Tag Archives: Chinese Zodiac

CZ12’s Massive Opening Marks a Massive Shift in China’s Film Business

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By Robert Cain for China FIlm Biz

December 21, 2012

On Thursday Jackie Chan’s and Huayi Bros’ action-comedy film CZ12 (formerly known as Chinese Zodiac) confirmed a reality that should strike fear in the hearts of Hollywood’s studio executives: China doesn’t need Hollywood films to break box office records.

One-man band Chan, who wrote, directed, produced and DP’d the $50 million CZ12, has exceeded all expectations by delivering a film that set a new December single day record in China with 43 million RMB (US $6.8 million) on Thursday, adding fuel to an already blazing hot month at PRC multiplexes. Last week China set an all-time single-week revenue record, and this week is on track to break that record.

CZ12 follows on the heels of smash Chinese hit Lost in Thailand, which will pass $100 million in its first two weeks and should easily eclipse $160 million by the end of its run (my Chinese colleague Firedeep was the first to go on record with a prediction that the film’s gross will exceed $200 million). That will make it the second highest grossing film in China’s history after Avatar. With its lower ticket prices, Lost in Thailand will actually beat Avatar’s record for total admissions.

Although I haven’t yet seen it, CZ12 gets my vote as the film most likely to break out from China and become an international hit. Release dates are lined up in Russia, South Korea, Malaysia, Vietnam, and all over Greater China, and a U.S. release now seems likely.

Just as Detroit mocked the clunky little imported Toyota cars from Japan in the 1950s and RCA, Magnavox and Zenith (remember them?) ignored Sony’s little transistor radios in the 1960s, Hollywood has so far done little to protect its position vis a vis China as the world’s leading provider of movies.

To be sure, China has a long way to go, but if Hollywood had any common sense it would be sending legions of smart, China-savvy execs and producers to the PRC to figure out how to make movies there and profit over the long run. Instead Hollywood has yielded that advantage to the Hong Kongers and South Koreans, who are now much better positioned to ride the China wave and profit there than Hollywood may ever be.

There is still time for the major U.S. studios to counteract the competitive threat from China, but the success of films like Lost in Thailand and CZ12 ought to be viewed as the first shots across the bow of Hollywood’s global hegemony.

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.

‘Pi’ Slices Up the Chinese Competition Again

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December 10, 2012

Screenwriting and producing assignments have kept me from posting here on China Film Biz during the past few weeks, but I’ll aim to catch up in the coming days. Much has happened since I last put virtual pen to paper.

First things first: the extraordinary box office performance of Life of Pi. The Ang Lee fantasy adventure is remarkable not only for its gravity-defying theatrical run in China, but also for what it reveals about the contemporary Chinese moviegoing audience. Not since Avatar has a film so captured the imaginations of China’s movie literati as Life of Pi, which has inspired more than 5 million tweet messages on Sina Weibo, the PRC’s leading Twitter-like site. The picture is well on its way to becoming only the second U.S. film this year to earn more in China than in North America, and its success underscores a broadening trend of the PRC’s mainstream audience beyond popcorn spectacles to include more thoughtful fare.

Widely expected before its launch to earn only middling numbers, Life of Pi has caught fire with multiple audience segments, including Ang Lee fans, 3D movie fans and, perhaps most importantly, sophisticated moviegoers who appreciate Pi’s symbolism and its exploration of weighty topics like faith and religion. China’s social media sphere has positively lit up with speculation about such topics as the metaphorical significance of the film’s carnivorous island, and its philosophical musings about the subjective nature of storytelling.

Three weeks after its debut Life of Pi has grossed nearly $70 million in China—$9 million more than it has earned in North America. It should wind up at around $95 million when SARFT’s regulators pull it from theaters after its sanctioned 30 day run. If—and this seems unlikely—SARFT allows the picture a 2-week extension, it could surpass Painted Skin: Resurrection to become the mainland’s second highest grosser this year after Titanic 3D.Box office week ending December 2, 2012

Pi’s success has not only dealt a serious blow to director Feng Xiaogang’s film Back to 1942 (not to mention his stature in China’s film industry), but it has also thrown a wrench in SARFT’s hard fought schemes to keep the market share of foreign films below 50 percent in 2012. Pi will outgross SARFT’s initial estimates by about $70 million, thus tipping the market share balance in favor of imports, much to the dismay of China’s bureaucrats who are responsible for market share manipulation .

If Back to 1942 manages a decent hold and if Jackie Chan’s Chinese Zodiac performs at or near expectations, the mainland’s total 2012 gross could approach $2.6 billion.  That would represent a 29 percent increase over last year’s total, another record year for the PRC and another step closer to catching up with the $10+ billion North American market.

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.

