Chinese Audiences Embrace Non-Studio Hollywood Movies

By Robert Cain for China Film Biz

August 11, 2012

China’s on-again, off again love affair with Hollywood movies heated up last week, abruptly ending a summer fling with Chinese filmmakers, at least for the moment. After a month’s vacation from late June to late July when American films were embargoed from China’s multiplexes, Hollywood movies have roared back to reclaim the lion’s share of the box office, with 82 percent of last week’s total ticket revenue.

Even though SARFT has only partially, temporarily opened the door to US imports, allowing two animated features and two non-studio pictures into domestic theaters in the past few weeks, there’s been enough pent-up demand to propel three of those films—Fox’s Ice Age 4, the Simon West/Jason Statham crime thriller The Mechanic, and Lionsgate’s John Singleton action-mystery Abduction—to the top 3 ranks of the box office chart for the week ending August 5th.

The Mechanic and Abduction were only modest performers stateside, earning $29.1 million and $28.1 million during their North American runs in 2011.  But the Chinese audience is clearly hungry for new Hollywood fare, and in the absence of new live action American studio films, PRC moviegoers showered the two non-studio pictures with solid, if not spectacular, welcoming parties. At nearly $8 million, The Mechanic enjoyed the second best non-studio foreign film opening of the year so far, behind the $10 million June bow of Lionsgate’s The Hunger Games.

Ice Age 4 reached a key milestone by becoming the second highest grossing animated film ever in China, with almost $45 million in ticket sales in its first 10 days. With little real competition for the family market in coming weeks, Ice Age could challenge Kung Fu Panda 2’s Chinese box office record of $92 million.

This week the door will close again to Hollywood, although two non-Chinese films will debut: the China-US co-pro Shanghai Calling, and Europa Corp’s Guy Pearce starrer Lockout, which earned $14 million in the US and $25 million worldwide earlier this year. Four new Chinese animated features also bow this week and on August 15th another Lionsgate film, The Lincoln Lawyer, will open against a handful of new Chinese releases.

August box office will remain subdued until the 30th, when The Dark Knight Rises is scheduled to open. Whether China Film Group will move The Amazing Spider-Man off that same release date remains to be seen.  But the fickle attitude of China’s film czars toward Hollywood’s studios has become exceedingly obvious, and chatter about co-productions is now on the rise.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at

China’s Leading Movie Production Companies


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 and at

China Film Personality: Han Sanping

by Robert Cain for China Film Biz

March 7, 2012

This week Hollywood welcomes one of the Chinese film industry’s most important and influential players, Han Sanping (韓三平). As Chairman of the Chinese government/business mega-conglomerate China Film Group, Han is responsible for more financing, production, distribution, export and import of films than everyone else in China combined.

Han is visiting Los Angeles this week to meet with executives at several studios (Universal, Sony and Disney have been specifically mentioned in the industry trades) to seek out co-producing partners, and to consider requests for precious import quota slots. A couple of clients of mine are meeting Han this week to ask that he allow their blockbusters to screen in Chinese cineplexes.

There is no real Hollywood equivalent to Han, because he wears so many hats: producer, director, studio executive, government administrator, and mentor. If you took Jack Valenti, Lew Wasserman, and Steven Spielberg and rolled them into one, you’d begin to get an idea of Han’s power and influence in China. He has overseen the production and distribution of hundreds of movies and television series, he manages the Beijing Film Studios, and he has final greenlight authority on all co-productions with foreign partners.

Han is also widely recognized as a kingmaker who has nurtured the careers of such top directors as Chen Kaige, Zhang Yimou and Feng Xiaogang, and of many leading Chinese actors and actresses as well.

