CHINESE FILM INDUSTRY AND MOVIE BUSINESS

CHINESE FILM INDUSTRY

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Bringing film to the villages in the Mao era
China is the fastest-growing movie market in the world, with box-office receipts in 2011 rising 29 percent from the previous year to break the $2-billion mark. China is on pace to become the world's second-largest movie market after North America in 2012. Thanks in part to a moneyed middle-class willing to shell big bucks for movie tickets revenues are forecast to top $5 billion by 2015. While China's box office sales rose in revenue in North America, though still far larger at $10.2 billion, has fallen for two straight years.

According to the State Administration of Radio, Film and Television, China’s box office receipts exceeded $1.6 billion in 2010, a 64 percent increase from the previous year. By contrast economic woes sent the 2010 US box office down 5.72 percent to a 13-year low of $10.57 billion. Much of the increase in Chinese receipts was attributed to the success of Avatar and Chinese blockbusters such as Feng Xiaogang’s Aftershock and If You Are the One 2 . Chinese box office revenues surged 44 percent to $908 million in 2009 according to the state-run China Film Group. Chinese films accounted for 56 percent of the take. In 2005, China's box-office receipts totalled about $230 million.

China produces three main kinds of movies: commercial films, propaganda films and art films. They sometimes go through a similar screening process but are produced with different goals in mind and different relations with the government. Chinese art films are popular with the Western art house crowd but are often hard to find in China even on pirated DVDs. In the 1990s and early 2000s, Chinese filmmakers needed to sell a movie to Europe and the U.S. to make a profit. This is no longer the case, with China's robust box office.

Chinese films do well at international festivals. In 1995, Chinese films won 48 prizes at international film festivals but hardly any of them were shown in China. The Minister of Propaganda Ding Guangen said, the main characters were "ignorant, barbarous and unhuman" and the films failed to exhort "lofty ideals and beliefs and excellent working style of the Communist Party."

China is now the third largest film producer in the world, after India and the United States. China’s film industry produced over 500 films in 2009, compared to just 100 in 2002. In 2010 more than 520 films were made---about as many as in America. Only India produced more. Only a small number of Chinese films make it to theaters, and many of these are produced by the state-run China Film Group and often play on a swelling national pride to attract wide audiences. Of the 330 films were made in China in 2006 less than half made it to theaters. Most went straight to DVD. Some were never seen, Blockbusters and romantic comedies dominated the box office. The Bureau of Film Administration is the government bureaucracy that presides over the Chinese film industry.

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Flowers of the Motherland
The number of Chinese watching Chinese films has declined significantly in the past three decades. In 1977, just after the Cultural Revolution, a peak of 29.3 billion people attended films. In 1988, 21.8 billion people attended films. In 1995, 5 billion movie tickets were sold, which is still four times the number as of the United States but about the same on a per capita basis. In 2000, only 300 million tickets were sold. In 2004 only 200 million were sold. The decline has been attributed to television, Hollywood and watching pirated videos and DVDs at home. In the 1980s, about half of all Chinese still didn't have televisions and virtually no one had a VCR.

The Economist reported: “Tickets to Chinese cinemas are costly---about 80 yuan at weekends. The lack of copyright protection means that almost all revenue must come from the box office rather than from DVDs or television. Audiences are paying for the experience of an afternoon away from their cramped apartments, rather than simply to see the film (illegal versions of which are widely available). Cinemas are clean and airconditioned. Many have state-of-the-art screens and sound systems. The snacks are quite good, too.

Top grossing films in China in 2011 (in US$): 1) Avatar; 2) Transformers: Dark of the Moon; 3) Let the Bullets Fly (local); 4) Aftershock (local); 5) Kung Fu Panda 2; 6) Inception; 7) Pleasant Goat and Big Big Wolf 2 (local); 8) Pirates of the Caribbean: On Stranger Tides; 9) If You Are the One 2 (local); 10) Transformers: Revenge of the Fallen.

The Golden Horse awards have been dubbed the Chinese Oscars. They are given out in Taipei to people in the film industry from China, Taiwan and Hong Kong, with most of awards going to talent from Taiwan and Hong Kong. The Hong Kong International Film and Television Market, or Filmart, is one of Asia’s biggest film industry trade show. It had 640 exhibitors in 2012---10 percent more than last year---hoping to sell their films to 5,200 buyers expected from around the world.

Good Websites and Sources: Chinese Movie Database dianying.com ; Internet Movie Database /www.imdb.com ; Shelly Kraicer’s Chinese Cinema site chinesecinemas.org ; Modern Chinese Literature and Culture (MCLC) Resource List mclc.osu.edu ; iFilm Connections---Asia and Pacific asianfilms.org ; Love Asia Film loveasianfilm.com ; Journal of Chinese Cinemas intellectbooks.co.uk ; Wikipedia article on Chinese Cinema Wikipedia ; Senses of Cinema sensesofcinema.com ; Film in China (Chinese Government site) china.org.cn ; Directory of Interent Sources newton.uor.edu ; Chinese, Japanese, and Korean CDs and DVDs at Yes Asia yesasia.com and Zoom Movie zoommovie.com ; Expert on Chinese film: Stanley Rosen, a professor at the University of Southern California.

