China Dreaming Big on Movies
 
May 06, 2017
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When Hollywood studios have wanted to capture a big share of the Chinese market for their blockbusters, they have traditionally inserted scenes filmed in Shanghai or Hong Kong or used Chinese stars to play a leading role in the film.

The model has now been turned on its head, however, with Chinese investors now putting up money to hire Hollywood stars and buy Hollywood technology to shoot China-themed films. One recent example of that is the Zhang Yimou film “The Great Wall,” a collaboration between Dalian Wanda Group subsidiary Legendary Entertainment, Universal Pictures, the China Film Group and Le Vision Pictures that was released at the end of 2016.

With a production budget of US$150 million, “The Great Wall” set a new record for production costs for a Chinese movie. It was filmed primarily in the Qingdao Oriental Movie Metropolis but made in English, and its production team of producers and screenwriters came straight from Hollywood armed with such credits as “The Dark Knight,” “The Bourne Identity,” and “Jack Reacher: Never Go Back.”

Director Zhang Yimou wanted to use the picture to try his hand at the “heavy industry” nature of filmmaking, to make a big budget film while conveying Chinese culture.

To do that, however, he acknowledged in an interview while promoting “The Great Wall” that, “If we want to do a film for the whole world, we have to complete it within this business framework [Hollywood’s professional system]. I personally don’t have that ability.” Even with “The Great Wall’s” Chinese orientation, Zhang says the target audience of the film, which he has described as a “popcorn blockbuster,” was teenagers in a small town in Arkansas.

Time has since proven that the team of Hollywood producers and screenwriters and Zhang Yimou underestimated small town youth. “The Great Wall” has taken in US$320 million worldwide to date, of which US$170 million has come from China, according to Box Office Mojo figures. The film has only grossed US$45 million in the United States, however, leaving it well short of the US$400 million to US$500 million global box office its producers originally anticipated.

In explaining the disappointing U.S. numbers, The Financial Times opined that while the world is accustomed to American heroes, American filmgoers “have little appetite for Chinese fables.” But the determination and power displayed by China’s film industry in backing “The Great Wall” cannot be dismissed by negative reviews or box office losses, even if it faces obstacles in projecting its influence globally.

“Because of differences in ideology and cultural habits, there remain big obstacles for Chinese films to reach out into the world or to resonate in Hollywood. It’s not a problem that can be resolved by a film itself or by buying Hollywood companies or taking stakes in Hollywood films,” Chinese film director Zhang Yibai tells CommonWealth Magazine.

“How to overcome these obstacles? Whether it’s Zhang Yimou or Chen Kaige, there will be one wave of people after another giving it a try. It’s not an easy problem, but there will eventually be an individual or a generation of people who will overcome the barriers,” says the director of “Fleet of Time” and “I Belonged to You.”

Fang Ting, a writer for Chinese technology media “36Kr” who has covered the development of China’s film industry for many years and reported on “The Great Wall,” sees the film as a step in the right direction. “Wang Jianlin, Jack Ma, Zhang Yimou – this generation of people – have the dream of making China a cultural powerhouse. But the real significance of ‘The Great Wall’ is that it was a co-production, allowing China’s younger generation of filmmakers to participate in the Hollywood ecosystem,” Fang says.

She argues that China has long talked about China-U.S. co-productions and moving closer to Hollywood, but it was nothing but empty rhetoric until the goals were achieved in the making of “The Great Wall.” Ready to Step Up: Chinese Cultural Talent That experience is critical considering the potential rise of a younger generation of talent.

In an article in Japanese business media Nikkei published at the end of last year, Peking University management professor Jeffrey Towson argued that while many people believe the increasing flood of Chinese money is having an impact on Hollywood, what will affect Hollywood the most in the future is the wave of artists, animators and other creative professionals emerging in China.

“Of the 19 million students enrolled in Chinese universities in 2009, over 1 million were studying art and design, a higher total than for science, law, education or economics. These students are now entering the workforce in droves,” Towson wrote.

When Japan-based Sony bought Columbia Pictures Entertainment (which included Columbia Pictures and Tri-Star Studios) in 1989 and India-based Reliance Entertainment acquired a stake in Dreamworks in 2008, the moves sparked considerable interest in American media. But those two companies were far more low-profile than the Chinese companies of today that see themselves as kings of the world. The Dalian Wanda Group, which harbors the ambition of becoming the world’s largest movie theater company, is the clearest example.

After acquiring AMC Entertainment Holdings, the second largest movie theater chain in the United States, in 2012, it bought Europe’s largest cinema chain, Odeon & UCI Cinemas Group, in July 2016.

