Huanxi Media CEO Talks $600M Blockbuster ‘Full River Red,’ Chinese Film Industry Recovery

If there’s a company that’s emblematic of the Chinese film industry’s nascent post-COVID rebound, it’s Huanxi Media.

Co-founded in 2015 by veteran producer Dong Ping (Crouching Tiger, Hidden Dragon) and former attorney Steven Xiang, the studio built its business around signing exclusive deals with some of China’s most bankable directors to produce big-budget tentpoles to release during the country’s most lucrative holiday periods. Thus, China’s long, three-year path through the pandemic — featuring recurrent “Covid Zero” lockdowns of entire cities and provinces — hit the company particularly hard, as it regularly had to hold back its big-ticket films for better release conditions.

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When Beijing abruptly dismantled its COVID Zero policies in late December, Huanxi faced yet another dilemma. As the Omicron variant spread like wildfire throughout the country in late December, China’s cinemas and streets became even quieter in many cities than they had been before the policy pivot, as residents stayed home for fear of catching the virus that was suddenly everywhere (Disney released James Cameron’s Avatar: The Way of Water during this period and although the film was extremely well received, its China gross of $248 million is half as much as some initial estimates). Huanxi had one of its strongest titles of the year — legendary local director Zhang Yimou’s Full River Red, a period comedy thriller — ready for release over the upcoming Lunar New Year holiday, beginning Jan. 22. But it was totally unclear at the time how the post-reopening infection wave would progress — whether consumers would eagerly return to malls and multiplexes, or if the country could be facing a potential health system collapse.

“We actually had multiple discussions about whether we should delay the release,” says Xiang, Huanxi’s CEO. But his team ultimately decided that since the government’s pandemic control policies were over, they should roll the dice and put the movie out as planned. “Little did we know that people would end up lining up down the street to see the movie,” he says.

Full River Red has become the world’s biggest film of the year so far, earning more than $600 million. It’s also the top-earning title of Zhang’s long and storied career. Xiang says the veteran director told him he visited several local cinemas in disguise, simply to bask in the film’s enthusiastic holiday reception among the people. “It was quite a journey and an emotional end to the pandemic for us,” Xiang adds.

Full River Red is making its international sales debut at Berlin’s European Film Market this week. Ahead of the market, The Hollywood Reporter connected with Xiang to discuss the various factors driving China’s film market recovery in 2023 and how his studio is poised to capitalize on the moment with a deep backlog of potential blockbusters.

Huanxi’s founding strategy, as I understand it, was to partner with China’s top directors and then produce tentpole theatrical films for the Lunar New Year holiday and other major release windows, while also using that same exclusive content to later build out your own premium streaming channel. A lot has obviously changed since we last spoke — the pandemic made the theatrical market profoundly challenging for a very long time, and there has been a fundamental reassessment of the streaming business. Has your approach changed in any way? 

Well, the quick answer is that our strategy has not changed. We still believe in that two-pronged approach, supported by us having exclusive relationships with China’s best content-generating directors. That will remain the foundation of our company. What changed, obviously, was our speed, because of the interruptions of the past three years. We had two major releases ready for Chinese New Year in 2020, but then everything went into a standstill and locked down. We obviously didn’t anticipate the pandemic, but we also didn’t anticipate that the ensuing tightening of the pandemic policy would last as long as it did. It was very difficult for the whole industry, not only us. With cinemas opening and closing all of the time, we weren’t able to release any of our major films with confidence, and production of new films was interrupted as well. This was an interceding disruption that we couldn’t possibly foresee. Obviously, financial difficulties came with it, because the main pillar of our business was no longer reliable. For our streaming service, we have always been very disciplined in our curated approach, which we think will distinguish us from the big platforms. But it still requires regular investment — particularly for fresh, high-quality Chinese content — in order to have the rate of growth that we envision. During the pandemic, we had to pare back and slow down. The good news is that we persevered — and now we are quite confident about 2023.

Despite the difficulties you mentioned, Huanxi managed to make some pretty impressive moves during the first phase of the pandemic. Within just one day of Chinese cinemas shutting down in January 2020, you determined that the problem was unlikely to go away anytime soon, and you executed a $100 million deal with ByteDance to release your Chinese New Year tentpole Lost in Russia online for free. Selling a major theatrical movies to a streamer gradually became commonplace during the pandemic, but this was at the very beginning. How did you pull that off in such an uncertain moment?

