‘Oz’ Blahs, or Why China is NOT Going to Save Hollywood (But Might Buy It)


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn. For info on China Pooch email info@chinapooch.comOz Chinese poster

By Robert Cain for China Film Biz

March 31, 2013

Oz the Great and Powerful debuted to a distressingly low $9 million in China this weekend, becoming the tenth straight U.S.-made film this year to falter in PRC theaters. Every major studio has now had at least one disappointing release in China in the past three months, and none has had a breakout success.

The huge box office bonanza that Hollywood movies enjoyed a year ago in China is now looking more and more like a cruel head fake.  For 23 straight weeks in 2012 Hollywood films reigned at the top of China’s box office. But their longest streak this year is 2 weeks on top, and they’ve placed first in only 3 of the past 16 weeks.

Meanwhile, Chinese language films are hot. Scorching hot. In those same 16 weeks two Chinese films have broken $200 million at the box office, another went over $135 million, and a fourth—the low-budget Finding Mr. Right—will soon become the highest grossing Chinese romantic comedy of all time.

I’ve written many times in this space that Hollywood’s movies will eventually be marginalized in China. I thought this would take at least several more years, but it’s happening before our eyes.  In the first quarter of 2013, U.S. films’ cumulative grosses in China are down by 22 percent, while Chinese language films are up by 128 percent. China’s tastes have shifted decisively toward local product, with the result that American films are now performing at about the same level they did back in 2010, when China’s market was half the size that it is now.Chinese B.O. 1Q12 v 1Q13

This turn of events comes at an unfortunate time for Hollywood. With box office revenue down by 13 percent in North America, the studios have been looking to China to help fill the gap.  But that’s not going to happen, at least not with any consistency. Sure, the next Avatar or Transformers or Iron Man movie will do fine in China. But the days of $50 million grosses for movies like Battleship and John Carter are fading. Oz won’t likely get past $35 million, and Jack the Giant Slayer will be lucky to break $15 million. Chinese audiences would rather spend their money to see local stories with Chinese faces.

With North America flat at best, and limited prospects in the industry’s biggest international growth territory, one wonders how much patience the major media conglomerates have left for their film divisions. According to a recent Economist article, pre-tax profits at Hollywood movie studios fell by around 40% over the past five years, and they now account for less than 10% of their parent companies’ profits. According to Benjamin Swinburne of Morgan Stanley, by 2020 the studios will contribute just 5% of the media conglomerates’ profits. The day will soon come when at least one of these conglomerates decides to unload its studio operations.

And who better to buy that studio than a Chinese distributor? China will soon be the world’s biggest movie territory, with a more profitable business model than Hollywood’s. And it has major international ambitions, but completely lacks the ability to serve the global market. The right strategy for a globally minded Chinese movie mogul will be to acquire a major U.S. studio at a bargain basement price. The only thing they need now is a willing seller.

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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No Golden Ring For ‘Hobbit’ in China


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn. For info on China Pooch email info@chinapooch.comHobbit poster

By Robert Cain for China Film Biz

February 24, 2013

With its $5.6 million opening day and projected $18 million 3-day weekend gross in China, The Hobbit: An Unexpected Journey has become the third major Hollywood film in a row—after Skyfall and Jack Reacher—to fall short of expectations in its mainland theatrical release. In its first two days Hobbit managed only a distant second place finish behind the Chinese language hit Journey to the West, which has been in release for two weeks, and its attendance pattern over the course of the weekend suggests a relatively soft theatrical run ahead.

To be sure, an $18 million weekend in China is not in and of itself a bad result. Not many pictures, Chinese or foreign, reach that level in their first three days in the PRC. But for a global phenomenon like the Hobbit, which has grossed nearly $1 billion in the rest of the world, this result comes as a surprise to the downside. As the following chart illustrates, several much smaller territories will generate bigger total grosses for the film.Hobbit Gross by Intl TerritoryEven given the context of the picture’s long-delayed opening and marginal post-holiday release slot, one could have reasonably expected Hobbit to at least match Skyfall’s total China gross of $60 million, but this now appears highly unlikely. Hobbit’s Friday-to-Saturday revenue bump was just 26 percent, among the smallest increases I’ve ever seen for a wide release in the PRC. A total gross in the low 40 millions is looking more probable, a figure that won’t even place the film in the top 20 releases in China this year. That number would be on par with the PRC performance of last year’s John Carter, a picture that grossed barely a fourth of what Hobbit did worldwide.

What is particularly troubling about China’s cool reception to The Hobbit is that it is a 3D fantasy film, a genre format that has consistently performed handsomely with Chinese audiences.  Painted Skin 2, a poorly reviewed Chinese fantasy, earned $115 million in its 2012 China release, and Journey to the West has just reached $160 million and could well surpass Avatar‘s record $209 million China gross. Harry Potter and the Deathly Hallows: Part II earned $63 million two years ago, when China’s market was barely half the size that it is now. Journey 2: The Mysterious Island took in $60 million early last year, and Life of Pi grossed $91 million just a few months ago.

