In a long-stagnating North American market, Hollywood knows not only that it can't ignore the enormous buying power of the rapidly emerging Chinese middle class, but that actively courting it is the only path to growth.
The western economies – the traditional market for Hollywood fare – haven't grown very fast since the late 90s even aside from the financial carnage of the GFC. Meanwhile, the costs of making and selling movies have skyrocketed. A $200m budget was the stuff of scandal back when Titanic (1997) was made, but today no self-respecting midyear superhero blockbuster would cost much less.
And marketing costs have risen even faster. According to conventional wisdom, publicising a global-release movie costs as much as making it. That means your $200m extravaganza has to make $800m to break even (after the exhibitors take their 50 percent of box office receipts).
Hollywood is in a perfect storm of what an economics writer once called 'the Western lust for access to the Chinese entertainment market'. Box office revenue reached $2.7bn in China in 2012, outstripping predictions and up 37 percent from 2011 to pass Japan as the second biggest movie market in the world.
So with the box office rising across the world – but not that much – Hollywood either needs a race of movie-loving aliens with disposable income to arrive on Earth, or the burgeoning rich from one of the emerging economies like Brazil, India or the holy grail – China.
Content management
One of the first things affected will be broad release, tentpole films. 1997 saw Richard Gere in Red Corner and Brad Pitt in Seven Years in Tibet, films critical of the Chinese judicial process and supportive of Tibet, respectively, but you'll likely never see movies that criticise China or support their enemies costing more than a few dozen million again. Rule number one of marketing might be not to insult the customer, and in the blockbuster stakes north of $100m, China is automatically a customer.
Content that appeases a foreign market is nothing new. Naomi Klein's 1999 book No Logo claimed Disney's Mulan (1998), using Chinese characters, served its purpose in making Chinese authorities receptive to a $2bn Disney theme park in Hong Kong – even though the film flopped.
More recently, the remake of Red Dawn – which was filmed in 2009 and not released until three years later, was given a pre-release makeover so the invaders were changed from Chinese to North Korean.
The most high profile example of movies tailored for the region was the much-publicised China-only scenes in Iron Man 3, but it proved there's a right and wrong way to adapt a product for a local release. "There was a lot of negative reaction to the Iron Man 3 scenes shot in Beijing and product placement that just felt forced," says Boxoffice.com editor Phil Contrino.
Those hoping to 'buy' Chinese appeal, he says, would do well to remember that the 3D re-release of Titanic was one of the biggest hits in China of recent times, and Avatar is still the biggest Chinese release to this day. Neither film, Contrino points out, had anything specifically tailored to China. "Hollywood is still best at making universal stories and that's what they need to focus on instead of going after easy solutions to reach Chinese movie goers," Contrino adds.
Disney Chairman Bob Iger thinks a smart local sensibility rather than a standardised global rollout of properties is critical. Speaking at a business forum in Chengdu in early June, he said Disney had to 'be very careful'. "On one hand the Disney brand and what it stands for is of interest to the culture... But, it's very ... important that ... in that market it feels like, for instance, China's Disney. It can't just be the Disney that exists in carbon copy form somewhere else in the world."
Dreamworks Animation seems to have done it better than anyone with the announcement of a licensing agreement that saw characters appear at a Macao resort from July 2013. Shrek, How to Train Your Dragon, etc are global properties, but accompanying them are characters from what's been one of Dreamworks' biggest money spinners in China, Kung Fu Panda.
Producing alliances
Hollywood's also signing a gaggle of co-production deals – everything from name brand talent showcasing the culture to production and distribution partnerships.
Paramount is taking a similar approach to Marvel's China-centric deployment of Iron Man 3 with Transformers 4. But rather than tack on a few ill-advised scenes that added nothing to the plot, the studio has teamed up with two major Chinese media companies to create 'a major presence' for the film.
As part of the agreement, director Michael Bay will get help choosing filming locations and actors in China, access to postproduction facilities and heavy promotion of the film to an enormous local customer base.
Meanwhile, everyone else seems to bee getting in on the action too. Jackie Chan has committed to two films with Chinese studio Huayi Brothers. Keanu Reeves' company has an alliance in Shanghai to develop and finance projects. Legendary (the powerhouse behind Chris Nolan's Batman trilogy, Pacific Rim, Man Of Steel and a host of other blockbusters) and Pinewood Studios UK have both signed production deals with Chinese studios. Perhaps most bizarrely, a Chinese/American co-production of Arabian Nights has been given the go-ahead to be filmed in China.
Time Warner are looking even further, signing an agreement with China Media Capital to stake a claim in the growing media sector that will see an explosion of digital devices in the Chinese market and content for people to play on them. If that's true, China might finally break the back of the niggling problem behind delivering movie content to people's iPads and mobiles phones, unraveling complicated rights and licensing issues and ushering in the long-talked about and near-mythical 'iTunes for movies'.
Soft power
All this adds up to one thing. Like no other demographic or group outside the contemporary North American film market the US movie industry was built upon, China has Hollywood over a metaphorical barrel.
But it's not just the sheer number of consumers (EW's Grady Smith says an average of 10 movie screens a day are opening across China). Still the model of centralised and unopposed government control, China's leadership is in a unique position to tell Hollywood bigwigs what to do in exchange for all that action.
Firstly, China itself is doing better because of the new climate in the cinema industry – no doubt helped along by the incredible growth in the local exhibition sector. Chinese films took 70 percent of the total box office in the first three months of 2013, quite a change from 15 or so years ago when there was hardly a Chinese film industry to speak of and around twice as much as the same period in 2012.