Links in this Website: HONG KONG MOVIE INDUSTRY Factsanddetails.com/China ; CHINESE FILM MAKERS AND THEIR FILMS Factsanddetails.com/China ; ZHANG YIMOU AND ANG LEE Factsanddetails.com/China ; HONG KONG FILM MAKERS AND THEIR FILMS Factsanddetails.com/China ; FOREIGN FILMS IN CHINA Factsanddetails.com/China ; CHINESE FILM ACTORS Factsanddetails.com/China ; JACKIE CHAN Factsanddetails.com/China ; BRUCE LEE AND JET LI Factsanddetails.com/China ;

Websites: The site, http://www.chinesefilms.cn, features news, film release dates, cast and crew details and plot outlines. There are also links to Chinese studios and the websites of film-makers, as well as independent English language reviews of movies.

dGenerate Films, a New York-based distribution company that collects post-Sixth Generation independent Chinese cinema.

Books: The New Chinese Documentary Film Movement: For the Public Record by Chris Berry (Hong Kong University Press, 2011); Painting the City Red: Chinese Cinema and the Urban Contract by Yomi Braester (Duke University Press, 2010); Adapted for the Screen: The Cultural Politics of Modern Chinese Fiction and Film by Hsiu-Chuang Deppman (University Press of Hawaii Press, 2010); Chinese Martial Arts Cinema: The Wuxia Tradition by Stephen Teo (Edinburgh University Press, 2009); Speaking in Images: Interviews With Contemporary Chinese Filmmakers by Micheal Berry, associate professor of Contemporary Chinese Cultural Studies at UC Santa Barbara. Lights! Camera! Kaishi!: In-Depth Interviews with China's New Generation of Movie Directors by Shaoyi Sun and Li Xun (EastBridge, 2009) It features interviews with Jia Zhangke, winner of Venice Golden Lion for Still Life in 2006, and superstar blogger and female director Xu Jinglei and 19 other leading directors. Sheldon Lu of the University of California, Davis wrote: “It contains illuminating interviews...with the leading directors and sheds light on a whole range of important issues such as independent cinema, censorship, film industry, and globalization.

Rise of Chinese Film

“In the 1980s the film industry fell on hard times, faced with the dual problems of competition from other forms of entertainment and concern on the part of the authorities that many of the popular thriller and martial arts films were socially unacceptable. In January 1986 the film industry was transferred from the Ministry of Culture to the newly formed Ministry of Radio, Cinema, and Television to bring it under "stricter control and management" and to "strengthen supervision over production.” [Library of Congress]

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Crossroads (1937)
Government statistics show Chinese revenues surged from 920 million yuan in 2003 to 4.3 billion yuan in 2008 ($703 million). Mainland China made about 330 films in 2006, up from 212 films in 2004, which was up 50 percent from 2003, and a figure exceeded only by Hollywood and Bollywood. In 2006, the United States produced 699 feature films. Film revenues in China reached 1.5 billion yuan, a 58 percent increase from 2003. The year 2004 was also significant in that the top 10 Chinese films outgrossed the top 20 foreign films in China.

In the next five to 10 years, the Chinese film market could well become the largest in the world. The market grew by almost 44 percent in 2009, and about 30 percent in 2008. In 2009, it was worth US$908 million - about a tenth of the $9.79 billion of US revenues in the previous year. At the current rate, the Chinese film market will outgrow the American market in five to 10 years.

Francesco Sisci wrote in Asian Times that two primary elements in the growth of Chinese film are “an increase in the importance of the Chinese domestic film market and a global appeal of certain “China issues”. These two things will increase the impact of Chinese culture in our homes. We could then become culturally more Chinese long before China becomes a first-world economy, which could happen in 20 to 30 years. The cultural change could occur with or without critical sense, and possibly only through the almost subliminal impact of future blockbusters made in China or for the Chinese market. Times are tight for acquiring the necessary cultural tools to gain a critical sense of China's complicated culture, past and present.

Aspects of the Chinese Film Industry

The movie business in Hong Kong, China and Taiwan are all intertwined. A Taiwan financed movie, for example, might be filmed on mainland locations with Hong Kong actors. Taiwanese movies were shown for the first time in the 1980s. The takeover of Hong Kong by Chinese in 1997, led to forging of many deals involving mainland studios and Hong producers, anxious to take advantage of mainland's stunning locations, cheap labor and talented film makers.

Chinese films tend to feature more fighting and less sex than Western films. Miao Di, a professor of film and television at the Beijing Broadcasting Institute, told the Los Angeles Times, “The Chinese people have always been very sensitive about sexuality but not worried about violence.” Nurtured on king fu. Many Chinese find American films less violent than home grown ones.

Some think films have had a significant social and cultural impact in China. Filmmaker Jia Zhangle told The New Yorker. “In the early eighties, many directors made films about women’s rights---about their confinement, their unhappy marriages---and, through these films, Chinese people realized women must be respected and treated equally.”

