Can Hollywood Studios Win in China?

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Keanu Reeves, Luc Besson

Western film companies would do just about anything for a piece of the action in China, which recently overtook Japan as the world’s second-largest movie market. From ensuring big-budget international releases are China-friendly to sharing editorial control with local partners, major studios are pulling out all the stops to break into the difficult, highly regulated market.

 

It’s easy to see why. China’s box office receipts grew by 36 percent to $2.7 billion last year, and the country is on pace to surpass the United States as the world’s largest movie market by 2020.

 

Though China recently relaxed regulations on foreign movie companies, only 34 foreign films can be released on the mainland each year, and foreign companies may keep only 25 percent of any revenues. Regulators aren’t shy about insisting the country is portrayed positively, and they prefer films that emphasize Chinese culture and values. While foreign production companies have long lobbied for better access to the Chinese market, they now seem to be shifting gears and joining forces with Chinese companies, either by establishing jointly owned production companies or through co-production deals with domestic companies. Filmmakers and Hollywood executives are hoping that by cooperating with local studios, they can get a piece of the enormous market and keep regulators happy at the same time. Whether they can please Chinese audiences and earn a decent return doing so, however, remains to be seen.

 

Luc Besson, director of “The Fifth Element,” is one of the people trying. Besson came to the Beijing International Film Festival last month from Paris to formalize a co-production deal between his company, EuropaCorp, one of France’s largest production companies, and Fundamental Films, a large distributor based in Shanghai. As part of the three-year deal, Fundamental will distribute up to 15 titles produced by EuropaCorp and co-produce at least three of the movies. For EuropaCorp’s first joint production, “Wolf Totem,” an adaption of Jiang Rong’s award-winning, semi-autobiographical novel, Besson will team up with China Film Group and Beijing Forbidden City Pictures. The film will be shot in China using Mandarin-speaking actors.

 

“We are convinced that part of the future of our company relies on China. We aim to become a major player here,” Christophe Lambert, CEO of EuropaCorp, told the Financialist. “This partnership with Fundamental Films is crucial. The China market is opening, and by working with local partners we’re able to compete on the same levels as large Hollywood majors.”

 

Last year, DreamWorks Animation announced it was partnering with China Media Capital, Shanghai Media Group and Shanghai Alliance Investment to develop a Shanghai studio enterprise valued at $330 million. The ambitious venture, Oriental DreamWorks, aims to produce one animated feature a year starting in 2016.

 

DreamWorks Animation CEO Jeffrey Katzenberg says Western studios can’t afford to overlook China’s tightly controlled media market. “When you look out five to seven years from now, China will be the number one media market in the world,” he told the Los Angeles Times.

 

Partnering with a local producer can be an effective way to navigate regulations imposed by China’s State Administration of Radio Film and Television (SARFT). Foreign producers say the arrangement allows studios to bypass the stringent quota system that limits their releases, while Chinese officials see an opportunity to reinforce cultural values and influence movie content.

 

“Co-productions should show the unique charms of China to audiences worldwide,” SARFT Director General Zhang Honsen said at a forum organized alongside the Beijing International Film Festival. “The best thing we can offer foreign directors is our culture. I hope our foreign counterparts can dig deeper into the riches of our heritage.”

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