Entertainment

China and Hollywood Team Up for More Co-Productions


Bruce Willis’s mob hit man travels to the future in next year’s movie Looper. Thanks to backing from Beijing-based DMG Entertainment, that future is in China. DMG funded the production on condition that the location was moved from France and a role was written especially for Chinese actress Xu Qing. By jumping through these hoops, the movie now qualifies as a Chinese co-production, exempting it from the nation’s 20-film-per-year import quota and allowing foreign backers to keep three times as much in box office receipts. “We are trying to be relevant to a significant market,” says DMG Chief Executive Officer Dan Mintz. “The industry is growing like a rocket ship.”

Looper is one of a wave of Sino-U.S. productions as Hollywood looks to expand in China, which is adding more than 1,400 cinema screens a year. The 2010 remake of Karate Kid, starring Jackie Chan and Jaden Smith, was produced by Sony Pictures’ (SNE) Columbia TriStar and state-owned China Film Group. Fox Searchlight Pictures and Beijing-based IDG China Media teamed up for Snow Flower and the Secret Fan. “Everyone is coming in to join the bandwagon,” says Hong Kong-based Bill Kong, who co-produced the 2000 hit Crouching Tiger, Hidden Dragon. “Ten years ago, if you made $3 million in China, you would be jumping up and down. Today it’s more like one or two hundred million.”

Box office receipts in China grew 64 percent last year, to 10.2 billion yuan ($1.6 billion), according to the State Administration of Radio, Film and Television. While that’s a fraction of the $10.6 billion in U.S. receipts, according to Box Office Mojo, China is a huge potential growth market for Hollywood. Its cinema-building will more than double the number of screens by 2015, from 6,200 at the end of 2010, says Mintz.

James Wang, 41, and his older brother Dennis made their first movie, the comedy Party A, Party B, in the mid-1990s. It earned $4 million, “a blockbuster at the time,” he says. Last year, Wang, CEO of Huayi Brothers Media, China’s largest independent film producer, released Aftershock, a Feng Xiaogang film about the 1976 Tangshan earthquake. It made $105 million.

Beijing is using its quota system to prevent the spread of foreign culture and promote its fledgling domestic film industry. “China is keen on promoting its soft power,” says Shen Dingli, a professor at the Center for American Studies at Shanghai’s Fudan University. Joint film productions serve “the political purpose to promote our culture and systems with Hollywood’s competence.”

DMG is raising $300 million for a fund to help U.S. film franchises qualify as co-productions. To gain that status, films must be licensed by China’s media regulator, which sets rules on the film’s finances, its location, and the percentage of Chinese stars in the cast. Among the benefits: A co-production gets to keep 47 percent of box office receipts, vs. as little as 13.5 percent for imported films. Kong turned The Mummy: Tomb of the Dragon Emperor into a co-production with NBCUniversal’s Universal Studios and China Film Group four years ago. Filming took place in China, and Jet Li and Isabella Leong were among the Chinese actors added to the cast. “It wasn’t a great movie, but it utilized a big American franchise in China,” Kong says. “The time will come when there are more.”

Huayi’s Wang recently teamed with Thomas Tull, founder of Legendary Pictures, whose hits include The Dark Knight and The Hangover, to start a venture called Legendary East. The unit will make films in China targeting international and local audiences, financed in part through the sale of a 50 percent stake to Hong Kong-based Paul Y. Engineering Group for $220.5 million. West Hollywood-based Relativity Media, one of the financiers of Cowboys & Aliens, on Aug. 14 announced a $100 million joint venture with Huaxia Film Distribution to produce films and TV shows in China.

Getting the formula right isn’t easy. Some U.S. hits have struck gold in China, with Avatar grossing $216 million in ticket sales. By contrast, the Chinese version of High School Musical, made by Huayi with Walt Disney (DIS) in 2010, earned less than $155,000. Chinese audiences, says Wang, don’t like musicals.

The bottom line: Hollywood studios are teaming up with Chinese film companies to bypass profit-restricting quotas on foreign films on the mainland.

Frederik_balfour
Balfour is Asia correspondent for Bloomberg Businessweek in Hong Kong.
Ron_grover2
Grover covers the media and entertainment industry for Bloomberg Businessweek in Los Angeles.

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