The China Clusterf--k: Is Hollywood Fed Up?
China Relaxes Some Film Censorship Requirements (Report)
This story first appeared in the May 3 issue of The Hollywood Reporter magazine.
At a time when securing film financing is harder than ever, Hollywood desperately is searching for a pot of gold. And there it sits in China -- if only the studios can figure out how to get their hands on it.
But increasingly, whether seeking a big investment in a slate of movies or a far smaller commitment to an individual film, they are meeting with frustration. "A lot of people in China talk about wanting to invest, and ultimately, for whatever reason, it doesn't seem to happen," says the head of one entertainment company. "It's unclear to me what they think they're getting going in and, when it doesn't happen, what's caused them to change their minds."
By now, many studio executives have given up on the idea that authorities will ever permit a Chinese company to invest broadly in a studio whose films might not suit the state-run China Film Group. Many have actively pursued deals including, recently, Sony Pictures and Universal. (Some are said to be under pressure from parent companies in this respect.) Financier-producer Legendary Pictures also is said to be in pursuit of Chinese money.
Among contenders, perhaps DreamWorks Animation, with its family films, has fared best. It has released more than a dozen films in China without a hitch and has announced plans to team with Chinese partners to build a production facility in Shanghai. Kung Fu Panda 3 is set to be the first animated co-production in China.
Others have learned that even a partnership with a Chinese company on a film doesn't ensure their movie will be designated an official co-production, which allows studios to get a bigger cut of the box-office gross.
In fact, even if studios expect nothing more than the chance to play a movie in Chinese theaters and believe all hurdles have been cleared, sudden obstacles can arise. Such was Sony's experience with Quentin Tarantino's Django Unchained, pulled from theaters in China on April 11 literally moments after it began to play.
Still, the lure of China is strong. The country has become the world's No. 2 movie market (behind the U.S.), on track to become No. 1 by 2020. (China generated box office of $2.7 billion in 2012, up more than 30 percent from the previous year, and the country is still adding screens fast.) Although China typically returns only 20 to 25 percent of box-office grosses to U.S. studios on films allowed in -- less than other foreign markets -- a smaller cut of a bigger pot is well worth pursuing, especially in these hungry times.
But some say the climate in China seems to be getting worse, despite the easing of its quota system to allow into the market 34 foreign films a year instead of 20. There have been frequent censorship issues to contend with, as well as the Chinese desire to tilt the board in favor of homegrown product. In August, when The Amazing Spider-Man was forced to open opposite The Dark Knight Rises, MPAA head Christopher Dodd called the Chinese embassy in Washington to ask why.
There's growing awareness that the Chinese agenda in dealing with American studios is largely about creating China's own version of Hollywood. "I think they have a real ambition to build up a film industry, a real studio business," says Sony Entertainment CEO Michael Lynton. "They hope to learn a lot about how movies are made and marketed." Such thinking is said to have been behind Dalian Wanda Group's $2.6 billion acquisition of U.S. theater circuit AMC Entertainment in 2012.