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Hollywood Cashes in on China

2012-12-21 09:53:18        Global Times

"Transformers" and "Avatar."

Hollywood is cashing in on China's movie addition. And even though the exact numbers may be difficult to verify, it is clear that the growth trend has been significant in recent years, leading movie professionals in both continents to find ways to boost their bottom lines.

It has been widely reported that between 2010 and 2011, movie theater construction across the nation was roaring along at a pace of nearly 300 screens per month. Helping developers to fill those seats, a new revenue-sharing deal to increase the number of Hollywood films screened in the country was signed between China and the US. The agreement took effect in February this year and raised the total number of imports from 20 to 34 - as long as those additional films are in the 3D or IMAX format.

Despite the resulting carnage experienced by domestic films, the box office totals are still setting annual records, with this year's estimated total revenue soaring above 15 billion yuan ($2.4 billion), according to Xinhua. In the first half of this year, domestic films made only one third what the foreign imports brought in, and there is no reason to believe results of the second half won't rewrite the same sad tale.

As Chinese directors are left scratching their heads trying to get more screen time at the multiplex, Hollywood producers are salivating as they vie for a bigger piece of the Chinese pie.

Exponential growth

According to a study conducted by the Legal Mirror from 2006 to 2011 (covering the 5-year period before the new agreement), China's contribution to Hollywood's overseas earnings rose from 1.63 percent to 7.9 percent.

Now that the trend is well established and the new revenue-sharing deal is proving lucrative, Hollywood is thinking about China even during the planning stages of many films. Some pictures may only contain a sprinkling of Chinese cultural elements, while others develop entire China-related subplots (Shanghai scenes in Looper).

But what makes domestic industry insiders truly proud is that on one hand, Chinese movie stars are being awarded more important roles to attract audiences (Li Bingbing in Resident Evil 5), while on the other, some scripts are being rewritten to avoid offending Chinese moviegoers.

An example of that latter strategy comes from MGM's 2008 remake of Red Dawn in which the enemy army was switched from Chinese to North Korean.

The 1984 version starring Patrick Swayze depicted a Soviet invasion of the United States. For the remake, the invading force was originally changed from Soviet to Chinese. But by the time the film had been completed, the Chinese troops had been replaced with North Koreans - an obvious bow to the Chinese market.

In a 2011 report, The Los Angeles Times summarized the move this way: "Without Beijing even uttering a critical word, MGM is changing the villains in its 'Red Dawn' remake from Chinese to North Korean. It's all about maintaining access to the Asian superpower's lucrative box office."

Be not proud

Although many Chinese are happy to see that domestic audience preferences can influence the movie moguls in Hollywood, some insiders are more realistic.

"We can only say that the Chinese market is likely to be increasingly important to Hollywood," said Teng Jingshu, vice general manager of Chinese Entertainment Shanghai. Teng's opinion is supported by movie critic Bi Chenggong. Bi told the Global Times, the overseas market for Hollywood is well established with the UK, France, Germany and Japan as the former biggest markets.

"In the recent five years or so, several new markets have emerged: Russia, China, South Korea, Australia, Mexico, Brazil and Spain, which have developed pretty much to the same degree as the previous ones," Bi said. "Yet, among all these countries, no one is developing as fast as China. And the rate of annual increase in China is even higher than the sum of all the other countries' rate."

Even so, it will take years for China's total box office revenue to equal what Hollywood achieves at home.

According to a report from the Legal Mirror, the box office of China in 2011 was around $2 billion. In North America (the US and Canada), it was $10 billion.

According to Bi, it will take nine or 10 years to catch up: "Only then will the Chinese market be regarded as important as the UK and France."

This is because, as Bi analyzed, the box office spilt ratio in China, at 30 percent, is currently much lower than the international standard. So, even if a movie makes $10 million in China, what Hollywood gets from that is lower than if it made 42 percent of $9 million somewhere else.

Bi and Teng agree that under the current situation, with all the new cinemas and screens going up, Hollywood producers consider the spilt ratio as more important than the box office.

US looks outward

Compared with the Chinese market, both US and Chinese media are saying that North America is experiencing a downward trend.

In a report on Foreign Policy magazine's official website, Stephen Galloway, executive editor of The Hollywood Reporter, wrote that this year's theater revenue in North America from early May to early September had a downturn of 3 percent compared with last year, and "fewer people went to the movies this past summer than at any comparable time in 20 years." He went on to thank foreigners in general for coming to the industry's rescue.

As for whether the US market will keep going down, Teng thinks not. "It's the rule of the market that sometimes there will be a blockbuster that ushers in a technical revolution, like Avatar, and sometimes there will be more artistic or political works that may not gross as much at the box office," she said.

By the end of this year, recent blockbusters like Skyfall and The Hobbit will have pushed Hollywood's yearly global box office total back into record territory. The good news for China is that insiders on both sides of the Pacific clearly understand one important point - good things come to those who cooperate.

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