Stephen Hamel
Still, just this week, it came to light that Passengers producer Stephen Hamel is opening an office in Beijing for his Company Films to produce a slate of both English- and Mandarin-language film and TV projects, some of which will star Hamel’s friend/partner Keanu Reeves.
Regardless of political maneuverings, China is a market that cannot be ignored because it is seen as the next frontier, with more than 1.2 billion potential consumers. Wanda is expanding in exhibition in China, building out more theaters in the territory expected overtake North America box office by 2018 — and becoming the No. 1 market in the world — despite a slowdown in growth in 2016. Box office receipts in China are expected to double U.S. results by 2023.
At the Los Angeles gathering in October, AMPAS’ Boone Isaacs rallied in support of Wanda, taking to the stage at the Chinese company’s dog-and-pony show to say that the U.S. film history wing will be renamed the Wanda Wing. What she didn’t say there was that it came after Wanda donated $20M to the Academy.
She also said of China, “We have so much in common, not just because the industry is global but because the values are universal.” This, as the Human Rights Watch has consistently condemned China for human and civil rights violations. It is no secret the government keeps certain American films out of circulation there (Ghostbusters comes to mind, though ghosts are on the list of China Film Bureau’s no fly-zones even for Chinese movies) and they also heavily censor the Internet and have banned Twitter since 2012.
Boone Isaacs’ sentiment about “sharing the same values” would be reiterated a month later when Chinese businessman Jack Ma announced his e-commerce conglom Alibaba was taking a minority stake in Steven Spielberg’s Amblin Partners.
Also at the L.A. event, Garcetti called Wanda’s Gao “a brother,” noting Chinese companies’ large real estate holdings in Los Angeles — it is estimated that Chinese firms now own half of the buildings in downtown LA — and urged filmmakers to head out of Los Angeles and into China. This, as runaway production is a constant concern among local unions in Los Angeles.
REX/Shutterstock
MPAA chairman and CEO Chris Dodd also, surprisingly, took part in a promotional video for Wanda. The MPAA has long battled piracy and has named China as one of the worst offenders. Dodd’s predecessor, the late Jack Valenti, worked vigorously to stop China’s pirating of films.
When Trump started talking tariffs against China during the campaign, Wang said he asked Dodd to send a message to the eventual President-elect, threatening Trump’s hard stance against China and saying that position could cost the U.S. about 20,000 jobs (he was counting the number of companies in which they are invested).
The last USTR film industry contract in 2012 saw the quota rise from 25 to 34 films with a revenue-share hike. (There is a widely held misconception that the revenue-share films are currently capped at 34 per year. But, according to the agreement, 34 is a floor and not a ceiling.) It’s understood that the companies are beginning to align on what terms will be sought.
China’s People’s Daily noted that there is a line of thought that the big studios may, at some point, release their own films. “Local companies can already apply for distribution licenses but have not taken advantage of the ability thus far,” it wrote. “Even if they did, they would still need to go through the censorship process, and only China Film Group, which essentially controls the market, can apply for an import license.”
Meanwhile, no true ancillary markets exist in China, so Amblin’s play, for example, was economic. As one former executive with experience overseeing a studio’s international division put it: “It’s the only ancillary money you get out of China. Alibaba is Amazon and Walmart put together. They are enormous so everyone is rushing to do a deal with them.”
Why? Because there is a 50% tax to the government on box office and then they split 50-50 with the distributor, so only about 25% is actually coming back to Hollywood (although that’s considered pure-play, falling directly to the negative since P&A is inexpensive in the PROC, though growing). TV is also controlled by the government. The DVD market is basically pirated. Alibaba right now, we’re told, is talking about possibly giving better terms than a 50-50 split.
Still, with Trump on his way with a new trade czar who is suspicious of China, along with lawmakers already leery, 2017 may just be the year that Navarro alluded to when he wrote his 2006 book The Coming China Wars.
One U.S. executive who has been working with the Chinese reckons that if the Trump administration continues on its present course, that “could be the biggest challenge facing Hollywood” in 2017.
“The first place you see retaliation from the Chinese government is shutting down messaging from the West (in the form of movies, TV, press, etc.). The Ministry of Propaganda controls messaging to the masses, and mitigating messaging from the West is part of that.” The exec notes that the exception would be messaging that may show the complete dysfunction of the U.S. government, à la House Of Cards.
In the meantime, those who know the situation with Wanda say that Wang is over-leveraged in real estate bets in two-tier and three-tier cities and has looming debt issues, and is doing whatever he can to beef up the company. And in China, even in business, you must show “a cultural good” for the people when you buy and sell property. “People talk about censorship and content, but it’s not about content,” said one U.S.-based executive who works with Chinese firms. “He is trying to buy assets to bring into China, to shore up his multiple to wash away debt.”
So it seems partnerships may be mutually beneficial in some cases, but with the Trump administration coming this month and all eyes on Chinese investment, the future remains tenuous.
Chris Fenton, a trustee of the Washington DC-based U.S.-Asia Institute and also president of Los Angeles- and Beijing-based DMG Entertainment, recalls being in China during the U.S. election. “Sentiment there regarding the results was initially positive. They viewed President-elect Trump as a transparent businessman and someone they could comfortably negotiate trade policy, etc. with,” he told Deadline. “That said, much has happened since, ruffling feathers in the U.S.-China relationship.
“The amount of calls I’ve received from offices of U.S. Congressional members expressing interest in the institute’s 2017 Congressional member delegation trips to China is unprecedented,” he continued. “Additionally, anxious calls from Hollywood executives curious how U.S. lawmakers and regulators will deal with the U.S./China relationship moving forward has surged. The motivation to understand the Chinese point of view and to find common ground is indeed there, but the challenges and obstacles look to be rising in the coming year.”
Reply With Quote
