Mar 17, 2016

    China speaks Hollywood's language: Money

    WITH cash flowing faster than the Yangtze River, Hollywood is awash with ever-expanding volumes of Chinese funding but analysts are warning the film industry that there is no such thing as a free lunch.

    The Beijing-based Wanda Group's record-breaking deal in January to buy United States film studio Legendary Pictures finally confirmed the long-heralded emergence of the world's second-biggest box office as a major player in Tinseltown.

    The US$3.5 billion (S$4.8 billion) agreement is the largest cultural takeover by China, with US studios keen to capitalise on its burgeoning cinema market at a time when Beijing is pushing entertainment as a source of "soft power".

    Legendary, the maker of Jurassic World, Godzilla and the latest Batman trilogy, has grossed more than US$11 billion worldwide since it was founded in 2005, mostly with the kind of big-budget blockbusters popular with Chinese audiences.

    "It's a win-win situation... because the China market is really incredibly taking off and Hollywood has a real interest in that," Stanley Rosen, a political science professor at the University of Southern California, told Agence France-Presse (AFP).

    It is an arrangement that benefits both sides financially, with movies becoming increasingly expensive to produce and the Chinese hungry for Western-made films.

    But China, which has yet to make a global hit, is also buying expertise.

    "Hollywood has what China lacks, which is storytelling ability, marketing, distribution," Prof Rosen noted.

    Wanda owner Wang Jianlin, who burst into the international spotlight in 2012 by buying US cinema chain AMC Entertainment for US$2.6 billion, says the Legendary deal makes his company the highest revenue-generating movie unit in the world.

    It also gives future Legendary films direct access to China's booming market, which has become crucial to foreign film-makers, with North American ticket sales stagnant.

    PricewaterhouseCoopers has projected China's box office to rise from US$4.3 billion in 2014 to US$8.9 billion in 2019, meaning it would outstrip the US within two years.

    In 2014, 8,035 movie screens - 22 per day - were installed in China and the screen count stood at 31,627 by the end of last year, according to official sources.

    Underlining the shift in power, Chinese box-office monitor EntGroup announced that cinemas took a record US$1.1 billion in February - a 70 per cent year-on-year jump - overtaking the North American monthly revenue for the first time in history.

    The main driver of Chinese cinema's phenomenal growth is a steady emergence of a modern consumerist lifestyle among China's burgeoning middle class, expected to account for 75 per cent of households within a decade.

    Cumulative Chinese investment in the US since 2000 reached US$63 billion last year, with US$4 billion going to the entertainment industry, according to research firm Rhodium Group.

    The trend looks set to accelerate, with Huayi Brothers planning to produce at least 18 films with LA studio STX Entertainment, and Shanghai-based Fosun International taking a stake in US media company Studio 8.

    Both Wanda and tech firm Alibaba have been touted as possible minority investors in Paramount.

    Hunan TV has signed a US$1.5 billion deal to fund Lionsgate movies and Perfect World Pictures is investing US$250 million in Universal's slate over five years.

    Beijing has pushed back against an invasion of "foreign culture", however, issuing an edict in 2011 discouraging movies featuring "fantasy" and "time travel" among other "bizarre plots".

    President Xi Jinping has instructed artists to abandon "naive sensual amusement" and instead promote "true-to-life images to tell people what they should affirm and praise".

    Only 34 foreign films are given cinema releases in China each year under a quota set by Beijing. All are subject to official censorship over content deemed politically sensitive or obscene.

    Co-produced movies can bypass the quota as long as they contain significant Chinese elements, such as characters, plot devices or locations.

    But the strategy has backfired at times, most notably with Transformers: Age Of Extinction, which was derided for depicting characters drinking the Chinese version of Red Bull in Texas.

    Jonathan Landreth, managing editor of the New York-based online magazine China File, warned in a recent article that Wanda and Legendary were operating under Mr Xi's "looming encouragement" and said the deal could not have gone ahead without the approval of China's Communist Party.

    "While Wanda invests in Hollywood to make money, the deal sees Legendary unwittingly becoming one of the most powerful channels for Beijing's worldview, a worldview that bars open discussion of the jailing of dissidents and the disappearing of booksellers," he wrote.

    The first co-production from the Wanda-owned Legendary will be the US$150 million sci-fi action movie The Great Wall, starring Matt Damon, Willem Dafoe and Hong Kong Cantopop singer and actor Andy Lau.

    Directed by Chinese film-maker Zhang Yimou and due for its China release in December, two months ahead of the US opening, the film will be entirely English-language.

    Christopher Spicer, a film financing expert and partner at international law firm Akin Gump, said the film, the most expensive shot in China, could serve as a litmus test of public appetite for Chinese-American joint projects.

    "I've been doing film and television for eight or nine years and at different times in history, primary funding sources of film and, to a lesser extent, television have come from different countries all over the world," he noted.

    "But certainly, for the time being, I would expect the trend of Chinese financing to continue."