Handicapping China’s 2012 Import Quota Slot Derby


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn

by Robert Cain for China Film Biz

October 22, 2012

One of the big questions of the moment in China’s film distribution community is which movie has been or will be awarded the final valuable import quota slot for theatrical distribution. Depending on whose information you believe, the number of remaining slots is either one or none.

As you’ll recall, earlier this year Xi Jinping agreed under great duress from Vice President Biden and the U.S. Trade Representative to increase the number of foreign films that can be distributed in China’s theaters via revenue-sharing arrangements from the previous 20 films per year to 34 this year and beyond. As a face-saving compromise, China decreed that the additional 14 films must all be “enhanced” films in either 3D or IMAX formats.

Quota allocation is a big deal because China’s rev-share slots have become extremely valuable. China is now the world’s second biggest movie market, and even though the share that goes to the foreign distributor only tops out at 25 percent of box office receipts, that 25 percent can amount to 5, 10, or in some cases more than 20 million dollars going to a picture’s bottom line. The Jason Statham action pic The Mechanic earned nearly half its international gross in China, and it appears that the Australian horror flick Bait 3D will do the same.

Because SARFT and the Film Bureau tend to be close to the vest with information, and because they have a tendency to change their minds, it’s a thorny problem to determine where quota allocations stand at any given time. Official decisions get reversed, permissions get revoked, and in some cases, as with the U.S.-Chinese co-production Looper and the French-Chinese co-pro Mystery, co-production status gets yanked at the last minute. Bait 3D has caused a great deal of head-scratching, as some sources have designated it an Australian-Chinese co-production, although I’m fairly certain that it was a flat-fee buyout film of Australian-Singaporean provenance.

With the preceding caveat out of the way, I’ve detailed below my best knowledge regarding the films that have been released through quota slots so far this year. I show 16 of the 20 regular format film slots having been used already, with 3 of the remaining 4 spoken for, and 11 of the 14 enhanced film slots used, with the remaining 3 also taken. This leaves one regular format slot open.

That one last slot is sure to be hotly contested, with studios lobbying heavily to secure it for themselves (studio execs, if you missed it, see my recent column on how to get ahead in China). MGM’s Skyfall and Warners’ The Hobbit were both likely candidates, but those two films have apparently been pushed to next year by China’s decision makers. I had heard a rumor that the Alfonso Cuaron sci-fi thriller Gravity was awarded the last slot, but since that film hasn’t been dated yet for a U.S. release, this seems unlikely.

If you think I’ve gotten any of the above information wrong, or if you have knowledge regarding the 34th film, please write me so that I can update the chart.

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

Advertisements

Hollywood’s Looming China Syndrome


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn.

By Robert Cain for China Film Biz

September 11, 2012

In the 1979 Oscar nominated thriller “The China Syndrome,” a pair of journalists played by Jane Fonda and Michael Douglas stir up a hornet’s nest when they expose a nuclear plant accident that they fear could result in a “China Syndrome,” a worst-case scenario where the reactor core melts through its containment structures and drops into the underlying earth, “all the way to China.” The nasty end result would be a nuclear explosion that would render Southern California completely uninhabitable.

The film’s frantic tension arises from the conflict between the journalists’ efforts to obtain justice, and the nuclear plant operator’s self-preserving, sometimes violent attempts to maintain a cover-up of the accident. Fonda and Douglas characters’ righteous ambition winds up getting Jack Lemmon’s well-intentioned plant supervisor killed, and ultimately jeopardizes their own lives and careers, with the film’s final shot suggesting that nothing has really changed.

Hollywood’s major studios have set in motion a similarly risky and probably fruitless course of action by complaining publicly about what they feel is unfair treatment of their films in China. In pressing the U.S. Trade Representative to take diplomatic steps, the studios are escalating tensions in a situation that, if continued, could well result in a “China Syndrome” of their own that would poison their long-term prospects in the world’s fastest-growing and soon to be largest movie market.

The source of the studios’ discontent is their perception that recent moves by China Film Group have aimed to reduce the grosses of American films at Chinese multiplexes, by setting “blackout periods” during which Hollywood movie releases are limited, and by pitting at least two of these movies, “The Amazing Spider-Man” and “The Dark Knight Rises” against each other on the same weekend.