In recent years Beijing has been attracting much of China’s film making and acting talent. The Beijing Film Academy is the top film making school in China. Shanghai hosts the Shanghai International Film Festival

Beijing Film Academy Professor on the Present State of Chinese Cinema

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Meng Lijun (1940)
Zhang Xianmin, Professor of Beijing Film Academy, film producer and critic, and organizer of the China Independent Film Festival wrote an essay on the absurdity of China’s film culture and industry today called Daytime Booze, Nighttime Party: Thoughts on the Present State of Chinese Cinema . The essay is divided into four parts: the current cultural milieu, Chinese films, box office, international film festivals, and the role of the Internet. He argues that first, vibrant film culture exists only in a few major Chinese cities while zero film culture exists in all other places; second, mainland Chinese cinema is not competitive in the global market because it is yet to develop any unique and cross-cultural popular genres; third, award-winning Chinese films at various international film festivals do not have much influence on Chinese cinema but are heavily oriented towards China’s social and political realities; and lastly, Chinese audience consume more foreign films than the other way around. To get his points across, he draws examples from his own experiences as a judge at several international film festivals. Though he can be extremely ironic at times, he shares his most honest thoughts about contemporary Chinese cinema with us in this essay. [Source: Zhang Xianmin, translated by Isabella Tianzi Cai, dGenerate films, September 29, 2010]

China’s box office revenue generated by domestically produced films has increased rapidly in recent years. However, the money has come from a limited number of blockbusters which gave no respect whatsoever towards our traditional cultural values. The government is in favor of high movie ticket prices; it is making our film industry into a capital-intensive industry. If a director tries to make a film, he or she will only get the script approved if the film can help the relevant gatekeepers either get rich or get promoted. These gatekeepers don’t care about the film industry. Their children study overseas, and their only wish is to wait until they have the money to emigrate. Ironically, they deem China not a good place for their children because of its bad culture.

I can outline three kinds of games that are played in contemporary China. First is the game of political leverage. For example, [Communist Party leader] Bo Xilai’s son Bo Guagua studies in London. Guagua came back to China once and delivered a speech in Peking University about his determination to contribute to China’s cultural industry. Many years ago Kim Il-Sung’s son said the same thing to his father. Second is the game of money. Han Sanping said that he wanted to invest 6 billion yuan in turning Huairou into China’s Hollywood. Jia Zhangke also said that he would donate 200 million yuan to support young Chinese filmmakers. Third is the game of fame. All of China’s film critics in their 60s agree that the love story in Under the Hawthorne Tree (dir. Zhang Yimou, 2010) is absolutely romantic and touching. And the officials at our film bureau insist that Aftershock (dir. Feng Xiaogang, 2010) is a realist film. This is why we have midnight drinking parties followed by late night dancing parties. So cinema stands alongside alcohol and parties. Under this condition, it is meaningless if a film wins an award in an international film festival. Time has changed. Now is different from ten years ago. An award-winner has little influence on Chinese cinema. Awards matter less than more practical things. The general public lives under stress. They consume bad popular culture and they are in turn the shapers of that bad popular culture. At least that’s their relationship with China’s mainstream media.

Beijing Film Culture

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Sons and Daughters in Time of Storm
On the dominant yet insular nature of Beijing film culture, Shelly Kraicer of the blog dGenerate films wrote: “Beijing has long been the capital of mainland Chinese independent film and avant-garde culture. No less than half of the dGenerate Films catalog are by Beijing-based filmmakers: Jia Zhangke, Liu Jiayin, and Cui Zi’en, to name a few. And yet, despite its openness to progressive artistic activity, Beijing has an intensely policed view of the cultural other and the potential role of these others in its cultural discourse." [Source: Shelly Kraicer, dGenerate Films, July 21, 2010]

"There may be several reasons for this dichotomy. Beijing has been a more homogeneous Chinese city until quite recently (dating to probably the early part of this century, with the internationalization of Beijing’s urban surface, at least, in the lead up to the 2008 Olympics). And Beijing remains (in a certain, conflicted, post-Cultural Revolution way), the incubator, curator, and protector of a certain idea of Chinese culture. This protective attitude leads Beijing’s cultural workers to patrol (though, again, for completely understandable reasons having to do with resistance to various colonialisms and post-colonial hegemonisms) the boundaries of us (Chinese) and them (foreigners). This attitude often strives to keep our (i.e. Chinese-made) cultural works in a safe zone, circumscribed and patrolled by rather regressive definitions of the Other. I’m generalizing, obviously, but I hope not uselessly."

"There are clear exceptions: many Chinese intellectuals I know joyfully and productively bring Western cultural theoretical concepts into their work, and play, creatively, in the spaces between Western post-theories and the various streams of Chinese historical cultural heritages. Western voices themselves, though, talking about Chinese art and artists, are entertained somewhat problematically.People in Beijing are often curious about what I’m working on (film research, for example), and are curious to hear my opinions, though they often far too quickly take these as somehow representative of a particular template of what a Westerner thinks about our Chinese movies (which is rather often far from the case, especially with my willfully idiosyncratic readings of what I’m watching here). But there comes a point in most conversations I have with Chinese colleagues where things sadly grind to a halt, to a refrain something like there are just certain things you won’t be able to understand, since you’re not Chinese. You can almost hear the intended effect: the portcullis clangs down, the drawbridge ratchets up, and the castle is secure with you safely outside. What can a non-Chinese person say to that? Any attempt to argue the point circles back to demonstrate that you just can’t know. It’s a completely self-sealing argument."

