‘China Has Ghosted Hollywood’: How the Fallout Will Affect the Film Industry

At some point in the past decade, Hollywood stopped looking at the burgeoning Chinese box office as found money and instead embraced the theatrical market’s windfall for what it has become: a necessity.

Today, whether or not blockbuster plays in China could mean the difference between hundreds of millions of dollars in ticket sales. That reality is downright painful at a time when China has continued to deny releases for Hollywood’s biggest 2021 movies, such as Disney’s “Black Widow,” “Shang-Chi and the Legend of the Ten Rings” and “Eternals,” as well as Sony’s “Venom: Let There Be Carnage.” And the few films that were given access to Chinese movie theaters, including MGM’s James Bond sequel “No Time to Die” and Denis Villeneuve’s “Dune” remake, earned far less than their studios had expected.

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China has always been strict about the number of foreign films it allows to screen across the country’s thousands of venues. But recently, there has been increased ambiguity about why the world’s largest theatrical market has all but closed the door on U.S. project — and if it will change in 2022 and beyond.

“China has ghosted Hollywood,” says Wall Street Journal reporter Erich Schwartzel. His new book, “Red Carpet: Hollywood, China, and the Global Battle for Cultural Supremacy,” hits shelves on Tuesday and offers a timely look at long-standing tensions between the two dominant forces in the movie business. “About a year ago, I would have said we’re looking at a future where China needs Hollywood less and less, and Hollywood should start taking steps to prepare. But over the past year, it’s been drastic.”

Ahead of the release of “Red Carpet,” Schwartzel spoke to Variety about China’s growing influence on Hollywood — and what it means for the film industry.

China hasn’t granted access to many major Hollywood movies, but it recently approved Woody Allen’s romantic comedy “A Rainy Day in New York,” which is three years old. What’s the reasoning behind these decisions?

The Woody Allen thing almost feels like trolling at this point. There’s a lot of theories. One is there’s a broader trend toward Chinese moviegoers preferring Chinese entertainment. You’ve seen American movies making up a smaller and smaller share of the box office over the past couple of years. This feels more charged than that. It feels like an effort to punish America as tensions rise. A lot of the people making decisions on what movies get in, they’re also interested in keeping their jobs. Sometimes the risk assessment is pretty easy. If you know that tensions between the U.S. and China are relatively high, do you really want to be the state bureaucrat who lobbies to let an American movie in and risk sticking your neck out?

There also seems to be an effort within China to stir nationalism and keep outside influence out. One thing that surprised me when I was writing this book is just how often China will turn on or turn off that spigot. There have been numerous examples throughout history when China, for whatever reason, maybe it’s a Communist Party anniversary, will say, “We’re going to cut back on the number of foreign films we let in.” And not only that, but “we also want state TV stations to start showing Chinese war movies, something that will bolster bolster patriotism.” What we’ve seen in the past year with all these major movies not getting in is the most consequential pattern that we’ve ever seen. There are a lot of studios with a big fat zero in a column they were expecting some money.

Are Marvel movies or “Fast and Furious” installments, which have always been enormously successful in China, waning in popularity? Or does the Chinese government have outsized influence on which movies do well?

It’s such a chicken-egg question. The controls that were put in place several years ago, like blackout dates or stacking movies so they cannibalize one another’s grosses, are still used, but less necessary — in part because Chinese movies, often with the help of Hollywood, have gotten better. People [in the U.S.] lament you can’t make any movie that’s not a superhero tentpole anymore. In China, there’s actually a pretty robust moviemaking operation of comedies, dramas and science fiction and original stories. And they’ve been doing really well. China is always going to want controls that ensure it looks to be the preferred option. But I also think that it is becoming more and more the preferred option. I don’t know if studios should have been as surprised as they were that eventually Chinese people would prefer to see Chinese stories and Chinese movie stars.

“Spider-Man: No Way Home” has managed to become a huge success without China. Can mega-budgeted movies still survive if they don’t get an attractive release date in China, or is that film an exception?