The kingmaker’s own career was nurtured and mentored by my new friend Liu Cheng. Han began producing movies nearly 20 years ago, which makes him the equivalent of an OG in China because there are few film veterans who can claim that sort of longevity. He has had a producing role on numerous Chinese blockbusters including Red Cliff (directed by John Woo), The Warlords (Peter Chan), Shaolin (Benny Chan) and Aftershock (Feng Xiaogang), and on such Hollywood films as Mission Impossible III and The Karate Kid. He also directed two of China’s highest grossing films of the past three years, the star-studded, Chinese Communist Party sponsored propaganda films The Founding of a Republic and The Beginning of the Great Revival.

Last year I helped Han to evaluate Hollywood visual effects companies for one of his films, and as a result I gained some access to his inner circle. I’ve heard that his trip this week has yielded at least one major surprise: there has been a marked negative shift in the major studios’ attitudes toward co-production with Chinese partners.

Apparently, in the wake of the Chinese government’s recent announcement regarding its relaxation of film import quotas and its enhancement of revenue sharing, the studios’ appetites have diminished for co-production as a means of boosting their China business. With enough quota slots now for each major studio to average 5 or 6 Chinese releases per year, and with their share of revenue now bumped up to 25 percent of box office gross, the Hollywood giants see little incentive to deal with the hassles of Chinese co-production. An unanticipated consequence of Beijing’s opening up of the Chinese market is that it may encourage less Hollywood cooperation, not more. Most of the studios have had trying experiences in the past with Chinese partners, and any incremental revenue they might theoretically earn by making movies in China isn’t considered sufficient compensation for the risks, creative restrictions, and headaches they would have to bear.

From my vantage point this is a good thing. China still wants access to Hollywood expertise and market clout, and the less the studios want to provide these things the more opportunity there will be for entrepreneurial American and other foreign companies. We may see more Chinese money begin to flow into high profile independent productions.

Han Sanping won’t have to concern himself with these issues for much longer; he’s nearing the mandatory retirement age of 60, and it’s widely anticipated that he will soon be leaving his post. Some speculate that Zhang Qiang, a younger protégée of Han’s, will step into the China Film Group chairman’s seat later this year.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at

Hands In the Cookie Jar: Chinese Box Office Skimming Said to Reach 40 Percent

By Robert Cain for China Film Biz

February 26, 2012

Back in the mid-2000’s when I spent three years in Russia setting up and running movie production companies, I often heard stories about exhibitors skimming revenues from the box office and reporting considerably shrunken figures to distributors. One audacious Moscow theater operator actually told me he’d decided that weekend revenues were his alone to keep, and that he shared only in the weekday receipts.

Having observed numerous similarities in the ethics (or occasional lack thereof) between the Russian and Chinese film industries, I’ve often wondered whether a similar phenomenon exists in China.

So when I traveled to the People’s Republic in mid-February I made a point of visiting several people who are in a position to know, and I asked them. Their unanimous consensus was that extensive exhibitor cheating exists in China, and those who are closest to the source assured me that under-reporting runs as high as 40 percent of total box office takings.

My interviewees included a theater owner/operator, a distributor, several entertainment attorneys, and most significantly, two box office reporting software company executives. Because box office skimming is a crime punishable by severe penalties, these individuals spoke with me with the understanding that they would remain anonymous.

Although I have no access to the underlying data, enough experts independently confirmed the 40 percent figure that I can publish it with some confidence, as outlandish as it may seem. Only the distributor thought this figure was too high—they were convinced that skimming runs no higher than 20 percent—but they admitted to having no real basis for backing up that assertion.

The parties closest to the data, the box office reporting software company executives, claimed to have deep knowledge of cinema sales and operations. They told me they have direct access to actual ticket sales figures and also to the numbers reported to distributors. They said that, although SARFT requires cinemas to install sophisticated point-of-sale reporting systems at all box office locations, there are several ways in which exhibitors can short-change distributors on rental revenues.

