Now China’s Exporting Hockey Players?


Now China’s Exporting Hockey Players?

Last week the National Hockey League’s New York Islanders made history by drafting the league’s first ever China-born player.

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SARFT Report Confirms It: China Box Office to Exceed $2 Billion in 2011


By Robert Cain for China Film Biz

December 16, 2011

SARFT Chairman Cai Fuchao picked an auspicious day, December 15, to announce the latest statistics for China’s cinema business. While two just-opened films featuring Christian Bale (Flowers of War) and Jet Li (Flying Swords of Dragon Gate) battled for moviegoers’ attention and drew huge crowds at the theaters, Cai dropped the news that box office revenue in China this year has already exceeded 12 billion RMB, or US $1.86 billion at 2011’s average exchange rate. Cai also noted that the country’s cinema screen count has crossed the 9,000 mark, a 45 percent increase over the 6,200 screens operating at year end 2010.

That 12 billion figure was for the week ending December 11, which means that there are still 3 more weeks in the year for China to extend its record breaking revenue surge. With last night’s screenings of Flowers of War and Flying Swords reportedly running at better than 90 percent of capacity and with ticket prices high$12.50 for Flowers and nearly $19 for the 3D Flying Swords—these two films alone will likely push China past $2 billion for the year.   

For those of us who closely track China’s film business, Cai’s announcement was like water in the desert, as SARFT only announces these figures a few times a year. Both the box office and screen count numbers were positive surprises for me. It now appears certain that box office growth will hit or exceed the 30 percent rate I had predicted. New screens have been opening at a rate of 8 per day, and the current screen count has surpassed my year-end estimate of 8,900.

Total revenue has expanded by a staggering 110 percent in just two years, and is up more than six-fold in the past 5 years. When compared with North America’s sluggish growth of less than 2 percent per year (actually, negative growth on an inflation adjusted basis), it’s mystifying that Hollywood’s major studios haven’t deployed teams of their best people to tackle the opportunities there.  Most are largely sitting on the sidelines, tossing a picture or two a year into Chinese theaters, and mainly just watching the China juggernaut pass them by.

For 2011, China’s box office growth has once again nearly quadrupled the country’s overall GDP growth rate, at least the 8th year in a row that it has done so. And contrary to those who think the industry is due for a downturn, I believe China’s film business is still in its infancy.  It will most likely pass Japan in 2012 to become the world’s biggest territory outside North America; give it 7 or 8 more years and China will pass North America. The reasons for this continuing surge have to do with income growth, improving availability and quality of films, and especially rising screen count. Cinemas will continue to be built because there is a huge shortage of them: China has dozens of cities with populations larger than Boston or Washington that still lack a single multiplex.

There exists a fairly predictable straight-line correlation between the number of cinema screens in a country and total box office revenue. If you build it, they will come, so long as you aren’t over-built. Even with its spectacular 10-year long cinema expansion, China is still the world’s most under-screened major market. Given the country’s projected GDP and per capita income growth, it can build another 50,000 screens and still not be anywhere near over-built. With upside like that, fortunes are just waiting to be made.

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 Box Office: The Calm Before the Storm?


By Robert Cain for China Film Biz

December 14, 2011

For the week ending December 11th, White Vengeance held the top spot for the second week in a row in a disappointingly sluggish frame at the Chinese box office. While Vengeance grossed a respectable $8.3 million for the week to up its cume to $21.4 million, the 5 new openers combined mustered an aggregated gross of only $5 million between them.

Tops among the new entrants was South Korea’s monster flick Sector 7, which picked up $2.5 million, good enough for second place and also making it the highest grossing Korean film in China this year. Far behind among the new releases was India’s Bollywood smash hit from 2009, the Aamir Khan starrer 3 Idiots, which despite amassing a $55 million total in India, managed a scant $1.2 million from Chinese theaters.

