‘Oz’ Blahs, or Why China is NOT Going to Save Hollywood (But Might Buy It)


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By Robert Cain for China Film Biz

March 31, 2013

Oz the Great and Powerful debuted to a distressingly low $9 million in China this weekend, becoming the tenth straight U.S.-made film this year to falter in PRC theaters. Every major studio has now had at least one disappointing release in China in the past three months, and none has had a breakout success.

The huge box office bonanza that Hollywood movies enjoyed a year ago in China is now looking more and more like a cruel head fake.  For 23 straight weeks in 2012 Hollywood films reigned at the top of China’s box office. But their longest streak this year is 2 weeks on top, and they’ve placed first in only 3 of the past 16 weeks.

Meanwhile, Chinese language films are hot. Scorching hot. In those same 16 weeks two Chinese films have broken $200 million at the box office, another went over $135 million, and a fourth—the low-budget Finding Mr. Right—will soon become the highest grossing Chinese romantic comedy of all time.

I’ve written many times in this space that Hollywood’s movies will eventually be marginalized in China. I thought this would take at least several more years, but it’s happening before our eyes.  In the first quarter of 2013, U.S. films’ cumulative grosses in China are down by 22 percent, while Chinese language films are up by 128 percent. China’s tastes have shifted decisively toward local product, with the result that American films are now performing at about the same level they did back in 2010, when China’s market was half the size that it is now.Chinese B.O. 1Q12 v 1Q13

This turn of events comes at an unfortunate time for Hollywood. With box office revenue down by 13 percent in North America, the studios have been looking to China to help fill the gap.  But that’s not going to happen, at least not with any consistency. Sure, the next Avatar or Transformers or Iron Man movie will do fine in China. But the days of $50 million grosses for movies like Battleship and John Carter are fading. Oz won’t likely get past $35 million, and Jack the Giant Slayer will be lucky to break $15 million. Chinese audiences would rather spend their money to see local stories with Chinese faces.

With North America flat at best, and limited prospects in the industry’s biggest international growth territory, one wonders how much patience the major media conglomerates have left for their film divisions. According to a recent Economist article, pre-tax profits at Hollywood movie studios fell by around 40% over the past five years, and they now account for less than 10% of their parent companies’ profits. According to Benjamin Swinburne of Morgan Stanley, by 2020 the studios will contribute just 5% of the media conglomerates’ profits. The day will soon come when at least one of these conglomerates decides to unload its studio operations.

And who better to buy that studio than a Chinese distributor? China will soon be the world’s biggest movie territory, with a more profitable business model than Hollywood’s. And it has major international ambitions, but completely lacks the ability to serve the global market. The right strategy for a globally minded Chinese movie mogul will be to acquire a major U.S. studio at a bargain basement price. The only thing they need now is a willing seller.

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.

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Superhero Movies’ Powers Are Strong—But Not Yet Super—in China


by Robert Cain for China Film Biz

May 9, 2012

China joined the rest of the world last weekend in the Avengers phenomenon, pouring $19 million into the ocean of cash that the film has collected around the world.  That’s a big opening weekend for the movie, third only behind its premier weekends in the U.S. ($200 million) and the U.K. ($25.4 million). In its first two days Avengers’ China run exceeded the entire runs of prior Marvel superhero movies Thor and Captain America, which each earned a total of $14 million in China.

As I pointed out back in December, Thor and Captain America under-indexed in China because the country has no tradition of superhero stories, and apparently not as much interest in these types of films as there is in other markets. “Green Hornet” fared better with $21 million, mainly because it featured a popular Chinese actor, Jay Chou, as the co-star.

So does the Avengers opening signal the start of a new era for superhero movies in China? Should the team at Marvel be popping champagne corks and swinging from the rafters (or whatever superhero movie execs do) to celebrate their ascendance to China’s box office throne?

Not yet. Not hardly.

While a $19 million opening is very good for China, it’s not super-sized; two other Hollywood films—Titanic 3D and Mission Impossible 4—have opened to bigger numbers so far this year.

And compared to its spectacular reception in the rest of the world, Avengers’ start in China can only be termed as “very good,” but not “great.”

In fact, when measured on a relative indexing basis against those other movies, Avengers will likely wind up as an under-performer in China.

Let’s take a look at the numbers. Last year, American films overall earned 5 percent of their total global box office revenue in China. Marvel’s superhero movies under-indexed there, with Captain America earning 3.8 percent of its global box office figure in China, and Thor earning 3.2 percent. Green Hornet was the only superhero movie to over-index, with 9.2 percent of its global take coming from Chinese ticket sales.

It appears a safe bet that Avengers will wind up with at least $50 million in box office receipts in China, which would qualify it as a hit movie there. But as we saw in a recent ChinaFilmBiz analysis, this year Hollywood movies have been earning more than 10 percent of their global revenue in China. Assuming Avengers goes over $1.5 billion globally, and that it takes in $50 or $60 million in China, its China share of the worldwide total would barely exceed 3 percent, a rather disappointing performance.

Were Avengers to index at the average level achieved by other films Hollywood in China this year, it would sell $150 million or more in tickets in China. That’s not going to happen.

But Marvel clearly has China on its mind, with its plans to co-produce Iron Man 3 together with Chinese production company DMG. No doubt they’ll cast a  Chinese lead or two, perhaps even Jay Chou. Others looking to capitalize in China on the superhero genre would do well to consider doing the same, or perhaps even creating new Chinese superhero characters with global appeal.

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.