One software executive said that his company, which has a significant share of the market, actively helps theater operators to cheat. He builds ‘back-door’ mechanisms into his tracking software that allow monies to be diverted out of the officially reported revenue figures. He said that SARFT officials hate the cheating because it robs them of tax revenues and also, presumably, of the ability to funnel more money into their own accounts.

Another executive told me that online ticket selling, which accounts for a considerable share of movie ticket sales, also offers opportunities for mis-reporting. His company provides a platform for marketing, sales facilitation, tracking and delivery of tickets to end users, so he sees every aspect of the transactions. He said that theater owners offer bundled combos where a moviegoer can buy two tickets, two popcorns, and two drinks for say, 200 renminbi (RMB) (around US $32). The tickets would be worth 120 RMB if purchased separately, but the theater operator allocates 140 RMB in revenue to the popcorn and drinks, leaving just 60 RMB to the value of the tickets, thus cheating the distributor of 50 percent of their rightful revenue.

Sometimes the under-reporting is highly transparent and official. A theater operator told me that China Film Group collected 1.1 billion RMB from ticket sales for Transformers 3. But, as the story goes, when it came time to pay Paramount its share, CFG told the studio that because it had already made more than enough money on the movie, its revenue share would be limited to the first 900 million RMB in receipts. CFG would be keeping all the revenue on the last 200 million, and there was nothing Paramount could do about it.

Apparently China’s film industry officials have a strong sense of fairness about their business. But oddly enough, it only runs one way. I’ve yet to hear a story about a Chinese official saying they’d made too much money on a picture and consequently feeling compelled by a sense of fairness to give some back.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at

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 and at


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 and at

What Types of Films Over-Perform in China?

By Robert Cain for China Film Biz

December 4, 2011

For international distributors whose films underperform in the global market, China can sometimes offer a welcome boost. Even when they fall flat elsewhere, some foreign films perform extremely well with Chinese audiences. And occasionally, big global hits that do well everywhere do even better in China. This phenomenon is what distributors call “over-indexing;” that is, the situation when a film performs significantly better in a given market than its performance in other markets would lead one to predict.

With China now accounting for about 5 percent of global box office receipts—$1.6 billion out of about $32 billion worldwide in 2010—one would expect a “typical” foreign film to take in 5 percent of its theatrical revenue from a China release. And indeed, the median indexing film this year, Lionsgate/Mandate’s The Next Three Days, took in almost exactly 5 percent of its $70 million in global revenue from China (Note: international revenues are difficult to come by; for this report I am relying on public sources such as and, which may in some cases provide information that is inaccurate).

Let’s take a look at the foreign films that over-index in China, and see what patterns emerge.

Sony’s sci-fi-action film Battle Los Angeles has been the highest indexing foreign film in China so far this year, with 15.4 percent of its global revenue coming from Chinese ticket sales.  On top of its $82 million in U.S. receipts, the film took in an additional $133 million overseas, with an impressive $34 million of that total coming from China.

As it happens, Battle Los Angeles is the prototypical China over-indexer. Almost every one of the top 10 over-indexing films in 2011 is either a sci-fi or action film, or in several cases, both.  CG special effects are also a big factor in these films, as is evidenced by the second highest over-indexer, Transformers: Dark of the Moon. Transformers earned a whopping $165 million in China, for 14.5 percent of its global total.

Although it presents an exception to the sci-fi/action rule, it’s fairly obvious why the third highest over-indexer, Kung Fu Panda 2, did disproportionately well in China.  In addition to its strong local cultural appeal, Kung Fu Panda, like Transformers, was a sequel to a franchise that had previously out-performed at Chinese theaters.

These films outperform in China for the same reasons they outperform in other non-English speaking territories: they are long on spectacle and (mostly) short on dialogue and character emphasis; they provide a level of effects and production value that can’t be matched by home-grown films; and they target the prime movie-going demographic of 12-25 year olds.

Of course, many films don’t perform so well. It can be just as instructive to take a look at those movies that under-index in China.