According to the Los Angeles Times, MPAA Chief Policy Officer Greg Frazier admits that the Chinese haven’t really done anything illegal. “Are they violating WTO obligations? Probably not.” To his credit, Frazier has been much more restrained and diplomatic in his statements than his studio counterparts have been.

The timing and tenor of the Americans’ complaints betray a complete disregard for the facts, a pronounced insensitivity about current events in China, and an alarming level of ignorance about how to win favor and get things done there.

Let’s take a look at what’s been happening with American movies in China:

  • In the first half of 2012, U.S. movies took a 68 percent share of China’s box office receipts. After the summer blackout, their share now stands at 60 percent. Domestic Chinese films have a 15 percent share, and China/Hong Kong co-productions another 23 percent. The rest of the world: 2 percent.
  • “The Amazing Spider-Man” and “The Dark Knight Rises” had China’s third and fourth best opening weeks, and after just 14 days in release the two films are already China’s 9th and 10th highest grossing pictures of 2012.
  • As I pointed out in an article last month, American films enjoy wider distribution, more screens and longer runs in China than do Chinese films.
  • During the past two weeks, U.S. films have taken 98 percent of China’s nationwide movie ticket revenues.
  • Of the 11 highest grossing movies in China this year, 10 are American.

Get the picture?

Now let’s look at China’s domestic scene:

  • The economy is experiencing an epic slowdown, one that is putting tens of millions out of work and raising serious questions about China’s financial viability.
  • The country’s communist party leadership is embroiled in the midst of an unwieldy succession crisis. With a once-in-a-decade power transition about to begin, one of the party’s top political stars has been disgraced with murder and corruption charges, and presumed president-to-be Xi Jinping has completely disappeared from public view, possibly due to a heart attack.
  • Territorial disputes over islands in the South China Sea and East China Sea have escalated to frightening levels, with diplomatic and trade relations between China and Japan deteriorating to post-WWII lows.
  • The party’s legitimacy is under threat from rifts within its ranks and also from the public via social media. As Dr. Cheng Li, a research director at the Brookings Institute recently put it, “This legitimacy crisis is worse than in 1989, and may be the worst in the history of the Communist Party. People are afraid that it could lead to revolution if it is not handled well.”

With all this turbulence, do the studio heads really think this is a good time to complain about movie schedules? Last weekend, the studios made almost as much money in Chinese theaters as they did in U.S. ones. To the Chinese they must seem like unwanted houseguests who, after living in the guest house for a while, have commandeered the master bedroom, eaten almost everything in the fridge, and now they’re screaming bloody murder because the homeowners have told them to stay out of the kitchen on weekends and marked a couple of food containers as off-limits.

Meanwhile, the Chinese homeowners are overwhelmed with problems: uncle and auntie have murdered a foreigner in the living room, the phone is constantly ringing with calls from bill collectors, major cracks have appeared in the foundation, and the neighbors have figured out how to open the windows from the outside and hurl insults at them about their previously private bodily functions.

And what are these ungrateful Americans doing for them anyway? Only a few companies—most notably IMAX, Fox, and Dreamworks Animation—have made efforts to appease the PRC’s political leaders and make a contribution, by producing and distributing Chinese language films.

Xenophobia is on the rise in China, and anti-American sentiment has climbed to levels not seen in decades. The communist leaders can gain much-needed legitimacy at home by standing up to pushy foreigners. If the studios aren’t careful they could easily precipitate their own nuclear meltdown, with China Film Group punishing the studios by shifting their imports toward American indies and non-U.S. films. And a nationalistic boycott of American movies isn’t unthinkable; the territorial disputes with Japan appear to have resulted in lower car sales in China recently for Toyota, Mazda and Nissan.

It’s natural during tough times to scapegoat foreigners; both the Americans and the Chinese are guilty of that. The studios should back off and leave things alone until the 18th Party Congress has chosen its new chiefs and the dust has settled on other current crises. The MPAA has done a marvelous job so far and they should keep their powder dry for the times ahead when they can have a meaningful impact with the next generation of leaders. And all of us should learn to take a more conciliatory tone in our conversations with the Chinese. We may not like their style, but they hold the keys to the future of our business. Triggering a nuclear reaction won’t benefit anyone.

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