Big Trouble in Movie China

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By Robert Cain for China Film Biz

November 26, 2012

Crisis in China’s movie business was narrowly averted on Friday when the country’s film authorities announced that they will award performance-based box office bonuses to domestic film distributors and to theaters, ending a weeks-long dispute that had each side threatening to boycott the other over revenue splits. Thanks to the feds’ intervention, the eagerly awaited release of Feng Xiaogang’s Back to 1942 will proceed as planned on Thursday, and Chinese moviegoers will enjoy a normal December movie season,

Tensions were high in mid-November when five of China’s biggest film distributors banded together to demand an increase in their shares of box office revenues from 43 percent to 45 percent. The five companies—China Film Group, Huayi Brothers Media Group, Bona Film Group, Stellar Mega Films, and Enlight Pictures—told theaters that if they didn’t get their way they would immediately start withholding the releases of their blockbuster movies, including Back to 1942 and Jackie Chan’s China Zodiac, both of which are expected to be major holiday season hits.

In a notice issued to theater chains, the five film distributors said that China’s domestically-made blockbusters have contributed significantly to the nation’s film market. Yet, they complained, as they continue to produce films using state-of-the-art technology, production costs will continue to rise. “Therefore,” the distributors asserted, “In order to boost the creation and production of domestic movies, improve their quality and gradually smooth over the economic relationships between the stages of producing, distributing and screening, we five companies have reached the consensus that the profit share proportion for distributors should not be lower than 45 percent.”

Theater operators responded by holding an emergency meeting of their industry organization, the China Film Circulation and Projection Association, on November 17th in Guangzhou. They published a combative response (copied below) to the distributors’ demands and offered some choice words to reporters, with veteran Wanda Cinema salesman Liang Liang telling a reporter, “I have only three words [for the distributors]: Go to hell!”

In their declaration, the theater operators deemed the distributors’ demands unacceptable, for the following reasons:

  1. The five film distribution companies failed to follow the rules; without any attempt at consultation, they simply went ahead and gave the theaters an ultiimatum.
  2. The five film companies failed to consider that the industry’s current revenue split has been formed over an extensive period of trial and error and therefore any change in pattern would require adequate preparation.
  3. The five film distribution companies only took into consideration their own interests, without considering the challenges faced by theater operators. Most theaters are unprofitable due to the exorbitant rents they must pay their landlords.
  4. The distributors failed to use the correct method to address their grievance. They could have easily taken their request for a raise in revenue shares to China’s Movie Special Funds and apply for the increase in rates there.
  5. The distributors exchanged friendship for profit. China’s movie industry has always supported these five major players in film distribution. However, their actions showed how they have seemingly left behind their integrity when the temptation of personal gain showed its face.

Note that most of these objections are moral and ethical ones, not legal arguments. It’s an interesting example of how business operates in a country like China, where contractual obligations are usually less important than relational ones.

Civil war was ultimately prevented when the National Film Development Funds Management Committee (NFDFMC) stepped in and offered a solution in the form of bonus compensation to both sides, as follows:

For distributors of domestically made 3D and IMAX films 

If a film grosses RMB 50mm to 100mm , a RMB 1mm bonus

If a film grosses RMB 100mm to 300mm, a RMB 2mm bonus

If a film grosses RMB 300mm to 500mm, a RMB 5mm bonus

If a film’s box office gross surpasses 500mm, a RMB 10mm bonus

For theater operators

If at least 50 percent of a theater chain’s total annual box office gross is earned from domestic films, 100 percent of fees paid during the year by the theater chain to the NFDFMC (a straight 5 percent of every RMB of ticket sales) will be reimbursed to the theater chain.

If the percentage of box office earned from domestic films is between 45 percent and 50 percent, the NFDFMC will reimburse 80 percent of the fees a theater has paid to it.

If the percentage is below 45 percent, but the domestic film revenue is still more than last year’s, the NFDFMC will reimbursed 50 percent of the fees.

Both sides were apparently satisfied with this solution, and the show will go on. China’s theaters will continue to run films from the five distributors, and Back to 1942 will unspool on the 29th.

Having witnessed an endless string of financial shenanigans in China’s movie business, I can’t help feeling that this whole dispute was staged as a ploy to justify an end result that undeniably favors domestic films over imported ones. After all, China’s film regulators have for years twisted and strained to get around the WTO rules, and have often simply reneged on their legal obligations, in order to keep foreign films’ revenues below a 50 percent aggregate share of the box office.

With the attractive NFDFMC bonuses to tempt them, it’s hard to imagine that any theater chain in China will ever again submit an annual report with a domestic film box office share of less than 50 percent. The new rules give them powerful incentive to under-report the grosses of the foreign films they exhibit (if they aren’t already doing so) in order to maintain the desired balance and win their juicy year-end spoils.

As if this shift against the interests of foreign distributors wasn’t injury enough, I’m also hearing rumors that SARFT is planning to find ways to roll back the 25 percent share it pays foreign films to a somewhat lower rate. If you’ve heard anything about this please write me at the email address below.

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.