I think it’s an example of how they can do well, but it’s also an example of how they could have done better. Any studio executive would still prefer $1.9 billion [in global box office grosses] to $1.6 billion. The key question: As China becomes more and more of an uncertainty, does that change the budgets these movies are greenlit at? You can run a good business making $1.5 billion on a movie, but it may be a different equation than one that was expecting [to earn] $1.8 billion. “Spider-Man” is doing such gargantuan business, but I think it’s probably a little dicier for movies on the bubble. There have been a lot of expensive movies that China has meant the difference between profit and loss.

Hollywood is laser-focused on streaming. How does that change the film industry’s reliance on China?

It’s bifurcated things a bit. If streaming is going to mean that theatrical releases are reserved for the biggest of the big movies, that makes China more powerful in that department. But if there’s this other part of the business that’s really streaming oriented, that does reduce reliance because a lot of streaming content from studios doesn’t get into China. The business model is different whenever you’re trying to count subscriptions and not box office tickets. In one bucket, it has allowed China to retain power, but in another, China is a little irrelevant. Will a Disney Plus try to get into China? This traditionally has not worked out, but we keep learning time and time again that 1.4 billion consumers are impossible to ignore.

U.S. ticket sales are split roughly 50-50 between studios and theater operators. With China, studios only get 25% of revenues, but in return they don’t pay for marketing or distribution. Since it’s a notably smaller percentage, are those receipts mostly inflating the global box office figure or are they actually beneficial to film studios?

It’s mostly the latter. It’s not pure profit, but it’s much closer [to that] than what they get in the U.S. For a long time, studios were lobbying to the U.S. government and the MPA [Motion Picture Association] to do something about that. The 25% term was set in 2012, when China was a fraction of the market it is today. A lot of folks in Hollywood think China is allowed to operate on developing market rules, despite being a massively developed market. The 25%, while still a frustration, due to the intricacies of the dynamic — no marketing costs, things like that — it’s still found money. There’s comparatively much less work to do when you’re releasing a movie in China than another market.

What do you make of censorship in other territories, like North Korea?

We haven’t seen anything as dramatic as the North Korea hack. But the Chloe Zhao case last year was pretty high profile and extreme. A lot of folks will say, “Well, it’s the market reality. We censor movies for Saudi Arabia, Indonesia, airplanes.” The key difference is none have put the studios at odds with its own government. The U.S.-China rivalry is being called the story of the 21st century. It’s hard to ignore the fact that whenever decisions are being made, they are playing a role in this broader ideological debate.

Since Netflix isn’t available in China, it is one of the few Hollywood companies without a vested interest in appeasing Chinese censors. Is that important?

It’s a fascinating exception to the rule. It doesn’t seem like they’ll get into China, and it has given them this kind of freedom. As they censor elsewhere, they seem to not have to worry about China to the degree other studios have. It seems, so far, that just meant they’ll carry shows and documentaries that others wouldn’t touch. It doesn’t feel like it’s translated into a purposeful mission. I haven’t heard of Netflix saying, “We’re not in China, so let’s greenlight a bunch of content critical of China.” But it does seem to give them a license that other studios and tech companies moving into China don’t have.

China recently restored the original “Fight Club” ending after censorship backlash. Were you surprised to see that reversal?

We don’t necessarily see any kind of reaction to these things in China. It introduced a lot of Americans to what storytelling in China is like, with every movie trying to reach a moral equilibrium. It was like that in the U.S. for a while when Hollywood was much more religiously influenced. There had to be consequences for bad actions. But China takes that to another level. Most Chinese moviegoers see through this. I don’t think there are a lot of Chinese moviegoers streaming “Fight Club” and not seeing what [the revised ending] is all about. I would talk to people who would say things like, “I thought it was pretty good for a propaganda movie.” There’s more awareness that Americans can acknowledge. It’s not like people are seeing a movie and then being like, “Oh, thank God the Chinese government stopped Tyler Durden.

This interview has been edited and condense for clarity.

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