China Suffers Cold in Hollywood 中国投资好莱坞需谨慎
China is finding out quickly that Hollywood may be all glitter and sparkle on the outside, but it’s quite a different world to insiders where cutthroat competition is more the norm and laggards are quickly cast aside to the B-list or worse. That’s the message coming across from a new report saying Hollywood movies are taking a growing piece of the Chinese movie market since Beijing started allowing more US films into the market earlier this year. It’s also the message that Chinese firms are likely to learn the hard way as they try to buy into the Hollywood scene, as one Beijing company will probably learn after last week signing a deal to invest in a big-budget US film.
Let’s look at the bigger picture first, which has seen the major Hollywood studios gobble up a bigger piece of the Chinese box office after a major relaxation of Beijing’s longtime restrictions early this year. (English article) Under the old system, foreign companies were only allowed to import 20 movies each year to China, greatly limiting their ability to sell into a fast-growing box office that has become the world’s second largest after only the US. But in February, Beijing raised the quota by allowing foreign studios to import an additional 14 films each year if they contained value-added effects like 3D or formatting for big screens like Imax.
An official with the State Administration of Radio, Film and Television, which regulates the sector, said that since the easing, the box office share held by local Chinese films has seen a “huge drop”, and this year has fallen to around 41 percent. He added that Chinese box office revenue reached 13.27 billion yuan in the first 10 months of this year, already outpacing total revenue for all 2011.
As a Shanghai resident and occasional movie viewer, I can say with some authority that foreign films do indeed dominate local theaters. At any particular time, only 1 or 2 foreign films will be available in theaters. But those films, including names like “Total Recall” and “Bourne Legacy,” which are both now in theaters, usually take up the big majority of screens, leaving only a few screens available for local Chinese productions.
The official in the article laments the declining share of local Chinese movies, and blames the problem on lack of competitiveness. Such talk may be cause for concern, as it could foreshadow a coming backlash to China’s recent strong moves to open its highly protected media market. In fact, the official’s comments echo similar ones made by another SARFT official 3 months ago, which again hinted at alarm at the rapidly rising influence of foreign media. (previous post)
While such a clampdown is possible, especially with new leaders coming into office, I wouldn’t expect it to be as serious as previous backlash if it comes at all. Instead, China should be awakening to the fact that building a strong media sector takes time, and it needs to give its young industry less protection and instead more space for creativity if it really wants to succeed over the longer term.
Meantime, other media are reporting that a Beijing company called Galloping Horse has sign on to help produce the new Hollywood big-budget film based on the popular sci-fi book “Enders Game.” Galloping Horse is actually making the investment through US special effects company Digital Domain, co-founded by blockbuster movie director James Cameron. Galloping Horse acquired the bankrupt Digital Domain last month (previous post), and clearly the struggling US company has wasted no time in convincing its new Chinese owners to invest in Hollywood movies, in this case taking a 37.5 percent stake of “Enders Game”.
I have no idea if Galloping Horse and Digital Domain are providing money or services as part of their investment, and I suspect it’s probably a combination of both. But I worry a bit about the Chinese company’s willingness to so quickly follow the advice of a bankrupt US company that clearly couldn’t survive by itself in the ultra-competitive movie industry.
While it’s quite possible that “Enders Game” will ultimately be a huge success, there’s also probably an even bigger chance that it will be a flop like so many other movies that started with big hopes and ended up as duds. I wouldn’t be surprised if we see more similar participation in big Hollywood films by Chinese investors in the years ahead; but I would also caution those investors to do their research and realize that Hollywood may be a place filled with glamor, but that the less visible failures far outnumber the high-profile success stories.
Bottom line: Foreign studios could face a backlash as they take a bigger share of the Chinese box office, but the size and duration of the pull-back is likely to be relatively mild.
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