What went wrong with these films? Note that there are no science fiction movies on this list. Cars 2, an animated film, had no built-in following in China, and likewise for Rio and Alpha and Omega. It takes an especially targeted animated film like Kung Fun Panda 2 to draw Chinese audiences, or one with characters and stories that they know well.

Two of the other under-indexers, Thor and Captain America, are superhero pictures. There is no tradition of superhero stories in China, and apparently not as much interest in these types of films as there is in other markets.

As for Red and The Eagle, it may be that the casts or stories didn’t click with audiences, or perhaps that they weren’t marketed well. Both were distrbuted by the extremely busy China Film Group, and perhaps they just fell through the cracks at times when CFG had its hands full with other movies.

One big lesson to take away is this: For a producer with a sci-fi film that is likely to succeed in China, it’s worth considering making it as a co-production, in order to get around the import quota. Co-productions return as much as 40 percent of Chinese box office revenues to their owners, as opposed to just 13-15 percent for quota films. In the case of a film that grosses $100 million or more in China, the extra revenue could make it worth the extra effort of working with Chinese partners. And with the way China’s box office is growing, there are certain to be many more $100 million grossers in the future.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at

American Film Market Recap: Chinese Film Buyers Clean Up

by Robert Cain
November 11, 2011

The Chinese buyer contingent at this week’s just-ended American Film Market was much bigger and busier than in years past, with dramatically higher attendance, purchases, and prices for US and international films.

One major buyer who declined to be named called it a “frenzy,” adding that “Chinese buyers are buying any and all content they can get their hands on.”

Several attendees complained mid-way through the market week that there was nothing left to buy. An acquisitions executive for China Lion Films—a company with which I work closely—mentioned that she attended screenings where the rights were snapped up before the film’s closing credits. China Lion did manage to pick up one film, the Canadian comedy “Starbuck.”

Chinese Attendance at AFM: 2010 vs. 2011

Source: American Film Market

China Film Group (CFG), by far the country’s biggest player in production and distribution, chose to sit out the frenzy, opting instead to use the market as an opportunity to establish relationships.

But many had their checkbooks out throughout the week, only to be outbid or pre-empted again and again.

With competition high, prices for Chinese rights soared at the market, with high 5-figure and 6-figure deals fairly common. These rates are 5 or 10 times higher than what they would have been only a few years ago. Still, prices tend to be somewhat lower for foreign films than for Chinese films, largely because of the value of TV rights, which can go for well over $1 million for popular Chinese language pictures.

Several U.S. distributors, including IM Global and GK Films, are said to have completely sold out their inventory of China rights. IM Global is rumored to have sold its entire 14 film slate to a single Chinese buyer for a package price of $2 million. Another rumor circulating the halls of the Loew’s Hotel was that one Chinese buyer had acquired the rights to 40 films.

Given the limited number of theatrical film distribution slots in China—20 revenue sharing slots and 30 additional flat-fee picture slots—one might reasonably ask what the new rights owners intend to do with all these films.

“With prices rising so fast maybe they’re stockpiling films for their library value,” speculated one major Hollywood studio chairman.

A more cynical view is that many of the buyers in these transactions may have knowingly made contingent commitments that will likely unravel.  Because Chinese purchase contracts routinely include a standard cancellation provision that allows purchasers to void the deal if a film is barred from exhibition by Chinese government censors, buyers enter into agreements knowing they have an easy out. If a film doesn’t receive a coveted quota slot—even if it does pass censorship—the buyers may invoke the cancellation clauses and nix their payment obligations.

Whatever their ultimate motivations, the buyers at this year’s AFM underscored the fact that China needs product, especially American product, to serve the Chinese movie-going audience’s increasingly voracious appetite. With revenue growth far outstripping Chinese producers’ ability to supply commercially viable films, Hollywood is and will continue to be a hugely important partner for China’s movie distributors.