Priest and The Adventures of Tintin held onto the 3rd and 4th slots, respectively, raising their cumes to $5.3 million for Priest and $20.4 million for Tintin. Distributor DMG has done a respectable job in handling Priest; despite the conventional wisdom that horror doesn’t click in China—not to mention the fact that vampire movies are technically prohibited under SARFT rules—the picture has significantly over-indexed in its PRC release, earning an estimated 8 percent of its worldwide gross there.

White Vengeance became the 34th film of the year to join the 100mm RMB/$15mm club, double last year’s total of 17. Of those 34 films 17 are from Hollywood, 9 are from China, and 8 are China-Hong Kong co-productions.

Breakaway rom-com hit Love is Not Blind winds down its run with nearly $56 million, making it the second highest grossing Chinese language film this year behind Beginning of the Great Revival.

All told the week was one of the slowest of the year, with total receipts of $23.4 million, a 21 percent dip from the same week in 2010.  Many are hoping that the year-end box office will kick into high gear next week when the $35 million budgeted Tsui Hark/Jet Li wuxia action romp Flying Swords of Dragon Gate opens against the  Zhang Yimou/Christian Bale $90+ millon historical epic Flowers of War.  Both pictures represent big gambles for their backers, as each will need to make record or near record box office numbers in order to recoup its investment.

Indeed, with questionable prospects outside of China due to its dark subject matter and contrived, melodramatic plotting, Flowers of War will need to gross well over $200 million in China to pay back its reported $91 million investment. That would be double the existing record for a domestic release of a Chinese language film (Let the Bullets Fly at $111 million). Although director Zhang Yimou is a huge draw in China, and star Christian Bale is well known there, it’s unlikely that this film has the commercial juice to pull in the Avatar sized numbers it needs.

Flying Swords of Dragon Gate seems the likelier of the two films to achieve commercial success. The Tsui Hark/Jet Li pairing represents a potent box office combo with a long pedigree of success. The Once Upon a Time in China films they made together are well-loved around the world and propelled both of their careers as masters of the action genre. And it should also help that Flying Swords is a remake of the beloved classic 1966 King Hu film Dragon Gate Inn, one of my personal all-time favorites.

Still, as Chinese audiences have proven, nothing is certain and anything is possible. Both films should perform well, and it won’t be much of a surprise if this turns out to be the biggest week at the box office 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 rob@pacificbridgepics.com and at www.pacificbridgepics.com.

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 boxofficemojo.com and IMDB.com, 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 rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China’s Box Office: The Power of ‘Love’


By Robert Cain                                                                        November 23, 2011

Love is Not Blind has throttled its Hollywood competition for the second week in a row with a $14.8 million box office take last week, more than enough to hold off the unimpressive $9.2 million debut of Steven Spielberg’s The Adventures of Tintin. In just 13 days of release the indie hit Love has become the highest grossing romantic comedy in Chinese history, and the fourth biggest film overall at the box office in 2011.

Love declined 48 percent in its second outing, a strong hold considering that two new high profile films opened against it, and three other Hollywood blockbusters are still occupying Chinese movie screens.

Despite Tintin’s inauspicious release—it didn’t even crack the top 20 among opening weekends for films in China this year—overall box office was up by more than 50 percent over the same period in 2010, when the Chinese ancient costume comedy Just Call Me Nobody opened to $9 million. Just Call Me Nobody finished its run with over $24 million last December; it remains to be seen whether Tintin can reach even that moderate level of success.

Among other films in release, Rise of the Planet of the Apes added another $1.6 million for the week, boosting it into the ranks of the $30 million box office club, the 15th film of 2011 to reach this level. Only 10 films surpassed this mark in all of 2010—half of them Chinese and half imported from Hollywood—and only 5 films did so in 2009. Even more impressive, 31 films have now grossed at least $15 million this year, against only 17 for all of 2010 and 8 in 2009.  As the Chinese market matures it is clearly broadening both in the numbers of films that are making solid profits, and in the range of genres that are working.

