Beijing’s (Bloodless) Boxoffice Battle


By Robert Cain for China Film Biz

December 7, 2011

Here in the West we share a fundamental, almost genetic conviction that our democratic free market approach to business is superior to the East’s planned economy model (for thoughtful counterpoint to this Western notion, see Andy Stern’s excellent Wall Street Journal article from December 1st).

But sometimes having a Big Brother calling the shots can be an advantage. With a single, authoritarian party making major policy decisions, you get to avoid the perils of deadlocked senates, of do-nothing super committees, and even, sometimes, of the wrenching, blood-spattered forces of supply and demand.

And if you’re an enterprising Chinese producer with an axe to grind, having all-powerful government decision makers to settle a score can be a very good thing indeed.

The SARFT hammer of justice

The talk of the industry last week was the David vs. Goliath style battle between producer Zhang Weiping and the entire Chinese theatrical exhibition establishment. Zhang had demanded that theater owners across China raise their minimum ticket price from 35 yuan ($5.50) to 40 yuan ($6.29), and that they lower their after-tax share of ticket sales from 57 percent to 55.

Zhang was looking to protect the nearly $100 million that’s been invested in The Flowers of War, his latest collaboration with his mega-director partner Zhang Yimou. The film, which stars Christian Bale, is the costliest in Chinese history, and is set to open wide next week. Under the existing structure distributors receive only 39 percent of each dollar, or yuan, of ticket sales, and after the distributors’ cut producers get substantially less than that.

As Zhang Weiping put it, “For producers in China, the only way to get a return on investment is through ticket sales. Ancillary products do not sell well. Raising ticket rates could help keep movies from being fast food and junk food.”

An increasingly disproportionate share of revenues has gone to theater owners, who have been steadily increasing their slice of the box office pie, along with the rents they charge to the companies that operate their theaters.

But in swift and stunning fashion last week, China’s State Administration of Radio Film and Television (SARFT) ended the brewing battle by hammering out a decree with far-reaching effects for the industry.  With its jazzily titled document “On Promoting the Coordinated Development of Movie Making, Publishing and Releasing,” SARFT shoved aside free market economics and proclaimed these new rules:

  • “In order to balance the benefits of distribution between production companies, distributors and exhibitors, referring to international conventions, cinemas can get no more than 50% of the box-office revenue in the first run in the future.”
  • “In order to promote the sustainable development of cinema construction, we suggest the annual property rent for cinemas should be less than 15% of the annual box-office revenue.”

The first rule was obviously a major victory for film producers and distributors. As Zhang Weiping rightly pointed out, theatrical revenue is the lifeblood of Chinese producers. The 7 point bump in their share will spell the difference between profit and loss for many Chinese films.

The second rule was aimed squarely at the real estate developers and theater chain owners who lease their cinemas to third-party operators. Rents had been on a steady climb, with rising profitability fueling an exuberant binge of cinema building; China’s total screen count has nearly doubled since 2009 to around 8,900. With this second ruling SARFT’s intent seems to be to tamp down investment and cool off the rate of new construction.

No mention was made of ticket prices, which will presumably be left to the discretion of theater operators.

Theoretically this new set of rules should benefit non-Chinese producers and distributors too, but at this point it’s unclear—and perhaps unlikely—that any of the 7 extra points will be passed along to them.

The long-term effects of these rules remain to be seen, but it seems a safe bet that curtailed theater profits will result in a diminished rate of new theater openings, and that China’s blazing domestic box office growth will slow as well.

Given these dramatic recent developments, now may be a good time for Hollywood to amp up its own campaign for an increased share of the revenues its movies generate in China.  After all, if a single producer can motivate China’s movie czars to make dramatic changes for the better, then certainly the world’s most powerful media companies can do the same.

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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One Market, Two Systems: A Tale of Two Movie Marketing Plans


By Robert Cain                                                                                                     November 22, 2011

In China there are two ways to create a box office blockbuster. One way is to target a large, hungry audience niche, create a crowd-pleasing film, and execute a clever and effective marketing campaign to put butts in seats. The other way is for the Communist Party to decree in advance that a film shall be a hit, clear competing movies out of the theaters, and then corral filmgoers into attending.

China’s first and second highest grossing domestic (i.e., non-Hollywood) films of 2011 have employed these two divergent approaches to tally up ticket sales. And while box office-by-command can certainly succeed, the more effective strategy, even in China, is to deliver a good old fashioned crowd-pleaser. In David vs. Goliath fashion, a little $1.4 million independent romantic comedy without stars or much of a marketing budget is poised to overtake a big budget, massively marketed, star-studded historical epic that had no less a backer than the Chinese government itself.

How did this happen? A look at the marketing tactics behind these two blockbusters can shed some light on how movie distribution works in China.