It certainly gives Hollywood opportunity for a bigger toehold. After all, American movies are doing better in China all the time. "Kung Fu Panda II was a far bigger hit overseas than it was in North America," Phil Contrino says, "and I think it's safe to say Kung Fu Panda III will be much bigger in China than it will be in North America."
Contrino calls it the 'new reality'. "Even before China's market passes North America's, you'll see a handful of movies a year do better in China. What's more important, North America or overseas? If they're releasing films overseas first, you know the answer."
Another unwitting collective strategy China might be exacting is to buy Hollywood directly. Few other nations have access to the kind of capital it takes to enter the volatile, potentially crippling field of tentpole movies.
Bruno Wu, co-owner of Sun Redrock Group and the man many in America call 'Mr Chinawood', investigated the possibility of buying Summit Entertainment (owner of the money-spinning Twilight franchise and now owned by Lionsgate) in 2011. When asked by Deadline.com whether he'll partner with an American studio for productions, he said 'I think we will probably have to'.
The most tangible example of Chinese money coming directly to America is the 2012 purchase of AMC Entertainment (owner of the AMC cinema chain) by Dalian Wanda Group. Chairman Wang Jianlin went on to say his company had earmarked $10bn for further investment in the US.
Cause and effect
But just like the scientific method teaches us, the observer is likewise affected by the experiment, and China itself is changing, meeting the American interest halfway. An $800m tax-free arts and entertainment hub is being built in Beijing to try and give the local industry a shot in the arm.
China is also courting American filmmakers just as much as studios are courting China. In Rian Johnson's 2012 sci-fi hit Looper, lead character Joe (Joseph Gordon Levitt and Bruce Willis) moves to Shanghai, falls in love and reaches middle age before being sent back in time to confront his younger self.
What really happened? The first draft had Joe act on a lifelong dream to move to France, but during filmmaker Kevin Smith's Smoviemakers podcast, Johnson explained that Beijing's DMG Entertainment gave him a great deal to film there. Thanks to that deal and several pre-sold territories, Looper was almost in the black before a single camera had rolled.
More recently, the Cultural Assets Office of Beijing Municipal Government announced the 2013 Beijing International Screenwriting Competition for American screenwriters, where the winners get an unparalleled opportunity to get their script made and China gets the cream of American writing talent. It's part of a dedicated push by China Phil Contrino says is designed to learn how to do things as good as Hollywood.
"China is making its goal to be less dependent on American movies to fill their box office," he says. "They're getting very good at making films that connect with Chinese audiences. There used to be a lot of stuffy, historical epics because they're obsessed with their history, but now they're making these stories about average Chinese citizens the same way Hollywood makes movies about average Americans."
Such moves already seem to be working – the $500m hit Man Of Steel was knocked off the top of the Chinese box office after one week by local film Tiny Times, a coming of age movie for teenagers.
The dark side
Hollywood falling over itself to entice Chinese ticket buyers gives Chinese media companies and development funds a unique opportunity to call the shots, but the other major player is a government that's openly conservative and oppressive by western standards.
There were raised eyebrows across Hollywood when Quentin Tarantino's violent western Django Unchained (2012) was suddenly pulled from release the day it released. Nobody involved – from Chinese censors to distributor Sony – has been very forthcoming about why the film was so visibly yanked apart from 'technical reasons'.
The news came after reports Tarantino had already edited and altered graphic scenes of splattering blood to meet censorship standards. The State Administration for Radio, Film and Television (SARFT) let Sony release Django Unchained about a month after its abrupt withdrawal and it grossed a paltry $2.75m across China.
So while 'tailoring' and 'editing' are innocuous words for what might go on, what about less palatable terms along similar lines such as 'homogenisation'? Hollywood's long been accused of chasing the lowest common denominator to appeal to the most lucrative quadrants. What happens when it has to play to a state approvals process that takes a dim view of sex and violence – two of the biggest selling points of the movies?
Greenlighting only movies that will meet official Chinese standards in order to gain entry to the marketplace might be good business sense, but might it cause studios to squeeze edgy or challenging material even further out of the system? Grady Smith believe the earning potential of international box office will cause a homogenisation of film.
Phil Contrino agrees, saying digital technology will only making it easier for the studios to roll out localised versions for certain markets. "This will definitely change the way Hollywood thinks about the movies they're making, in particular the scenes that are in those movies," he says. "[Studios] might go in thinking, 'when we send this movie to China we're just going to axe this, this and this scene'."
None of which is to say there isn't a more overt control of content by China as well. The Arabian Nights production mentioned above was given the go-ahead only after SARFT cleared a script synopsis submitted by the film’s producers. "China is in a position where it's pushing back and asserting its power in Hollywood," says Smith.
All this adds up to China falling short of the license to print money Hollywood hopes for so far. Many have already grumbled about hidden agendas, double standards and erratic official behaviour they say is making business impossible.
The recent example of The Life of Pi was a rude shock for executives with Yuan signs in their eyes. After a landmark decision struck by US Vice President Joe Biden last year, the number of Hollywood films released in China would increase in exchange for a guaranteed 25 percent of the box office back to the studios. After The Life of Pi made $93m in China and distributor 20th Century Fox looked forward to their $23m slice, the government suddenly announced a new tax that would reduce Fox's share to barely $2m.
"The China film group is still run by their government," Smith says. "American movies don't always have the easiest time over there – some films are randomly pulled, Batman and Spiderman are forced to open up against each other, and of course China never says it's an aggressive move but it certainly seems to be that way. But you'll never hear anyone in Hollywood say it because they don't want to offend anyone there."
But the gulfs between the cultures, styles of government and business climates of Hollywood and China isn't likely to discourage studio heads from doing their damnedest. "What Hollywood likes is the same as what Hollywood has always liked," Smith says. "Money."
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