One genre that appears on the surface to be working but which looks shaky under closer scrutiny is animation. The Chinese government has made domestic animation production a huge priority, investing heavily in facilities and equipment, but Tintin’s lackluster debut raises doubts about the wisdom of this investment initiative.  Of the 17 animated feature releases this year only three—Kung Fu Panda ($92mm), Smurfs ($40mm), and the Chinese-made Pleasant Goat and Big Big Wolf ($22mm)—can be deemed successes. Most foreign animated films have under-indexed in China relative to their success in the U.S. and international markets, and most home-grown animated films have been dismal failures.

Even animated films that perform well elsewhere often under-perform in China. Cars 2 earned only 2 percent of its global box office take in China, versus an average of 5-6 percent for other foreign filns, and Rio likewise disappointed. The problem may be over-supply. Because animation is one of only a few genres considered a safe bet to pass through China’s strict censorship process, producers and capital tend to gravitate to these projects, even when the scripts and artistic talent are lacking.

To be sure, there are some capable animation shops in China, but they may find it tough going in the years ahead as an increasing number of poorly made or poorly targeted films flood the market. The government should balance its enthusiastic investment in animation equipment and facilities with an equal level of funding for artistic training and  story-telling skill development.

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.

In China, ‘Love’ Conquers All


By Robert Cain                                                                                                    November 16, 2011

The one thing that can be said with certainty about China’s filmgoers is this: “Nothing can be said with certainty about China’s filmgoers.”

Until last week it seemed certain that romantic comedy would remain a marginal genre, far behind action and science fiction in mass audience appeal. And it was growing increasingly obvious that audience interest in locally produced films had gone cold, with the last Chinese-made breakout hit, Let The Bullets Fly, having been released nearly a year ago.

And then came ‘Love.’ The surprise hit of 2011 is unquestionably Love is Not Blind (失戀33天 ), a modestly budgeted, locally made romantic comedy that has caught fire with Chinese audiences, grossing $28 million in its opening week and crushing the competition from Hollywood, which included newcomers Real Steel and Immortals and holdover Rise of the Planet of the Apes.

Given its strong word of mouth and the ongoing dearth of films targeted at female moviegoers, Love is Not Blind will undoubtedly surpass Beginning of the Great Revival as the top-grossing Chinese made film this year, and could possibly join Let The Bullets Fly and Aftershock as only the third Chinese film to reach the rarefied $100 million box office mark.

Adapted from a lonely-heart blog turned popular online novel by Bao Jingjing, Love is Not Blind has been characterized by reviewers as a “Chinese Bridget Jones’s Diary.” Although it reportedly rolled out on fewer screens than were allocated to Real Steel and Immortals, Love resonated perfectly as a date movie for China’s Singles Day (11-11-11), and single-handedly out-grossed the ticket revenues of those two  American films plus Rise of the Planet of the Apes combined, and by a wide margin at that.

The new Chinese film’s success raises the bar for romantic comedy in China, and should open film marketers’ minds to the possibility that audiences are open to genres other than just action, sci-fi and animation.  The film also solidifies male lead Zhang Wen’s (The Sorcerer and The White Snake ) status as a box office draw, while also raising the profiles of female lead He Baibai and director Teng Huatao, both of whom were previously known mainly for their work in TV serials.

Disney should be disappointed with the modest showing of its Real Steel, but the true loser here is Relativity Media, whose Immortals continued the mini-major’s string of box office duds in China.

The next test for Love is Not Blind comes this week as it faces off against Steven Spielberg’s The Adventures of Tintin, which cost at least 40-50 times as much to produce.  Even last week Tintin seemed a certain lock to win this week’s box office crown. But given the newfound passion of Chinese moviegoers, what seemed certain just yesterday looks improbable today, and odds are that Love is Not Blind will topple Tintin to retain its number one status in China.

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

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 rob@pacificbridgepics.com.

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 rob@pacificbridgepics.com.

China’s Movie Streaming Sites Are Going Legit


By Robert Cain

Slowly, steadily, China’s movie streaming sites are going legit. Small dollars/yuan now, but the potential business opportunity is exciting for filmmakers everywhere.

Youku, Tudou, and M1905, among other Chinese content sites, have begun paying for the right to stream movies to their users. It’s an encouraging trend that could signal the beginnings of a shift away from video piracy in China.

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

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