Movie Theaters in China

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Majestic Theater in Shanghai
In 2012 the number of Chinese cinema screens reached about 10,000, up from 6,300 in 2011 and 1,500 in 2009, and was still rising at about eight movie screens per day, according to the China Film Group. The Chinese government has said it expects 20,000 screens to be operating by 2015 and 40,000 by 2040, bringing it on par with movie exhibition in North America.

As of 2006, there were only 1,118 (2,400) movie theaters in China for a population of 1.3 billion people. By contrast the United States has 36,000 movie theaters for about 300 million people. Chinese say the they don’t go the movie theater because the ticket price are too high. Tickets at some theaters are as high as $7, a full week’s salary for many workers. In an effort to attract more customer some theater have significantly lowered their ticket prices.

China had 4,700 screens, including 1,800 digital and 800 3-D screens, as of 2009. In 1995, there were about 3,100 theaters and 180,000 factory movie halls and outdoor theaters. Moviegoers often sat on wooden benches and watched the film on canvas stretched on the top of a truck. Ticket prices ranged from 75 cents to $2.00 and average around a $1.00. By one estimated that Chinese on average spend only 12 cents a year going to movie theaters.

New shopping centers have American-style multiplex theaters Time Warner opened about a dozen movie theaters in China but decided to sell them in 2007 after new laws required Chinese controls and because of limits on foreign films allowed. In the early 2000s, drive in theaters began popping up in a few places. They are mainly middle class phenomena because they are the only people that can afford cars. The drive ins not only give car owners a chance to see a movie it also gives them a chance to show off their car and spend time with it.

The majority of cinemas are dirty, rundown, dilapidated and empty: unheated in the winter and stuffy and hot in the summer. Describing one theater in Beijing, Mark Magnier wrote in the Los Angeles Times, “As soon as you walk in the door your senses are hit by the auditorium’s damp, smelly air that evokes a warehouse. Many of the seats have holes in the upholstery, food stains or are broken outright. The speakers rattle when the soundtrack hits the high notes. And the doors don’t shut properly, creating streams of light after the feature starts.” It is no surprise that people prefer watching pirated DVDs in the comfort of their homes.

Hong Kong and Korean investors are increasing investing in theaters in China as European and American giants wait for for new policies that will offer better opportunities. In the long run, it is estimated that more than half of the Chinese theaters will be controlled by American capital in the future. At it stands foreign companies can build new movie theaters in China but they can’t manage them. Some think that rule will be relaxed soon . [Source: Zhang Xianmin, dgeneratefilms.com, 2009]

Most domestic giants are tightly integrated with the reals state industry. Most noticeable is Wanda’s general success. They manage to cover almost all the new development zones which didn’t exist in the formal cultural map of China. In big cities, these development zones have hundreds of thousands people. Moreover, the residents are mainly young, white-collars, (Blue-collars don’t buy houses. Mid-age white-collars tend to choose better developed neighborhood, and they don’t go to cinema). [Ibid]

The payback period for new theaters is about three years, hardware deprecation is about 7 to 8 years, real estate contracts last about 10 years in general. [Ibid]

The scarcity of programming, in my own anticipation, will result a considerable percentage of empty seats in new cinemas in three years. This percentage will reach an unacceptable peak in five or six years, and the development will start to reverse, such as converting cinemas into billiard halls. Art cinema has to deal with the reality of the high rate of empty cinema seats. Some cinemas will have to depend on blockbusters to make money, others will rely on cultural activities and artworks to survive. [Ibid]

Film Business in China

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Asia Film Company Studio
China's film industry is the third biggest in the world, after Hollywood and Bollywood, in terms of films produced and box office revenues. Chinese box office takings surged 64 percent to $1.5 billion in 2010, with 44 percent of that going to American films. Chinese box office revenues surged 44 percent to $908 million in 2009 according to the state-run China Film Group.

Tian Jin, party secretary of the State Administration of Radio, Film and Television. said at the 18th party Congress in November 2012 that from January to October 2012, box office revenues amounted to $2.1 billion. Chinese films, however, lost their dominance in their home market, accounting for 41.4 percent of this gross. But Mr. Tian refused to blame the influx of foreign films, saying Chinese films needed to improve.Chinese films accounted for 56 percent of the take in 2009. [Source: Ian Johnson, New York Times, November 11, 2012]

“The immediate reason is the strong attack by the imported movies,” Tian Jin said. “But the basic reason is that our competitiveness needs to increase.” Mr. Tian also said that foreign films were not banned from Chinese theaters during national holidays when the theaters are often crowded, a claim often made by importers. He said that foreign distributors “voluntarily” decided not to show their products during this time “out of consideration” for local sensibilities. Chinese films, Mr. Tian said, have done less well abroad. In 2011, 55 Chinese films were distributed in 22 countries, grossing about $318 million. [Ibid]

There are 16 major studios and 32 distribution companies in China. About 150 to 350 films are made in China each years, with an average cost of $300,000. Most popular films produced in China are dramas and slapstick comedies. The movie market is still very small in China. A film that earns $15 million is considered a hit.

In the last decade, studios have suffered as a result of rising costs and declining attendance. Hardly any films reach a large market or make any money. Prints of all Chinese films are owned by the studios, which are concerned most about fulfilling their yearly quota of films and have little interest in getting the films to an audience. The studios have little or no money for marketing or promotion.