What’s impeding the success of The Hobbit may have less to do with the film itself and more to do with the current mood of Chinese moviegoers. During the past few seasons they’ve demonstrated an increasing preference for Chinese faces in Chinese stories, and a growing impatience with Hollywood blockbusters which, rightly or wrongly, have been criticized for being too much alike.

While it is far too early to sound the alarm for Hollywood’s movies in China, the recent trend ought to be cause for concern at the major studios. China will account for 10 percent of the global box office this year, and given that only those select few Hollywood films with the best perceived commercial prospects are allowed to release there, such releases ought to earn around 12 percent or more of their worldwide grosses in China.  But Skyfall earned barely 5 percent of its worldwide gross in the People’s Republic, and The Hobbit will probably wind up at around 4 percent.

If the next three U.S. releases—Les Miserables, A Good Day to Die Hard, and Oz: The Great and Powerful—turn in sub-par performances, then it may be time for the studios to heed the advice I’ve been freely offering for a long time: focus on what Chinese audiences want, and give it to them. Otherwise, the world’s fastest growing and soon to be biggest movie market will get along just fine without them.

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: A (Brand) New China


By Albert Wang for China Film Biz

March 26, 2012

Last week saw a film that has made news headlines of late (but for all the wrong reasons) take the number one spot at the box office in mainland China.  John Carter, which Disney announced will result in a massive $200 million loss for the company, succeeded in usurping Stephen Spielberg’s War Horse at the top of the Chinese box office, taking in a solid $14 million over its first three days of screenings.  John Carter easily outdistanced the Hong Kong/China co-production A Simple Life, which earned $3.5 million to hold on to the second spot for the second week in a row.

Debuting at number three was the Hong Kong action/thriller Nightfall, starring Nick Cheung, which earned $3.1 million in its first four days.  War Horse dropped three spots to number four, earning $2.6 million for the week, while Jason Statham’s action film Blitz (2011) debuted modestly to capture fifth place with $1.5 million over four days.

For the first time in six weeks, Journey 2: The Mysterious Island landed outside the top 5, collecting $1.4 million to raise its China cume to an impressive $58 million, or nearly 20 percent of the film’s worldwide revenue.

Although John Carter was a drastic under-performer for Disney in the key North American market, the film opened extremely well in China. Carter’s $14 million debut ranked third amongst all opening weekends in the PRC this year behind Mission Impossible’s $15.7 million 2-day haul in late January, and Journey 2’s $15.2 million over three days in early February. More and more often China is becoming Hollywood’s biggest international territory, which goes to show just how strong the “Made in Hollywood” brand is there.

In his book As China Goes, So Goes the World: How Chinese Consumers are Transforming Everything, author Karl Gerth describes the rapidly evolving Chinese consumer culture. Gerth contrasts David Ogilvy’s visit to China in the early 1980s with the PRC’s consumer market of today. Thirty years ago, Ogilvy encountered a country with a near-total absence of advertising, and what advertisements there were contained little more than technical information, with no evocative images of the products to pique the interest of potential consumers.

Fast forward to today, and advertising in China is a giant industry, with over eighty thousand ad companies employing over a million people, making the Chinese advertising sector a larger employer than its counterpart in the United States.  And along with this growth has come a complete transformation of Chinese consumer culture.  To highlight this point, Karl Gerth quotes a thirty-something professional woman in Beijing: “Brand names are social status and quality of life. When I was in the United States, I didn’t pay much attention to brand names.  Here it’s a culture. Look at me now; I’m equipped with nothing but brand names, such as Gucci, Fendi, Armani, Versace, and the like.”

However, unlike in the United States, where ultimately it is left to the individual company to create its brand identity, in China, the central government views the development of strong national brands as an issue of national economic security, and thus takes a hands-on approach to the ongoing development of Chinese consumerism.

Gerth mentions that Chinese officials are hoping to emulate Japan’s success in rebranding its national products.  Today, the “Made in Japan” is a signifier of quality and excellence in consumer goods, but this was not always the case.  Forty years ago, a consumer product labeled “Made in Japan” would have been viewed as inferior to its American counterpart.

China’s current situation with its national brand identity is quite similar in certain ways to Japan’s forty years ago, but it remains to be seen whether China can successfully rebrand itself.  There are a few internationally recognized Chinese brands that signify quality, Lenovo being one of them. But one need only look back over the past few years to be reminded of big scandals involving Chinese goods that have done more to sully the “Made in China” brand than any successful Chinese brands have been able to help elevate the global reputation of Chinese products.

And so perhaps it might be helpful for those of us in the international film scene to look at what is going on with China’s film industry and theatrical market within the broader context of what is going on with Chinese consumer goods and culture in general. After all, for Chinese consumers, the preference for things made in the West extends far beyond movies, and the Chinese government’s film quota system and film co-production rules can be viewed as being very much in line with the tariffs and regulations that Beijing places on imported goods in other industries as well.  Many Chinese consumers meanwhile are caught between their general desire to support Chinese businesses and their genuine fondness for American and other Western consumer goods, and it will be interesting to see if and when the brand “Made in China” will start appealing to mainland Chinese consumers just as much as “Made in America” does today.

Albert Wang is an aspiring producer of US-China film co-productions who joined the Pacific Bridge Pictures team in December, 2011. His previous blog on US-China films can be seen at hollymu.com.