Despite a Slowing National Economy, China’s Movie Business is Growing Faster Than Ever
China’s Movie Industry is Growing Faster Than Any Other Country’s Anywhere, Any Time, Ever
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7 Ways to Tell Whether You Have an Effective China Strategy
by Robert Cain for China Film Biz
May 7, 2012
If you’re looking to engage in China’s booming film business and you don’t have a clear, action-oriented strategy, then you’re not maximizing your chances for success and you may even be wasting your time there. Although China is now the world’s second biggest and fastest growing box office territory, it presents unique business challenges that even the most experienced entertainment industry players won’t have encountered anywhere else. Many of the pitfalls of doing business in China can be avoided through proper planning. Ask yourself the following questions to determine whether you have a winning China strategy:
1. Are you clear on your outcomes? You must be clear about your goals if you want to achieve them. Is your aim to make co-productions with global crossover potential? Mandarin language box office hits? Or are you mainly aiming for a share of China’s burgeoning VOD business? Each of these goals requires a customized approach, specifically tailored tactics and the right local partners and government contacts to enable success. Make sure your goals are realistic and achievable, and put yourself on a timetable for achieving them. Be as specific as possible. In order to choose the correct strategic roadmap you first have to know where you’re going.
2. Are you working with the right local people? There’s no question that local partners are essential to reaching your goals in China. But it can be extremely difficult to find the right people, those who will act as reliable, trustworthy partners and who can get things done. Lacking information and reliable methods for vetting Chinese collaborators, foreigners often rely at their peril on fancy government titles or inflated claims of connections to key decision-makers, only to wind up sorely disappointed or even cheated. If you don’t have the requisite knowledge and contacts to evaluate your prospective partners and to choose the right ones, then consult with experts who do.
3. Is your content appropriate for the Chinese market? I receive dozens of scripts and pitches every week that producers think appropriate for China, but I turn away 95 percent of them because they don’t pass the following simple tests:
- Is the content censorship friendly? It never ceases to amaze me, but the majority of the scripts I receive involve gang violence, corrupt officials, graphic sex, and countless other elements that are taboo under Chinese censorship strictures. Know the rules before you invest your time in a project that has no chance of obtaining SARFT approval.
- Is the story commercially viable for Chinese audiences? Your buddy comedy or political thriller may be perfect for English-speaking audiences, but its humor, language, foreign context or cultural references will likely bewilder Chinese moviegoers. Pay attention to what’s working commercially in China. Just because a story has Chinese characters doesn’t mean it has Chinese audience appeal. Teens and twenty-something ticket buyers in China are just as likely to avoid Ming dynasty costume dramas or tired kung fu action remakes as are their American and European counterparts.
A small investment of time and effort in understanding China’s rules and its movie-going audience will not only help you to avoid wasting time on inappropriate projects, but could also guide you to those projects that are primed for commercial success.
4. Are you taking appropriate action? China’s entertainment industry presents a perfect trifecta of opportunity: a huge potential market that has only begun to be tapped; growth that is unprecedented in the history of the movie business; and local competitors who have limited experience—especially in the global marketplace—and who know they need outside help to reach their potential. If you’re not making China a major priority then you’re probably squandering the opportunity of a lifetime. If you’re an executive of a big company who’s visiting China once a quarter or so and you have an executive or two on the ground, then you’re merely dabbling. Before you know it China will be the world’s largest movie market, and if you’re not thinking and acting on that reality every single day then you’re not doing enough.
5. Are you focused on delivering value? If your China plan only involves receiving but not giving back, then you have a short-term strategy, not a long-term one. Guanxi, or relationships, are the essence of business success in China, and guanxi involve give and take. What’s your plan for fulfilling the needs of distributors? Of ticket buyers? How do you intend to benefit your business partners? Are your interests aligned? Does your plan allow them to profit together with you? What else can you offer, to your partners, your customers, and to China itself? Consider supporting projects that meet the Chinese government’s ‘soft power’ ambitions, that present a positive image of China to the world. If you come to China with giving on your mind and in your actions, you should have no trouble with the receiving part.
6. Do you have adequate information? China is not only growing fast, it’s changing fast too. A critical component of success there is the ability to adapt, to revise your strategy and tactics in step with changes in the business environment as they occur. If you don’t have constant, timely, reliable information about box office trends, technological advances, personnel changes, shifts in government policy and the like, then you’re at a dangerous competitive disadvantage. Be prepared with the necessary insight to assess information and understand trends. Make sure you are properly positioned to stay on top of each wave of change, to benefit from rather than get swamped by every shift in the currents.
7. Do you have the right team? Given China’s extraordinary growth prospects, and thus its critical importance, you need to put your “A” team on the China beat. Make sure you have the right people in your lineup. Chances are you don’t currently have them. From your employees to your legal and business representatives, what you want is people who have been effective in cross-Pacific business, who have worked in China and in your home country. Take generalists over specialists, people who understand story, production, and the business side of entertainment. People who have strong networks among key industry players in China and also around the world. People who can hit the ground running in China. It’s a country and culture that can take many years to understand, and you can save precious time by employing staff who already know the territory and business environment. Success in China will come from being “Chinese” in your behavior, not from acting like an outsider trying to come in and make a killing.