Stanley Rose a professor at the University of Southern California who is studying Chinese film, wrote in Foreign Policy, the Chinese system “pursue multiple yet contradictory goals...The state administers production targets and film licensing while the market determines production investment and film promotion. Thus, the state intervenes to ensure that politically correct films are made and distributed but resulting products must fend for themselves in a market concerned only with commercial viability.”

These days about half the funding for new films comes from private sources But coming up with financing can be a problem. One director who made a film for $120,000 told the Los Angeles Times, “We got a lot of the funding from personal contacts we essentially had to lie to. If they really knew how risky this is, they’d never invest. Two of the top three private film investment companies have military ties.

In recent years as sources of investment have dried up at home Hollywood has been seeking Chinese investors flush with cash. Huayi Brothers Media Corp (See Studios Below) is said to be seeking a deal with Sony or another large Hollywood studio.

Film Investors in China

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The Life of Wu Xun
The late 1980s when private capital first entered the Chinese film industry. Some Chinese investors have investing in overseas projects as a way of laundering money.

Some wonder if a Chinese company might buy a major Hollywood studio as Sony did when t bought Columbia Pictures in 1989 for $3.4 billion.

Describing the evolution of investing in film in China, Zhang Xianmin of dgeneratefilms.com wrote: “Private investment in film production can also be roughly divided into three steps. The first step was the participation of local brands or enterprises through advertising, such as water pipe commercials for gunfighting films, Hainan real estate investment commercials for art films set on the beach. This also marked the beginning of the collapse of the big studio system. The phase when private investors insisted on their status as the exclusive copyright owner of films ended in 1995. Nowadays, no one does that any more except for the purpose of promoting an actress, and these kind of investors typically retire after their first film.” [Source: Zhang Xianmin, dgeneratefilms.com, 2009]

“The second step is seeking cooperation. Everyone, including CEPA, is talking about overseas financing. The prevalence of overseas capital and money-laundering means that capital will follow abroad before it circles back. This kind of investor normally makes two to four films. The first one might be a small production, just to see how deep the water is. Once they get enough investment to test the water, they’ll cautiously assess the chance of losing money. This phase is still going on. This is a process of transforming hot money into calm decisions.” [Ibid]

“The third step appears to be the combination of Confucian merchants and MBAs. Financial experts rich in cultural capital enjoy great popularity these days. Although counterfeit experts are unavoidable, there are also real MBAs, or PhDs from the States, or intellectuals from the 80s. These people intend to work in the industry for ten years or half of their life, and aim to accumulate as least twenty, or even fifty film titles with their name listed as partial copyright owners. [Ibid]

“Many people, including those investors who were cheated through money laundering, start to consider film as something that can make them a shareholder. Meanwhile, financial and private investors are interested in investing in several major film companies, comparable to buying shares at a high price.” [Ibid]

Chinese Film Marketing

A standard American blockbuster takes up about one-fifth of domestic screens when it is first released. But in China, an American blockbuster takes up three-fifths of theater screens; some domestic blockbusters can take up four-fifths.

Acclaimed director Zhang Yimou told NPR he thinks the rise of the mainland China cinema market is prompting Chinese directors to change their focus. He is no exception. Ten years ago, his films relied on the international market; some critics even sneered that his main audience were international film festival judges.[Source: National Public Radio, January 4, 2010]

Now, Zhang believes a Chinese film can earn domestic revenues that are 10 times what it makes overseas. His argument is that by being commercial, he is doing battle with Hollywood for the soul of Chinese cinema.

“Young people are the key,” Zhang told NPR, “If they lose their interest in domestic movies, we will be in big trouble. Then China's film market will be occupied by foreigners. Hong Kong, Taiwan and Korea are examples of this. The mainland is our last battleground. So in this case, it's not shameful to shoot commercial or funny movies,” he says.

International Market for Chinese Film

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Spring in a Small Town
Few Chinese-language films - with the exception of Zhang Yimou's "Hero" and Ang Lee's "Crouching Tiger, Hidden Dragon" - have done well in big Western markets. Earthquake drama "Aftershock", from Legendary's partner Huayi, fizzled earlier this year in United States cinemas, where subtitled films rarely perform well. Patriotic hits such as Founding of the Republic do not travel well either. Foreign bottoms are less biddable.

Despite the American market's perceived resistance to subtitled films, many are optimistic about new international demand for Chinese films. He says: "We need to work with smaller, independent distributors and outlets like Netflix. We have to be creative and think about how to supply our products using digital platforms."

Zhang Xianmin. Professor of Beijing Film Academy, wrote: Only Hollywood and a few other big conglomerates have the power to market domestically successful Chinese blockbusters in the international market; maybe one film per year with a box office revenue of $20 million gets that attention. China distributes two to four of its films in 20 countries worldwide, but the countries are small countries like the one that trapped its coal miners underground for over a month. There is nothing to be proud about the sales because they are basically effortless deals. China makes about 5 million yuan for each of these films. But the domestic Chinese audience cannot care less about them  either they cannot find these films or they will not watch them.

