The collapse of The Great Wall at the domestic box office (it has made $34.8 million in North America) has iced any notion of a significant future for U.S.-China co-productions. The movie likely will end up with losses of more than $75 million, sources say, and Universal Pictures will be on the hook for at least $10 million.
The studio funded about 25 percent of the film's $150 million production budget, the rest coming in equal parts from Legendary Entertainment, China Film Group and Le Vision Pictures. But Universal also covered Wall's global marketing expenses, conservatively estimated at $80 million-plus. The film earned $171 million in China (a disappointment) and is expected to top out at about $320 million globally. That's way less than investors had anticipated for the biggest-ever U.S.-China co-production. "The fusion of the No. 1 and No. 2 movie markets in the world will eventually happen, but it is a misfire, domestically speaking," says box-office analyst Jeff Bock. Adds one Hollywood executive who has dealt extensively with China, "There's no question but that it's a failure."
The good news for Universal is that its share of this failure will be relatively modest. The studio gets to collect a roughly 10 percent distribution fee from all theatrical revenue (between 40 percent and 50 percent of the total box office), and box-office rentals likely will recoup much, if not all, of its marketing outlay before other investors dip into whatever money is left to cut into production costs. The four partners will split any further theatrical income equally.
If the movie generates hoped-for ancillary revenue (including $20 million from domestic home entertainment and as much as $40 million from international home entertainment, with $25 million to $30 million from TV - admittedly, a best-case scenario), that will further stanch the red ink.
Still, the crumbling of this Wall has toppled much hope for major Sino-American pictures. Among the lessons insiders have learned are the difficulties of finding stories that meld Eastern and Western characters and the challenges of blending crews, which in Wall's case meant hiring 100 interpreters and solving conflicts that allegedly took place among some below-the-line workers.
"This was the first movie of its type," says one executive connected to the project. "You're trying to appeal to everyone, and you're not compelling enough to appeal to anyone. It feels like Esperanto."
To date, the studios have viewed officially sanctioned China co-productions with skepticism, even though they offer vastly greater financial benefits, enabling backers to pocket 43 percent of ticket-sale revenue out of the country, far more than non-co-productions allow. Past tentpoles, such as Paramount's Transformers: Age of Extinction and Disney's Iron Man 3, were briefly planned as co-prods before their producers realized the depth of Chinese involvement and script control.
The highest-profile co-productions in the works are low- to midbudget period pieces such as Skydance and Alibaba's World War II drama The Flying Tigers, written by Randall Wallace (Braveheart), and producers Mark Gordon and Hawk Koch's road movie Edge of the World, to be co-produced by Pegasus and China Film Group.
Instead, studios have focused on strategic partnerships to boost their returns. Sony struck a financing deal with Dalian Wanda Group, and Paramount recently closed a purported $1 billion pact with Shanghai Film Group and Huahua Media Group.
Developing fully Chinese content with local joint ventures also is seen as a safer bet than co-productions. Warner Bros. is at work on a slate of a dozen Chinese-language films for its Flagship Entertainment banner, a partnership with Beijing-based China Media Capital.
Set in the time of the Song dynasty, Wall tells the story of European mercenaries, led by Matt Damon, who join forces with the Chinese to fight rampaging monsters. It's not the first feature director Zhang Yimou has made with an American star: He teamed with Christian Bale on 2011's The Flowers of War, solely financed by Chinese money. That $94 million movie earned $96 million in China but perished in the U.S. with $311,000.
Regardless of Wall's failure, one analyst predicts Hollywood will be back for more. "The market opportunities are too substantial to ignore," says Eric Handler of MKM Partners. "The problem with The Great Wall in the U.S. was poor reviews. At some point, someone will find the right formula."
Patrick Brzeski contributed to this report.
This story first appeared in the March 17 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.