Wanda's Big Qingdao Studio Pitch: Will Hollywood Take the Bait?

The Hollywood Reporter

Dalian Wanda Group chairman Wang Jianlin, Asia's richest man, brought his best game to Hollywood on Monday night, rolling back the curtain on his company's $8.2 billion film studio project in Qingdao, China.

He had plenty of A-list local support, too - Matt Damon, Los Angeles mayor Eric Garcetti and Academy president Cheryl Boone Isaacs all lent their voices to Wanda's pitch during the glitzy gala at the Los Angeles County Museum of Art.

The question that hangs in the air in the aftermath - as Wang boards his private jet back to Beijing - is whether Hollywood will buy what Wanda is selling on the eastern coast of China.

So far, the industry consensus appears to be: cautiously interested.

The banner news from Monday's event was that film and TV projects that shoot at Wanda's Qingdao Movie Metropolis will receive a new 40 percent rebate, co-funded by the Qingdao regional governments and Wanda itself, from a development fund worth $750 million and spread over five years. The rebate for each qualifying production will be capped at $18 million.

Not surprisingly, the pipeline from Burbank-based Legendary Entertainment, which Wanda bought for $3.5 billion earlier this year, is now scheduled to flow through Qingdao - Pacific Rim 2 and Godzilla 2 are the first tentpoles that will take up residence there. But will other U.S. studios take the bait?

"Forty percent is certainly an impressive subsidy and ranks up there among the highest," says Ilt Jones, a veteran location manager whose credits include Transformers: Age of Extinction, Iron Man 3 and The Dark Knight Rises. In Asia, Malaysia's 30 percent rebate for its Pinewood Iskandar Malaysia Studios was previously among the region's most lucrative.

Read more: Wanda Unveils Plans for $8 Billion 'Movie Metropolis,' Reveals Details About Film Incentives

"I hear on the grapevine that people in Hollywood still have qualms about issues like pollution, systemic corruption and culture clashes - but money talks," Jones wryly adds. "And when the studio execs who make the decision to send productions over don't necessarily have to spend much time there themselves, I'm sure there will be a healthy flow of production to Qingdao."

Bill Bowling, another location manager with decades of international experience (Sense8, The Insider), says that Wanda's incentive and infrastructure are an attractive package, but that the studio also needs to prove that it can facilitate the complicated staffing and workflow demands of big-budget productions.

"More than incentive amounts, trained and talented local crew are essential to create quality productions," says Bowling. If a foreign producer needs to fly in large numbers of crew and cast, incentive savings can quickly be canceled out, he argues.

"Sometimes people think that many on a filmmaking crew are laborers, easily trained," adds Bowling. "The reality is that effective production depends on many people working in sync with one another, each proficient in their skill and able to communicate well." 

Language itself can be a big obstacle, Bowling notes. And because of the studio's somewhat remote location, it may be difficult to find diverse supporting actors and background extras for non-Chinese films.

Given the way word travels fast within the film community - especially rumors of production delays or problems - the first few shoots in Qingdao will be vital test cases for Wanda.

Read more: Wanda Opens New China Theme Park Amid Battle for Dominance With Disney

There is a common perception that tried and tested production centers like Berlin, Budapest and others are the safest bet among the territories with decent subsidies, according to Jones. "But these were unknown territories themselves once," he explains. "All the studios watch carefully to see how the others fare in new environments - once a studio does well somewhere, then the flood gates tend to open." The stakes in Qingdao will be especially high at the outset.

One U.S. studio executive (who asked not to be named) says he believes one of the main attractions of Qingdao will be the way it makes official co-productions with China somewhat easier to greenlight.

Films that pass through China's film co-production system are classified by government regulators as local Chinese movies, meaning they can circumvent China's notorious quota on foreign film imports and take a larger share of ticket revenue (43 percent, instead of the 21 percent to 25 percent that U.S. studio titles usually get). To qualify as a co-production, a film must not only film partially in China, but also include Chinese story elements, as well as local cast and production staff. But if shooting in China is now more commercially and technically viable - not to mention more comfortable - thanks to the Qingdao studio, the overall co-production formula may become somewhat more appealing for big studios, especially given that China's box office is expected to surpass North America as the world's largest within one to two years.

"If you shoot there as a co-production, you're almost guaranteed more screens in China," the exec says. 

The projects that stand to gain the most from Wanda's incentive are "films that would benefit from the location, developing China market access and local-partner relationships," agrees Rance Pow, chairman of Asian film industry consultancy Artisan Gateway. 

As for the travel and time away from home that working in China would entail, the studio exec says: "Most of us in the business see ourselves a bit as explorers; we like going to places where we wouldn't have otherwise gone."

Once fully complete in August 2018, the Qingdao studio will be the most sprawling in the world, with 30 soundstages spread over 408 acres and several facilities that are larger than their international counterparts by far. But even if Hollywood were to snub the venture, Wanda executives boast that they won't have trouble filling it.

"When we did our surveys in China itself, our people came back to say there is already a big glut of productions and a huge need for more stages in the country," says Edwin Tan, president of Wanda Studios Qingdao. "We have no doubt in our minds that as domestic production increases, the local industry will need even more stages."

Jeffrey Chan, COO of Bona Film Group, a leading Chinese film company that invested $235 million in Fox's movie slate last year, says his company is waiting to assess the details of how the incentive works in practice, but agrees that Wanda appears to be "presenting a pretty appealing proposition." He adds the sophistication and cost of the Wanda stages may outstrip Chinese filmmakers' current needs, but perhaps not for long.

"With the growth of the Chinese industry, there will come a stage when we are producing Hollywood-standard films, and we'll need Hollywood-standard facilities," Chan says. "As for when, all I can say is sometime soon."

Borys Kit contributed to this report.

Read more: What Does Wanda Want? Weighing the Chinese Conglom's Global Movie Theater Buying Spree