Beginning of the Great Marketing Blitz                                                        

Back in May of this year, government officials were preparing to commemorate the 90th anniversary of the founding of the Chinese Communist Party (CCP) by readying the launch of their major pet project movie, Beginning of the Great Revival. Revival was a propaganda extravaganza (a “propaganza”?) funded and produced by China’s huge, state-owned studio, China Film Group (CFG).

Directed by CFG’s Chairman Han Sanping, the picture featured no fewer than 172 Chinese movie stars, including such luminaries as Chow Yun-Fat, Andy Lau, Fan Bingbing, Donnie Yen, Daniel Wu, Liu Ye, and mega-director John Woo in a rare acting appearance.  The CCP officials responsible for Revival’s release let it be known that they ‘expected’ it to gross at least 800 million Renminbi, or about US $125 million. This target was more an executive order than a hope or dream.

It should be noted that with such a galaxy of stars, Revival would have likely cost a private film production company something like $100 million to produce. But when the Chinese government asks an actor to perform in a film, he or she is expected to work for little or no compensation. Indeed, according to director Han, the total actors’ payroll amounted to less than the cost of lunch boxes for the crew. Numerous other favors were extracted in mounting the film, so the officially announced budget of 80 million Renminbi ($13 million) understates Revival’s true cost by several orders of magnitude.

But even with all the stars in the Chinese firmament on their side, government officials worried that a looming Hollywood invasion might spoil their party. With the eagerly anticipated Transformers: Dark of the Moon and Harry Potter and the Deathly Hallows Part 2 scheduled to open in Chinese theaters just a few weeks after Revival’s launch, they anticipated that filmgoers would swiftly abandon Revival’s history lessons for the escapism offered by alien robots and the English wizard boy.

So the CCP did something Hollywood studio chiefs can only dream about: they shut out the competition. Completely.

You will watch this film and you will like it                                                

When Beginning of the Great Revival opened on June 15, it had a near monopoly; the CCP saw to it that the film was running on most of China’s 6,200 movies screens. Transformers and Potter were postponed indefinitely. Not a single one of those screens was to be relinquished to the American films until Revival had reached the requisite number of ticket sales.

Problem was, few wanted to see Revival. Official reviews of the film in the state owned media were glowing, of course, but word on the street and on the internet was terrible. Bloggers passionately savaged the film. On VervCD, a file-sharing site, some 90 percent of commenters rated the film as “trash.”

So the CCP responded by doing what it does best. It censored all the negative reviews and mobilized the population. Ticket buying campaigns were organized; huge numbers of tickets were purchased by party organizations and state-owned companies. In Changchun alone, a city of about 7 million in Manchuria, the municipal government purchased 100,000 tickets for party members to see the film.

And at least some of those tickets were actually used by theater goers to see the propaganda picture. But savvy theater operators, eager to see Revival hit its numbers so that they could hustle the upcoming Hollywood films onto their screens, worked a bit of Chinese ingenuity to help the ‘propaganza’ along. They began selling tickets bearing the name Beginning of the Great Revival, but with the title scratched out and Kung Fu Panda, Fast Five, or Pirates of the Caribbean, written in by hand. This way the party got its ticket sale, the purchaser got to see the film they wanted, and the theater operator got the box office and concession business he needed.

As one wag wrote on China’s version of Twitter, “Even Kung Fu Panda has joined the Communist Party.” The Hollywood studios were clearly being short-changed, but even if they found out there was nothing they could do about it.

All this box office manipulation makes it impossible to say for sure how many people actually saw Beginning of the Great Revival or how much it truly earned. The officially reported final box office number—$62 million—fell far short of the party’s stated goal, and was mildly embarrassing. Still, Revival remained China’s top grossing home grown film of 2011 through the summer and into the fall, until a tiny upstart came out of nowhere to try and knock it off its perch.

Crazy Little Thing Called ‘Love’                                                                  

When it rolled into theaters on November 8th, Love is Not Blind appeared to have little going for it. With a paltry budget of just 8.9 million RMB (US $1.4 million), a cast that, while recognizable, had little if any marquee value, and a director whose last film, 2007’s The Matrimony, had barely made a ripple at the box office, the film seemed destined for a short and uneventful life in theaters. On top of its other shortcomings, Love is Not Blind’s genre, romantic comedy, was widely viewed as box office poison in China: up until that point the six rom-coms released in 2011 had averaged just $4 million in ticket sales.

Furthermore, the competition that week was fierce, with one Hollywood special effects driven crowd pleaser, Rise of the Planet of the Apes, already dominating the box office, and two more, Real Steel and Immortals, set to open against Love. This time there would be no government intervention, no state-sponsored publicity blitz, no legions of party members buying tickets for the cause. The little $1.4 million picture would go it alone against a combined $350 million worth of Hollywood firepower.

But for all its disadvantages, Love is Not Blind was able to do something none of the Hollywood films could. Something that Revival had failed to do. It targeted a specific Chinese demographic—singles in the 27 to 35 year old cohort—with a contemporary social issue—the ticking marriage clock—and delivered a charming, funny film with a clever and innovative marketing campaign.