My company, Pacific Bridge Pictures, is here to help you in crafting and executing your China strategy and projects. Our partners have more than 40 years of experience in developing, financing, producing and distributing motion pictures and television programs, in China, the U.S., and around the world. We have built successful companies, and we have worked for or consulted to most of Hollywood’s major studios, for many independent producers, and with such leading Chinese media players as China Film Group, Shanghai Media Group, and CCTV. I began my career working for and learning under Harvard Business School strategy guru Michael Porter, and have applied that knowledge to lead more than 100 entertainment companies through the process of defining their strategies and achieving their goals.
For more information about Pacific Bridge’s strategic advisory and production services for China, please contact rob@pacificbridgepics.com.
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.
Huh? You Say That China Has Loosened Its Film Import Quota?
By Robert Cain for China Film Biz
February 19, 2012 from Shanghai, China
I would have liked to put the headline for this story in giant, screaming, 48-point font. To be the first to inform you of ground-breaking news.
I would have liked to present you with the scoop that China has increased its movie import quota from the previous 20 films to the new level of 34 each year, and that it has raised the revenue share it will remit to foreign producers from 13-17 percent of box office takings to a more generous 25 percent in future.
But you already knew all that.
Here in Beijing, there’s been scant mention of any of this in the media. The government has been keeping a tight lid on a story that it apparently prefers to keep quiet in the PRC. In a day full of meetings on Saturday with film distributors, producers, and even the powerful head of China Film Group’s production division, not one person I spoke with was even remotely aware of the news. I only found out about it because a handful of friends back home in the USA were kind enough to email me stories from Variety, the Los Angeles Times, and other publications.
In fact, the front page headlines in Sunday’s China Daily (and all the pages that followed) have nothing to do with movies. Instead, the lead story reports—somewhat ironically—about Vice President Xi’s insistence that Washington loosen up its own trade restrictions that limit exports of American technology to China. China badly wants to access American innovations in such areas as civil aviation, integrated circuits, machine tools and other products. American movies and TV, not so much.
In fact the timing of the film quota announcement was rather awkward for the Chinese Communist Party, given that it came on the heels of a week of tough talk in Beijing about eliminating foreign TV programs from Chinese prime time broadcasts, and a general mood of xenophobic aversion to western cultural imports. The silence here about the shift in film import policy is deafening.
The policy shift was not exactly what Hollywood and the MPAA were asking for, but it is nevertheless big news, and I expect my producer and distributor friends back home are in a jubilant mood today. As Vice President Biden put it, “The agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast growing Chinese audience, supporting thousands of American jobs in and around the film industry.”
Specifically, the new agreement will allow, in addition to the previously authorized 20 foreign films per year, another 14 “enhanced” films, such as those made in 3D or IMAX formats. This last point is interesting, as it allows the Chinese government a bit of face-saving. The loosening of the quota might appear to folks in the PRC as capitulation by Beijing to US pressure, but the “enhanced” film requirement allows the Chinese to characterize the agreement as a ‘technological advance.’
After some investigation with studio and government connections in Beijing I’ve learned that there are important additional elements to the agreement which would smooth the process for mounting China-US co-productions, and also make it easier for US companies to set up joint ventures in China. But there are undoubtedly countless details to sort out before the new agreement can be implemented, and China could well drag its feet in putting the new policies in place. None of the U.S. press articles I saw mentioned any implementation timetable.
Of course, if you’re an attentive reader of this blog you know that film-related announcements from China are often overblown, exaggerative, and sometimes just plain false. Everyone got it wrong—myself included—in speculating that Jeffrey Katzenberg had arranged for Vice President Xi Jinping to announce a $2 billion joint venture between Shanghai Media, China Media Capital and Dreamworks Animation. Instead Jeffrey made the announcement himself regarding a far more modest $330 million deal.
Even former MPAA chief Jack Valenti got egg on his face back in 1994 when he proclaimed that he had negotiated a contract to lift all Chinese quotas and completely open up the Chinese entertainment market to Hollywood content. He later learned to his disappointment that he had negotiated the deal with a CCP apparatchik who lacked any decision-making authority.
If and when the new quota rules do get implemented, the biggest winners won’t be American studios, independents, or filmmakers. The biggest winners will be China Film Group and the PRC’s theater operators. With 14 additional Hollywood films to release each year, they’ll collectively rake in some $600 million or $700 million in incremental box office during the first year alone, with much more in subsequent years. 75 percent of that amount will stay in their pockets, making them the real beneficiaries of China’s ‘conciliatory’ moves.
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.
chinafilmbiz 中国电影业务 