The first Japanese movie allowed into China in 3 years is cleaning up at the (litter) box office
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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
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:
Get the picture?
Now let’s look at China’s domestic scene:
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
By Robert Cain for China Film Biz
February 19, 2012 from Shanghai, China
I would have liked to put the headline for this story in giant, screaming, 48-point font. To be the first to inform you of ground-breaking news.
I would have liked to present you with the scoop that China has increased its movie import quota from the previous 20 films to the new level of 34 each year, and that it has raised the revenue share it will remit to foreign producers from 13-17 percent of box office takings to a more generous 25 percent in future.
But you already knew all that.
Here in Beijing, there’s been scant mention of any of this in the media. The government has been keeping a tight lid on a story that it apparently prefers to keep quiet in the PRC. In a day full of meetings on Saturday with film distributors, producers, and even the powerful head of China Film Group’s production division, not one person I spoke with was even remotely aware of the news. I only found out about it because a handful of friends back home in the USA were kind enough to email me stories from Variety, the Los Angeles Times, and other publications.
In fact, the front page headlines in Sunday’s China Daily (and all the pages that followed) have nothing to do with movies. Instead, the lead story reports—somewhat ironically—about Vice President Xi’s insistence that Washington loosen up its own trade restrictions that limit exports of American technology to China. China badly wants to access American innovations in such areas as civil aviation, integrated circuits, machine tools and other products. American movies and TV, not so much.
In fact the timing of the film quota announcement was rather awkward for the Chinese Communist Party, given that it came on the heels of a week of tough talk in Beijing about eliminating foreign TV programs from Chinese prime time broadcasts, and a general mood of xenophobic aversion to western cultural imports. The silence here about the shift in film import policy is deafening.
The policy shift was not exactly what Hollywood and the MPAA were asking for, but it is nevertheless big news, and I expect my producer and distributor friends back home are in a jubilant mood today. As Vice President Biden put it, “The agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast growing Chinese audience, supporting thousands of American jobs in and around the film industry.”
Specifically, the new agreement will allow, in addition to the previously authorized 20 foreign films per year, another 14 “enhanced” films, such as those made in 3D or IMAX formats. This last point is interesting, as it allows the Chinese government a bit of face-saving. The loosening of the quota might appear to folks in the PRC as capitulation by Beijing to US pressure, but the “enhanced” film requirement allows the Chinese to characterize the agreement as a ‘technological advance.’
After some investigation with studio and government connections in Beijing I’ve learned that there are important additional elements to the agreement which would smooth the process for mounting China-US co-productions, and also make it easier for US companies to set up joint ventures in China. But there are undoubtedly countless details to sort out before the new agreement can be implemented, and China could well drag its feet in putting the new policies in place. None of the U.S. press articles I saw mentioned any implementation timetable.
Of course, if you’re an attentive reader of this blog you know that film-related announcements from China are often overblown, exaggerative, and sometimes just plain false. Everyone got it wrong—myself included—in speculating that Jeffrey Katzenberg had arranged for Vice President Xi Jinping to announce a $2 billion joint venture between Shanghai Media, China Media Capital and Dreamworks Animation. Instead Jeffrey made the announcement himself regarding a far more modest $330 million deal.
Even former MPAA chief Jack Valenti got egg on his face back in 1994 when he proclaimed that he had negotiated a contract to lift all Chinese quotas and completely open up the Chinese entertainment market to Hollywood content. He later learned to his disappointment that he had negotiated the deal with a CCP apparatchik who lacked any decision-making authority.
If and when the new quota rules do get implemented, the biggest winners won’t be American studios, independents, or filmmakers. The biggest winners will be China Film Group and the PRC’s theater operators. With 14 additional Hollywood films to release each year, they’ll collectively rake in some $600 million or $700 million in incremental box office during the first year alone, with much more in subsequent years. 75 percent of that amount will stay in their pockets, making them the real beneficiaries of China’s ‘conciliatory’ moves.
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.
By Robert Cain for China Film Biz
February 17, 2012 from Beijing, China 
I’m happy to be reporting today from Beijing, where I’ve just finished a second day of investor meetings on my 10-day, multi-city China trip. Things are going quite well; the level of interest among investors wishing to fund films made outside of China is higher than I’ve ever experienced. With a little luck I’ll be making an announcement regarding my company, Pacific Bridge Pictures, in the coming weeks.
Of course, any announcement I might make would pale in comparison to the one apparently being engineered by Dreamworks Animation (DWA) CEO Jeffrey Katzenberg. Although it hasn’t happened yet, it’s been widely reported that Katzenberg has arranged to have China’s President-apparent Xi Jinping announce today the formation of a new three-way, Chinese government-backed, $2 billion joint-venture between DWA, Shanghai Media Group, and China Media Capital.
According to reports in the Chinese press, under the terms of the joint venture the three companies will construct a studio facility in Shanghai with the intent of developing and producing film, television and live stage productions aimed at the booming Chinese media market.
None of the partners has deigned to comment or confirm the reports, but we’ll presumably know today whether there is truth to the story.
Assuming it is true, I’m giving Jeffrey Katzenberg a virtual kowtow of admiration and respect for his exemplary showmanship. Enlisting China’s President-to-be as his emissary is a brilliant political and public relations coup, and a win-win both for him and for Xi. As he prepares to assume the mantle of leadership in the People’s Republic, Xi gets to demonstrate China’s largesse (and importance) to the U.S. by showering a major Hollywood company with a $2 billion ‘gift,’ while deflecting attention from China’s extremely one-sided behavior with respect to entertainment trade. For Katzenberg, Xi’s endorsement would cement his standing in China’s animation business, and also send an important signal to Hollywood that he sees China as his most important territory after North America.
Although they have been quieter until now than DWA, Hollywood’s other major animation companies should not by any means be counted out. It hasn’t escaped the attention of Universal’s Illumination or Disney’s Pixar that China’s family animation market tripled in size in 2011 versus the prior year.
With heavy government support and a voracious market for animated films and TV programs and related merchandise, China will likely become the world’s biggest territory for these companies–even bigger than the US–in less than a decade. Although fewer than a quarter of animated feature films released in China are made by U.S. companies, these films dominate the market with a nearly 75 percent share of the box office.
China has a lot of catching up to do before its animation production companies can compete in terms of storytelling, technical quality, and global commercial viability. Because U.S. expertise is highly prized in China, America’s major animation companies can anticipate that their futures there will be very bright indeed.
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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