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.

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We’ll Be Right Back After This SARFT Holiday Break


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By Robert D. Cain for China Film Biz

October 8, 2012

More than a week after it was reported in the Hollywood trades and beyond that Looper opened with a record-smashing debut in China, there is still no official word from SARFT as to what actually happened at the PRC’s multiplexes. In a country where the designated president-to-be can disappear for 10 days without feeling the slightest obligation to explain or even acknowledge his absence, I suppose it’s too much to hope that timely box office reports might be delivered during a holiday week.

In the absence of official word, I’ll go out on a limb and offer my best guess as to what did occur in China over the past week and a half. Bear in mind that the figures below are only as accurate as my back-channel sources. Official numbers should be out in the next day or two, at which point I’ll provide an update.

First, Looper did open well in China, but it came nowhere close to the US $25 million figure that was initially reported by the Hollywood trades and picked up by more than 100 news outlets around the world. While the film did set several notable precedents, it didn’t break any box office records, and it now appears that my initial estimate of $4.3 million for Looper’s opening weekend was just about right.

The National Day holiday week of October 1st through 7th saw roughly $60 million in aggregate ticket sales, making it only the 8th best week of the year so far. Given the high expectations exhibitors had coming in to the week, they were likely disappointed by this result.

China’s year-to-date box office tally probably reached, or at least came very close to, the $2 billion mark last weekend. By the third week of October it will surpass last year’s record total of $2.06 billion. Had it not been for the bucket of ice SARFT dumped on the country’s sizzling box office growth by imposing its 2-month summer blackout of Hollywood blockbusters, the year-to-date total would now be more than $2.2 billion and China would have a shot at cracking $3 billion by year’s end. As it stands now I’m projecting a year-end total in the $2.7 billion to $2.8 billion range.

While China’s film bureaucrats continue to revise their priorities and tactics, two North American companies and one partially American one have exhibited great savvy in maneuvering through the ever shifting political sands of the PRC.

The two aforementioned North American companies are IMAX and Twentieth Century Fox. Both companies have made substantial investments in China and have been smart about how they conduct their business there. IMAX picked a winning film and a winning strategy when it decided to back the Huayi Bros action-fantasy film Taichi 0 with a large format theatrical release. IMAX was unquestionably a major factor behind Taichi  0’s winning box office performance. And Fox made the right move when it submitted Europa Corp’s Taken 2 as a French, rather than an American film, enabling that picture to slip through the holiday blackout and open on Sunday. Its estimated $2.3 million opening day bodes well for Taken 2’s China run.

The ‘partially American’ company I’m referring to, DMG, is a Beijing-based Chinese company that has strong American representation among its senior ranks. DMG pulled off several coups with Looper last week, getting a film that was clearly American (with Chinese flavor) released during a blackout week when Hollywood studio films were strictly prohibited. DMG also managed to obtain for Looper the first U.S.-China day-and-date release since Madagascar 3 opened in June. And DMG’s connections enabled it to achieve a strong screen count during an extremely competitive frame, and should enable it to keep the film running longer in China than most other American films. Although Looper’s China gross won’t come close to matching its U.S. total, it will likely wind up as one of the best indexing U.S. films in China this year.

Also of note: Lionsgate’s The Expendables 2 ended its spectacular run on Sunday, winding up at an estimated $53.6 million, which would put it ahead of The Amazing Spider-Man and just behind The Dark Knight Rises for China’s 9th best performance in 2012. Not bad for a film that grossed $84 million in North America.

And now back to our regularly scheduled program.

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 Media Stocks Are Sizzling in 2012


by Robert Cain for China Film Biz

May 18, 2012

This week I’m inaugurating a new stock index to track the performance of equities in China’s entertainment and media industry. The new index is called the Cain China Media Index (CCMI), and it comprises the stocks of 20 companies in China’s advertising, broadcast & cable, games, motion pictures and online media industries. Most of the stocks are in the mid-cap range (with a few small cap exceptions), trading on the Shenzhen, Shanghai, NASDAQ and New York stock exchanges.

The CCMI will be set at 100 as of the close of today’s markets in the U.S., and it will track the movements of the aggregate market capitalization of the 20 stocks.

My reason for starting the CCMI is to fill what I see as a gaping hole in the universe. I’ve been combing the web lately looking for useful coverage of the growth stocks in China’s media sector and I haven’t been able to find anything interesting or reliable.  So I’ve decided to step into the breach

Here’s why I think this is important, and why you should pay attention: 

  1. China is fast becoming the world’s most important media and entertainment market. In contrast with the low single-digit growth in North America, Europe and Japan, China’s media sector has grown at a compound annual rate of better than 30 percent for more than a decade. By 2020 China’s movie, game and online media markets will be larger than their counterparts in the U.S.
  2. China’s media sector is still in its early growth stage, which means that there is plenty of opportunity ahead for well-positioned Chinese companies in film, TV, and mobile and online content businesses, and for the investors who back them. All of the stocks in the CCMI are actively traded and can be purchased on the above-mentioned exchanges.
  3. Now is the time to invest in Chinese media. According to a recent McKinsey & Company research report, between 2010 and 2020 China’s GDP will double and 170 million Chinese households, or some 500 million people, will move up into the “mainstream” middle class and affluent class. That’s 500 million new buyers of movie tickets, video games, premium TV services, , and other forms of entertainment. Put another way, the next 8 years will offer the biggest surge in entertainment and media consumption the world has ever seen.

Even if China’s economy slows down, the entertainment business will keep growing, because the Chinese market is still extremely under-saturated and under-served by entertainment businesses.

The CCMI stocks, their ticker symbols and market caps are listed in the table below.

CAIN CHINA MEDIA INDEX

 

Investors in the sector have had a very happy 2012 so far. The stocks in the CCMI have risen by an average of 21 percent so far this year, compared with an 8.8 percent gain in the Dow Jones U.S. Media Index, a 6 percent gain in the Shanghai Composite Index and a 3.8 percent gain in the S&P 500.

Investors in certain Chinese online media stocks have been particularly well rewarded, as digital online video company Tudou has gained 188 percent in the past 4-1/2 months, and social media site RenRen has gained 76 percent. Bona Film Group has also performed well, gaining 55 percent since the beginning of the year.

I plan to update the index each week and to keep a close eye on trends in China’s media stocks, so keep checking in.

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.