At the beginning of 2016, it also paid US$3.5 billion to acquire U.S. film studio Legendary Entertainment, which produced the “Batman” series of movies, “Inception,” and “Jurassic World,” giving the Dalian Wanda Group a complete industry chain from movie investment, production and distribution to movie theater operations.

Similarly, Alibaba Group founder Jack Ma has also sought a high profile in the entertainment business, meeting with superstar Tom Cruise and acquiring a stake (through Alibaba Pictures) in Steven Spielberg’s film studio, Amblin Partners. It’s no surprise then that a Time Magazine cover story in February 2017 focused on “How China aims to take over Hollywood.”

The story quoted an executive who has partnered with Warner Bros. and Dreamworks as saying that China has both big pockets and a big stomach.

According to the Motion Picture Association of America, the total box office for North America (U.S. + Canada) in 2016 was US$11.4 billion, compared with US$6.6 billion for China, the world’s second biggest market.

Taiwan had a box office of US$300 million for the year, good enough to rank 16th in the world. Over the past five years, however, an average of 10 new theaters have gone up per day in China, and last year the number went up to 27 per day, leading many observers to believe that China will surpass North America as the world’s biggest movie market in the not-so-distant future. In its “Global entertainment and media outlook 2016-2020,” international professional services firm PwC (PricewaterhouseCoopers) predicted China could vault pass the United States at the box office this year.

As China gradually steps closer to becoming the world’s biggest movie market, the hands of government are visible everywhere. Protecting Domestic Films According to Hollywood website Tracking Board, the 34 American films imported into China (the maximum allowed under a quota system) in 2015 accounted for only 5 percent of the films shown in China that year but 38 percent of China’s box office. Those figures do not include the 87 films co-produced that year by China and a foreign partner, which are not subject to the quota system.

“China’s State Administration of Press, Publication, Radio, Film and Television’s main mission is to keep the box office for domestic movies higher than for foreign movies. So during a ‘national movies protection month,’ the Chinese New Year holiday and the extended Labor Day holiday, there are no new Hollywood movies for moviegoers to watch,” says a Chinese film equipment vendor. There was even a point in time when the films “The Amazing Spider-Man,” “Spider-Man,” and “Batman” were all shown on the same day to have them face off against each other.

As a result, Hollywood believes it needs to go the co-production route if it wants its movies to be screened during peak viewing periods. But Chinese moviegoers today are more discerning and less willing to back subpar Chinese-language films, contributing to the slowdown of box office growth in China last year.

Beyond government support, digital innovation has also contributed to China’s thriving film industry by creating a new wave of middle-class consumers and making it easier for the private sector to participate in the movie production business.

Many attribute the strong, sustained growth of China’s film industry to the huge inflow of capital, “but I think it has been more consumer-driven,” says director Zhang Yibai, whose “I Belonged to You” grossed 800 million renminbi (about NT$3.5 billion) last year.

Zhang observes that viewing behavior has quietly changed as Chinese consumers have gotten into the habit of paying for content, home TV screens have gotten bigger, and video websites have driven the rise of web dramas and even super dramas (web dramas with big budgets, big stars and high broadcast numbers).

The Rise of Web Dramas, Movies “Many movie directors have started to make web dramas, those super dramas with budgets of 15 million to 20 million renminbi per episode whose production models and content are influenced by American dramas. I think this could draw large groups of people away from movie theaters and to the internet to watch movies in the next two to three years,” says Zhang, who jokingly points out that in the past, directors were faced with the choice of making either an artistic film or commercial film, but now they may have to choose between video websites and movie theaters.

“Internet movies will present an opportunity in the future,” says Yvonne Huang, deputy general manager for film marketing management at Le Vision Pictures. The extension of the big screen to households has encouraged a broader range of films, such as artistic films, teen films, mysteries, and family films, that can cater to target audiences, Huang says.

“In the past, you didn’t know how consumers perceived marketing communications, but now users are online, and you can use data to more precisely reach consumers,” she says.

According to China-based CEC Capital Group’s report on China’s entertainment industry in 2016 and 2017, the number of Chinese users paying for video content has continued to grow rapidly, and it dubbed 2016 the year the paid content market came of age with nearly 60 million paying users. That group will increase to 100 million by the end of this year and to between 220 million and 250 million by 2020, the report estimated.

There is little doubt that this increasing segment of paid content users will likely be the new engine of growth for China’s entertainment sector in the next three years. China’s evolution from a literary generation to a visual generation to a game generation, as well as from people who read novels to people who watch DVDs and now play video games, means that the country’s film and video industry should enjoy a veritable feast in the future. But can it overtake and take down Hollywood and achieve its dream to become a film and video industry powerhouse? As much as China may be in a hurry, it will take a while before that question can be answered.