Chinese cinema is not competitive when it comes to box office. Westerners control almost all the channels for distribution. At the same time, Chinese cinema will not develop any particular type of popular film genre because of prolonged years of cultural suppression. The most influential genre we have had is kung fu films. Yet it was the Hong Kong film industry that first capitalized on them. What original genre can the mainland Chinese film industry come up with? If anyone knows the answer please let me know.

Film Studios in China

There are 16 major studios and 32 distribution companies in China. The world's largest film studio, Hengdian, is in China. It covers 35.5 million square feet.

The Shanghai Film Studio is one of the largest and oldest film studios in China. Run by conservative bureaucrats, it is known mainly for producing boring, risk-adverse movies. If these bureaucrats don’t like a script the film doesn’t get made. There are known for ditching entire project because they didn’t like one little detail. These days, the funding it receives is so low, it can hardly make any films period.

Like other businesses in China, China's film studio have their fingers in numerous enterprises. A director at the Shanghai Film Studio told the New York Times that it wasn't necessary for his films to make big profits because the studio earns a steady income from a metal factory it runs. Studios are now beginning to seek financial backing from the U.S. and abroad now that they are getting less money from the Chinese government.

The Huayi Brothers Media Corp, which Morgan Stanley called “China’s Warner Brothers for tomorrow, and China Film Group, are two of China’s largest studios. Huayi produced one romantic film that triggered a travel boom by Chinese tourist to the Japanese island of Hokkaido.

Three Chinese movie studios are aiming to get stock exchange listings. Huayi Brothers Media Corp. debuted on China's new small companies market in the southern city Shenzhen in late 2009, surging 148 percent on its first day of trading. The state-run China Film Group is planning to list in Shanghai. Beijing Polybona Film Distribution Co. is aiming to go public on the New York Stock Exchange in the second half of 2010. [Source: China Daily (11/3/09):

Polybona has already received funding from the venture capital firms Sequoia Capital and Matrix Partners China, with the second company investing 100 million Chinese yuan ($15 million). Polybona's businesses encompass movie distribution, production and multiplexes. Among its recent productions are the upcoming Jackie Chan historical epic “Big Soldier,” the historical thriller “Bodyguards and Assassins,” starring Donnie Yen, the police thriller “Overheard” and “Mulan..” Polybona had 50 movie screens by the end of 2009 and hoped to increase that number to 100 by the end of 2010 and 200 in three to five years.

China boasts the world’s largest outdoor film studio, called Hengdian World Studios, which includes a full-scale mock-up of the Forbidden City.

Film Distribution in China

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The Spring River Flows East_
The most profitable branch of the Chinese film industry is distribution. Of the money taken in the cinemas, 50 percent goes to theater owner, 25 percent goes to the film studio and 25 percent goes to the distributor (it used be 30 percent for the distributor and 20 percent for the studio). One angry studio owner told Reuter he told his distributor, "We spend the money to make the movies, we take all the investment risk, while you do nothing. You make profits on the basis of almost no costs."

Films must obtain a new permit each time they travel. This money goes to the distributors, who are often slow to grant permits until they receive enough in bribes. An a few occasions, film makers have stole their own films from studios so they could be shown in foreign film festivals.

There are 32 distribution companies in China. Distributors often work together with studios and theater chains and increasing are becoming interested in making money.

Free Market Film Zone in Shanghai

In 2009, it was announced that Shanghai would set up a free market zone in Shanghai where controls on imported movies would be relaxed and more than 20 foreign films would be allowed to screened. The ‘special cultural administrative region’ in Shanghai's Wai Gao Qiao free trade district would be a testing ground for further reform of government policy on foreign imports. The aim is also to boost the number of Chinese films which perform well in western markets, of which there have been only a handful in the past decade. [Source: Ben Child, The Guardian, March 23, 2009]

China has adopted a strict quota for film imports since joining the World Trade Organization in 2002.

Hong Kong's Salon Films is advising the Chinese government on the creation of the zone. Salon chairman Fred Wang told the Hollywood Reporter: “The Chinese government will be using Wai Gao Qiao as a testing ground for its cultural trade policies and strategic reform for import and export of films and other cultural products.”

Chinese Firm Buys Major American Movie Theater Chain AMC

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Diao Chan (1958)
In May 2012, China’s Dalian Wanda Group's agreed to pay $2.6 billion for the cinema chain AMC Richard Verrier and David Pierson wrote in the Los Angeles Times: “The deal ---which pairs China's biggest theater operator with the second-largest chain in the U.S.---marks the largest investment to date by a Chinese company in the U.S. entertainment industry. AMC is owned by Apollo Investment Fund, Carlyle Group and other investors who bought the company in 2004 for $1.7 billion. [Source: Richard Verrier and David Pierson, Los Angeles Times, May 22, 2012]

Some analysts have questioned how the deal benefits Wanda, noting that AMC is a highly leveraged theater circuit. Wanda is assuming $1.9 billion in debt to acquire AMC at a time when theater admissions in the U.S. and Canada have been in a long-term decline. As for the growing Chinese market, Wanda's ownership of AMC may have no effect on the distribution of American movies in China, where the government maintains tight controls on the number of foreign movies it allows into the country. "I'm kind of scratching my head on it," said James Marsh, an entertainment industry analyst at Piper Jaffray & Co. "I don't see the strategic synergies of the deal. I think this is more of a vanity purchase than anything else."