Rob Cain is a film producer and entertainment consultant who has been doing business in China since 1987. He can be contacted at

China’s Box Office: A Very Good Year So Far

by Robert Cain                                                                                                           November 7, 2011

China’s theatrical movie business has continued its decade long boom in 2011, with box office receipts through the end of October running 30 percent higher year-on-year than at the same point in 2010. At $1.6 billion for the year so far, China is surprisingly close behind Japan, and it appears increasingly likely that the People’s Republic will vault ahead next year to become the world’s 2nd largest film territory after the U.S.

According to data from the State Administration of Radio, Film and Television (SARFT), China’s box office has increased by an average rate of nearly 40 percent annually since 2001, a pace more than four times faster than the country’s overall economic growth rate.  Even if growth slows significantly, China will probably pass the U.S. within a decade to become the world’s most important film market.

China vs. U.S. – Historical and Projected Box Office, 2004-2020

Source: SARFT, MPAA, Pacific Bridge Pictures projections

Chinese filmgoers have demonstrated a strong preference for Hollywood films over home-grown ones, with the 35 U.S.-made releases accounting for more than half of all box office receipts. Films from Chinese producers accounted for just 25 percent, and China-foreign co-productions—most of these made with Hong Kong partners—accounted for another 18 percent of revenues. The average U.S. film grossed $22 million, while the average Chinese film grossed just $6 million.

Share of China Box Office receipts by Film’s Country of Origin, Jan-Oct, 2011

Source: SARFT, Pacific Bridge Pictures analysis

The market has broadened considerably this year, with 29 films having reached the 100 million RMB ($15 million) threshold so far, compared to 17 films for all of 2010. Leading the way are Transformers: The Dark Side of the Moon, at $165 million, and Kung Fu Panda 2 at $92 million. The highest grossing Chinese language film is the government-backed historical epic The Beginning of the Great Republic, at $62 million.

As in prior years, action-adventure, sci-fi and animation are the most popular genres in 2011, capturing almost two-thirds of total market share. Romances, comedies, thrillers, historical epics and dramas have been far less successful, with each of these genres drawing only about 5 to 7 percent of the market.

Share of China Box Office receipts by Genre

Source: Pacific Bridge Pictures analysis

Among U.S. suppliers, Paramount is the clear leader in China this year, due mainly to the huge success of Transformers 3. Disney and Sony are neck and neck for 2nd place, with Warner Bros and Universal a bit further behind, and Fox last among the majors with only a 3 percent market share. Despite all the noise it has made about its China adventures, Relativity has generated almost no interest for its films among Chinese moviegoers, with less than 1 percent of the box office.

Although American films are generating huge ticket sales, little of this money actually makes its way back across the Pacific. Under China’s quota system foreign-made films receive only modest flat-fee deals or, at best, about 15 percent of total receipts for those lucky enough to get one of the 20 annual revenue-share slots. So from the roughly $800 million in Chinese box office receipts earned so far in 2011 by Hollywood movies, just $100 million or so will go to their U.S. suppliers, with theater operators and major Chinese distributors China Film Group and Huaxia keeping the rest.

Given China’s massive potential and anemic growth in the U.S. market, it is surprising to note how little Hollywood’s studios have done to position themselves in what will soon be the world’s largest movie territory. None have mounted serious co-production operations, and tiny Hong Kong will likely earn more in China this year than all of Hollywood’s producers combined. A void exists in the market, a shortage of quality films and the expertise to make them. Hollywood can fill that void.

Of course, the Communist party administrators who oversee China’s film industry aren’t exactly eager to see Hollywood further extend its dominance over their cultural industries. Americans who wish to stake a claim in China’s movie gold rush will do well to get in now while it is still early, and to invest in building bridges with government officials, distributors, and others who hold the keys to the middle kingdom’s burgeoning box office riches.

Rob Cain is a film producer and entertainment consultant who has been doing business in China since 1987. Rob can be contacted at