, for which the director and crew will be paid not in cash but in equity participation in the project. And he said he’s planning to invest in the Avatar sequel together with China Film Group and Fox.

However, Lionsgate has yet to confirm the news of their supposed deal, and I am inclined to take the investor’s pronouncements with a grain of salt.

As we’ve seen in recent weeks and months, numerous claims and pronouncements have been made by Chinese investors regarding their intended partnerships with American film producers. And although I’m glad to know of their interest in Hollywood, I must caution readers that many of these purported deals will fall well short of expectations.

Exaggeration and mis-represenation are not uncommon in Hollywood and elsewhere, but they are unfortunately endemic in China. With so much naïve exuberance in the U.S. about potential fresh sources of capital from China, and with so many Chinese individuals and institutions flush with cash and opportunity, there are high hopes on both sides. With few long-term relationships or experienced guides to shepherd deals, many hopeful fundraisers in Hollywood will be burned with false promises, and many eager investors in China will be bilked of their renminbi.

As a producer, fundraiser and consultant who has for many years been in the middle of the U.S.-China film trade, I believe it is important to root out dishonesty and inefficiency wherever it occurs. The main reason that I started writing China Film Biz was to bring a clear and sober perspective to the cross-Pacific dialogue and to help others benefit from the mistakes I’ve made. I see it as very much in everyone’s interest to help elevate the level of integrity and accountability in U.S.-China entertainment dealings.

It is in this very spirit that my friends at TransAsia Lawyers, a prominent entertainment and media law firm based in Beijing, have launched ChinaGoAbroad, a web-based information and transaction platform dedicated to bringing new standards of transparency to inbound and outbound investments in and from China. They do so with the full blessing of SARFT, China’s state administration that oversees all media investments.

ChinaGoAbroad’s mission is to serve as a resource and matchmaker to facilitate business and to help honest dealmakers find one another. In this age of instant communications, of internet blogs, of Twitter and Sina Weibo, the posers and charlatans had better watch 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.