By creating the world's largest theater company, however, Wanda could use its size to negotiate favorable terms with major Hollywood studios in the world's two largest film markets. Wang Jianlin, the billionaire who controls Wanda, told reporters in Beijing that Wanda would invest as much as $500 million to upgrade operations and reduce debt at the Kansas City, Mo., chain, which has 5,034 screens in 346 multiplex locations in the U.S. and Canada. Wanda will keep AMC's management team in place. [Ibid]

Wanda said on its website that the deal received approval in March from China's National Development and Reform Commission. In the U.S., the deal will be subject to approval by the Federal Trade Commission. Although it is not required, Wanda also is seeking approval from the Committee on Foreign Investment in the U.S., a federal interagency committee that reviews national security implications of foreign investments in the U.S. [Ibid]

Since the 2008 financial crisis, Beijing has encouraged Chinese firms to acquire under-valued Western assets as part of the nation's years-old "going out" development strategy. Culture, especially film, has been cited as a key component to China's ambition to wield more so-called "soft power." The deal for AMC could result in more Chinese movies being screened in the U.S. But Chinese features have done poorly in front of American audiences, in part because of weak distribution. Feng Pengcheng, a professor at the University of International Business and Economics in Beijing, called the AMC deal impressive. "This is special because it is going into a cultural industry," Feng said. "This carries more significance because of the huge cultural differences between China" and the West. [Ibid]

The New York Times reported: “Any deal, whether for the entire company or for a major stake, would probably put a current value of roughly $1.5 billion on AMC. That figure is based on its reported cash flow of about $181 million for the 52 weeks ended September 2012 and an industry expectation that theater chains in the United States will continue to sell for as much as eight times their annual cash flow. [Source: Michael Cieply and Brooks Barnes, New York Times, May 7, 2012]

Founded in 1920 by three brothers with a single Missouri theater, AMC, based in Kansas City, later was a leader in building complexes to show more than one movie at a time. It now operates about 350 theaters with 5,050 screens. (The biggest theater chain is Regal Entertainment, which has 522 theaters with 6,580 screens.) AMC is known for having better locations than some of its rivals, which include Cinemark, the third-largest chain. Six of last year’s 10 top-grossing theaters belonged to AMC. Apollo and its founder, Leon D. Black, also had a major stake in the chain before it was sold in 2004 to a group in which Apollo and J. P. Morgan are the largest holders, with about 39 percent each. [Ibid]

Wanda, the Chinese Firm That Bought AMC

According to the New York Times: “Wanda, a conglomerate whose interests include commercial properties, luxury hotels and department stores, is involved with film production and distribution in China. It operates a rapidly growing theater chain that now has 86 multiplex locations, and a total of 730 screens, including 47 large-format Imax screens. On its Web site, Wanda says it accounts for about 15 percent of China’s movie ticket sales, which were about $2.1 billion last year. Wanda has said that by 2015 it plans to more than double its screen count to about 2,000. [Source: Michael Cieply and Brooks Barnes, New York Times, May 7, 2012]

Richard Verrier and David Pierson wrote in the Los Angeles Times: “Wanda, based in the northeastern city of Dalian, commanded 13.6 percent of China's box-office market share last year---good for first place even though it ranks seventh in the number of cinemas (86) and fourth in the number of screens (730, including 288 3-D screens), according to consulting firm Artisan Gateway. "In terms of quality, I would say they're one of the highest-end chains," Wu Renchu, a Shanghai-based film blogger, said of Wanda. [Source: Richard Verrier and David Pierson, Los Angeles Times, May 22, 2012]

Wanda entered the cinema business in 2004 when it signed a partnership with Warner Bros. to build dozens of modern multiplexes---a pioneering deal at the time that sparked China's cinema-building boom. In 2005, Chinese regulators reduced the share foreign companies could own in cinema ventures. Warner decided to leave shortly after. Since then, Wanda has evolved into China's largest privately owned company, controlling a vast portfolio of luxury hotels, sports stadiums and shopping plazas. [Ibid]

Wanda-AMC Deal Could Spur Others

Richard Verrier and David Pierson wrote in the Los Angeles Times: “Chinese conglomerate Dalian Wanda Group's landmark deal to buy AMC Entertainment Inc. for $2.6 billion could be a catalyst for similar acquisitions of American theater chains and other U.S. entertainment properties, industry analysts said. Most of the deal making has been Hollywood companies striking business deals in China. But Wanda's move to buy AMC could turn the traffic in the other direction, setting the stage for a string of similar moves by other Chinese investors looking to diversify and raise their global profile by scooping up blue-chip American entertainment properties. [Source: Richard Verrier and David Pierson, Los Angeles Times, May 22, 2012]

Some see parallels with the late 1980s and early 1990s, when Japanese companies acquired a number of prized U.S. assets, including Hollywood studios such as MCA-Universal and Columbia Pictures and crown jewels such as New York's Rockefeller Center and California's Pebble Beach golf course. "More and more Chinese companies are going to try to come in and buy American businesses, just like Japanese companies did in the 1980s," said Sean Yu, a Los Angeles-based executive director at Morgan Stanley Smith Barney who advises Chinese investors. "They want to increase their prestige and their reputation."