We believed at the time — and we still believe — that this was a great move for our company and our shareholders, as well as for the general public, because it allowed them to see a new high-quality Chinese New Year movie at home during a very difficult and scary period. Literally three days before the pandemic started, our movie Lost in Russia had already pre-sold about $5 million (RMB 30 million) worth of tickets. But when cinemas closed, we very quickly came to the conclusion that this would be a major issue in terms of people being able to return to movie theaters. One of the main reasons why we were able to execute a deal so quickly was that we owned 100 percent of the movie. I don’t want to give too much credit to our team, because this was the biggest factor. Most big films in China have many different investors, so most of the other Chinese New Year tentpoles would have needed a lot more time to discuss and reach agreements among all of the stakeholders. But since we owned the whole thing, we only needed to negotiate with ByteDance.

How often do you retain 100 percent ownership of your films? Like you said, that’s pretty rare in China — especially in the big-budget tentpole category where you are focused. 

It depends on the various directors we work with. Sometimes we also bring another production entity or investor into the project. Normally, we consider whether the third-party institution will be additive or accretive to the project itself. For instance, using Full River Red as an example, we brought in Maoyan [China’s largest movie ticketing app] to participate in that project — but we still maintained majority control of it.

So, you have exclusive deals with a stable of top filmmakers, but I’ve noticed that you don’t necessarily produce all of the films that these directors make. How does it work?

Well, it’s an exclusive arrangement, but when they have projects that Huanxi decides not to pursue, we sometimes make an exception so that the particular creator can work with other people. The best example, again, would be Zhang Yimou. Our first film together was One Second (2020), and right after that one, we started to look at new projects together. And, you know, as a prolific creator, he had several different projects he was interested in. Among those, we wanted to work with him on Full River Red. The question then is timing, right? Which will he do first, and how does each title best fit the market and our slate. There is a lot of trust involved, and it’s a very cordial relationship. In this case, he did two films first (Cliff Walkers, 2021; Sniper, 2022 — both produced by other studios), and then we came together again for Full River Red. 

It seems fair to say that you picked the winner.  

Well, needless to say, we’re very pleased with the response from the audience. It’s a period-mystery-suspense-drama-comedy, all wrapped into one; and the story has its basis in one of China’s most famous, classical poems. So, many people have been saying it’s a film that only Zhang Yimou could have handled. We began developing it right after One Second, but production didn’t commence until the summer of 2022. It was a relatively quick shoot, because the whole country was still subject to the “COVID Zero” policy, so it was very difficult to get a big group of people together for a production. It really was not easy. But Zhang Yimou had a lot of experience of working within a bubble, so to speak, because he directed the 2022 Beijing Winter Olympics opening ceremony, right? So he was able to use that experience to organize the shoot in the safest, most efficient manner. Another interesting bit is that he originally conceptualized the film as a single shot. The film takes place in the residence of the prime minister during the Song Dynasty and Zhang thought about using a single-shot effect as a way of showing the intensity of the confined space. He later abandoned this idea, but I think you can still feel its influence in the film — in the movement of the camera and the people, the quick pace, and the way the full story unfolds over what’s supposed to be a span of just a few hours.

You were among the first to anticipate the severity of the pandemic’s impact on the industry. Now that China is rocketing out of lockdown, what are your expectations for the rest of 2023? 

On a macro level, the January box office total in China exceeded RMB 10.1 billion (about $1.5 billion), which is a record for a single month. So that’s very encouraging. And as we talked about, we weren’t able to release many of our major movies over the past couple of years because of the pandemic. So we have about 10 movies either finished or in post-production. These include Ning Hao’s Mr. Red Carpet with Andy Lau, a Li Na biopic by Peter Chan and Huang Bo’s comedy Papa. All three of those films are major releases for China, so we’re hopeful that it will be a very big year for us — and for Chinese cinema as a whole.

On the regulatory front, there have been a lot of pro-growth policy reversals as of late, including in the film sector. I understand that domestic films are able to set their own release dates again and there is a new boss at the Film Bureau, an industry veteran who is thought to be very knowledgeable and industry-friendly. More Hollywood titles are also being allowed back in. How are you viewing these changes and what signals do you take from them? 

Well, we’ve heard about the things you mentioned and, of course, we welcome all of that. The regulatory support is coming at a very opportune time, after the long hard impact of the pandemic. There are also Marvel movies coming back into the market. That’s a welcome sign, as well, because having great international films in the market is healthy and good for the whole industry, including us. I agree with the economic consensus that China is headed for a big bounce-back year. I think the box office could break RMB 60 billion ($8.8 billion) — and hopefully, Huanxi will have a healthy portion of that.

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