Love’s producing and marketing team built the film especially around single, educated women who are under pressure to marry.  By the age of 27 almost every unmarried, educated Chinese woman falls into this category. The film’s protagonist, Xiaoxian, is a 27 year old “shengnu,” or “leftover woman,” whose marriage plans were heartbreakingly shattered when she discovered that her boyfriend of 7 years was seeing another woman on the side.

Without much cash to spend on advertising, the Love team turned to social media, leveraging the popularity of the online novel that was the basis for the film to foster dialogue and a community around the topics of breakups and marriage. Singles, and women especially, were encouraged on sites like Sina Weibo to chat and tweet and upload videos about their own breakup experiences.

The topic resonated beautifully with a very large audience. In the days leading up to the film’s release, some 6.6 million tweets were recorded on Sina Weibo, and on Baidu, China’s version of Google, the film’s Chinese title 失恋33天 (“33 Lovelorn Days”) set records for the most searches ever for a movie.

Love’s release was cleverly timed to coincide with “Singles Day,” an unofficial Chinese holiday that originated in the 1990s and which takes place every November 11th.  On this day single people get together to celebrate, and those who wish to change their relationship status attend blind date parties in hopes of finding that special someone. This year the holiday had special significance since it fell on 11-11-11, which, turned out to be a very popular day for movie-going.

Popular especially for Love, as it turned out. In its opening weekend Love is not Blind out-grossed the combined revenue of Real Steel, Rise of the Planet of the Apes, and Immortals, collecting nearly $29 million versus a combined total of $18.5 million for the three Hollywood blockbusters. In its second week it retained the number one spot at the box office against those three films and a newcomer from Steven Spielberg: The Adventures of TintinLove out-paced Tintin by a wide margin, $14 million to $9 million.

Most significantly, the tiny film drubbed Beginning of the Great Revival’s opening numbers: in its first week Love grossed over 50 percent more than Revival’s $18 million first week total. And even without the advantage of China’s vast Communist party machinery behind it, Love is Not Blind just might out-do Revival’s final $62 million tally.

Women hold up half the sky                                                                               As an old Chinese proverb favored by Chairman Mao Zedong says, “women hold up half the sky.” And with its success Love is Not Blind has proved that when the right film is marketed in the right manner, women can hold up more than half the box office.

Love is Not Blind‘s success holds three key lessons for distributors and promoters of films in China. First, the market there is changing quickly, and the conventional wisdom regarding what types of films work or don’t work in China is almost always wrong. Second, women are dramatically under-served by both local and Hollywood offerings, and tremendous opportunity exists to serve this audience with good, properly marketed pictures. And finally, you can try to coerce or browbeat people into seeing your film, but the best way to reach moviegoers is to appeal to their minds and hearts.

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.

Chinese Audiences Go Bananas for ‘Apes’


by Robert Cain                                                                                                        November 13, 2011

In an otherwise slow week at the Chinese box office, Rise of the Planet of the Apes grabbed US $13 million in ticket sales—well over half the receipts earned by all films—for a $24 million 10-day cume. Apes climbed past The Tourist and A Chinese Ghost Story and now ranks 20th among theatrical releases so far this year.

Far behind in second place was the newly released Japanese animated feature Detective Conan Quarter of Silence, with $3 million in ticket sales.

Chinese films barely registered, with the lone Chinese opener, Starry Starry Night eking out just $1.6 million in receipts, and holdovers Lost in Panic Cruise and Love on Credit earning $1.5 million between them. Also failing to spark much interest were two newly released U.S. made films, Liam Neeson thriller Unknown and fantasy western The Warrior’s Way, which managed just $1.1 million and $600,000, respectively.

The continuing poor performance of local films underscores a growing problem for Chinese exhibitors. Audiences have grown tired of domestically made movies, which are generally acknowledged to be inferior, and with a cinema construction boom underway exhibitors are increasingly reliant on the limited number of Hollywood films they’re allowed to book. Only one of the top 10 films this year, the propaganda piece Beginning of the Great Revival, is a domestic production, and that film can hardly be counted because its official box office total of $62 million is widely acknowledged to be inflated.

Strict domestic content regulations and a dearth of experienced screenwriters leave domestic films woefully uncompetitive with much higher quality Hollywood fare. Unless China loosens its 20 film quota, or co-production activity ramps up quickly, theater operators will find themselves forced to book more and more local films that audiences don’t want to see.

Rise of the Planet of the Apes is the 30th film of 2011 to cross the 100mm RMB/15mm USD threshold. Just 17 films reached that level in 2010.  Only 2 years ago $15 million was a lofty target, but with so many films now exceeding that number the bar has been raised for ‘blockbuster’ status, and the $30 million level has become a more appropriate benchmark;13 films have reached that level this year.

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.