Wanda isn't the first private Chinese company to buy American. Chinese carmaker Geely Holding Group bought Ford Motor Co.'s Volvo subsidiary in 2010 for $1.5 billion. In 2004, Lenovo purchased IBM Corp.'s personal computing unit for $1.25 billion. "It's all about brand names and status, and AMC is a brand name," said Stanley Rosen, professor of political science at USC and an expert on China. "It gives [Wanda] instant credibility."

Film historian and author Neal Gabler agreed that the Wanda deal could presage another wave of foreign buying in Hollywood. "I would be almost certain that as the Chinese economy grows, you will see other incursions made into the American entertainment industry," Gabler said. Wanda "may be the first foray, but I guarantee they are not the only ones licking their chops at these American properties."

Problems Making Films in China

Some filmmakers complain of how difficult to is to work in China The actress Natasha Richardson told the Times of London, “The whole Chinese cultural barrier has made things really difficult. The simplest things seem to involve translations from three different people. Everything takes so much longer than usual.” The producer Ismail Merchant said. “People don’t like saying “yes” here. They think about things, and you can’t do that when there's a shooting schedule to keep.”

A number of films made in China are produced by China’s illegal, underground film industry. These films vary in quality from great to crappy. They are shown almost exclusively abroad. The films are regarded as contraband. Film maker risk heavy fines if their film project are discovered or they are smuggling film out of the country. Some directors have had their film making careers taken away by the government.

Chinese Woman Sues over Cinema Ads

In 2010, a a Beijing woman is sued a local cinema for wasting her time. Chen Xiaomei claims she was unreasonably treated by the cinema's owners and the distributors of the film she went to see, because she was not warned there would be 20 minutes of adverts prior to the screening of the main feature. She is demanding a full refund (35 yuan), an extra 35 yuan in compensation for emotional damages and a written apology, reports the Xinhua agency. [Source: Ben Child, The Guardian, September 8, 2010]

In addition, Xiaomei is calling for the Polybona International cinema in the northern city of Xian to publish the length of advertisements on its website, in the lobby or on its customer hotline. In total, they should be less than five minutes, she says. Xiaomei's case has been accepted by the People's Court in Xian, the capital of Shaanxi province. The film she went to see, Aftershock, has become the highest-grossing domestic film of all time in China, earning 650m yuan.

Pirated DVDs in China

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Dog and Beauty, 1930
In 2007, it was estimated that 93 percent of the movies sold in China were pirated. Pirated DVDs, VCDs, (video compact discs, cheaper, low-tech versions of DVDs) and videos are widely available on the streets in China. The film industries in China, Hong Kong and Hollywood all lose billions to the pirating of films on videos, DVDs and VCDs that cost only a few cents to make and are sold for around $1 a piece all over China in markets, on street corners and subway station and in the backrooms of legitimate DVD and video stores. Stalls at Silk Street Market in Beijing display licensed DVDS with holograms and everything but when buyers purchase one they are given a pirated copy.

The latest Hollywood films often appear on the streets as pirated DVDs before the films open in theaters or soon afterwards. Pirated versions of the new Star Wars movies were available on pirated DVDs only days after they premiered at theaters in Beijing. In some places piracy is so rampant that even the pirates worry about their merchandise being copied. The selection of pirated material is amazing. Shops in Chinese cities often have a full catalog of classic films like old Hitchcocks, Truffauts and Hepburn-Tracy films as well as recent Hollywood releases. .

Some pirated DVDs are filmed with hand-held videos in American movie theaters on opening day, then taken to Asia by plane, copied on clandestine CD printing machines, and released on the streets within a few days. Others are made from high-quality screeners, advance copies given out members of the film academy and critics. In many cases the first copies to hit the streets are made with hand-held camcorders in theaters. Better quality ones show up weeks later.

DVDs are often pirated using copies that are available on the Internet. These days many viewers don’t even bother with $1 DVDs they simply share digital file for free on the Internet. Many get them from the popular Chinese movie website Mtime.

Hollywood finds Beijing policy particularly unfair because it fails to crackdown on the pirated DVD trade at the same time it restricts the import of movies, DVDs and music.

Effect of Pirated DVDs on the Movie Industry

Pirated VCDs showed up large numbers in 1995. They robbed the Hong Kong film industry of 40 percent of its business, and forcing video shops and theaters to close down. Pirating costs the world film industry about $3 billion a year in lost sales. The biggest losers are Chinese filmmakers and distributors. The six major Hollywood studios lose around $250 million a year.

Competition is very fierce among vendors which is why prices are so low. In 2005, DVDs of recent films could be purchased for as little 60 cents a piece. The quality of DVDs has improved over the years. Sometimes customers prefer the pirated copies to the real thing because they have not been censored by the government and are available much sooner because the distributors don’t have deal with government red tape. The selection at illegal shop is often much better the at the legal ones.

Pirated films are often versions that were shown outside China and thus are uncensored. Many of the foreign films sold by pirates were never even shown at neighborhood cinemas and those that were had scenes deleted from them. Newly released theater films have to make big money on the opening days because soon after that the film is widely available in pirated version.

Image Sources: Wiki Commons, University of Washington; Ohio State University

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2008 Jeffrey Hays

Last updated December 2012

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