By Robert Cain for China Film Biz

February 23, 2012 from Tokyo, Japan

I have word directly from the investor that a deal was struck on Wednesday morning between Lionsgate and China National Film Capital Company (国影投資管理有限公司, or CNFC) to co-produce a slate of 10 films over the next three years. CNFC says it will invest 50 percent of the total production costs in a ‘portfolio’ of Lionsgate movies, primarily in the action genre, with a wide range of budgets.

Wang Guowei, the CEO of CNFC, told me the news in person in a meeting on Wednesday afternoon in Beijing.

Wang also told me that his fund will invest in a low-budget movie to be directed by Michael Bay, for which the director and crew will be paid not in cash but in equity participation in the project. And he said he’s planning to invest in the Avatar sequel together with China Film Group and Fox.

However, Lionsgate has yet to confirm the news of their supposed deal, and given Mr. Wang’s spotty track record I am inclined to take his pronouncements with a grain of salt. When Wang appears as a panelist at the Film Financing Forum in Los Angeles in early March, those who meet him would do well to be careful in their dealings with the fund manager.

As we’ve seen in recent weeks and months, numerous claims and pronouncements have been made by Chinese investors regarding their intended partnerships with American film producers. And although I’m glad to know of their interest in Hollywood, I must caution readers that many of these purported deals will fall well short of expectations.

Exaggeration and mis-represenation are not uncommon in Hollywood and elsewhere, but they are unfortunately endemic in China. With so much naïve exuberance in the U.S. about potential fresh sources of capital from China, and with so many Chinese individuals and institutions flush with cash and opportunity, there are high hopes on both sides. With few long-term relationships or experienced guides to shepherd deals, many hopeful fundraisers in Hollywood will be burned with false promises, and many eager investors in China will be bilked of their renminbi.

As a producer, fundraiser and consultant who has for many years been in the middle of the U.S.-China film trade, I believe it is important to root out dishonesty and inefficiency wherever it occurs. The main reason that I started writing China Film Biz was to bring a clear and sober perspective to the cross-Pacific dialogue and to help others benefit from the mistakes I’ve made. I see it as very much in everyone’s interest to help elevate the level of integrity and accountability in U.S.-China entertainment dealings.

It is in this very spirit that my friends at TransAsia Lawyers, a prominent entertainment and media law firm based in Beijing, have launched ChinaGoAbroad, a web-based information and transaction platform dedicated to bringing new standards of transparency to inbound and outbound investments in and from China. They do so with the full blessing of SARFT, China’s state administration that oversees all media investments.

ChinaGoAbroad’s mission is to serve as a resource and matchmaker to facilitate business and to help honest dealmakers find one another. In this age of instant communications, of internet blogs, of Twitter and Sina Weibo, the posers and charlatans had better watch out.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

February 19, 2012 from Shanghai, China

I would have liked to put the headline for this story in giant, screaming, 48-point font. To be the first to inform you of ground-breaking news.

I would have liked to present you with the scoop that China has increased its movie import quota from the previous 20 films to the new level of 34 each year, and that it has raised the revenue share it will remit to foreign producers from 13-17 percent of box office takings to a more generous 25 percent in future.

But you already knew all that.

Here in Beijing, there’s been scant mention of any of this in the media. The government has been keeping a tight lid on a story that it apparently prefers to keep quiet in the PRC. In a day full of meetings on Saturday with film distributors, producers, and even the powerful head of China Film Group’s production division, not one person I spoke with was even remotely aware of the news. I only found out about it because a handful of friends back home in the USA were kind enough to email me stories from Variety, the Los Angeles Times, and other publications.

In fact, the front page headlines in Sunday’s China Daily (and all the pages that followed) have nothing to do with movies. Instead, the lead story reports—somewhat ironically—about Vice President Xi’s insistence that Washington loosen up its own trade restrictions that limit exports of American technology to China. China badly wants to access American innovations in such areas as civil aviation, integrated circuits, machine tools and other products. American movies and TV, not so much.

In fact the timing of the film quota announcement was rather awkward for the Chinese Communist Party, given that it came on the heels of a week of tough talk in Beijing about eliminating foreign TV programs from Chinese prime time broadcasts, and a general mood of xenophobic aversion to western cultural imports. The silence here about the shift in film import policy is deafening.

The policy shift was not exactly what Hollywood and the MPAA were asking for, but it is nevertheless big news, and I expect my producer and distributor friends back home are in a jubilant mood today. As Vice President Biden put it, “The agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast growing Chinese audience, supporting thousands of American jobs in and around the film industry.”

Specifically, the new agreement will allow, in addition to the previously authorized 20 foreign films per year, another 14 “enhanced” films, such as those made in 3D or IMAX formats. This last point is interesting, as it allows the Chinese government a bit of face-saving. The loosening of the quota might appear to folks in the PRC as capitulation by Beijing to US pressure, but the “enhanced” film requirement allows the Chinese to characterize the agreement as a ‘technological advance.’

After some investigation with studio and government connections in Beijing I’ve learned that there are important additional elements to the agreement which would smooth the process for mounting China-US co-productions, and also make it easier for US companies to set up joint ventures in China. But there are undoubtedly countless details to sort out before the new agreement can be implemented, and China could well drag its feet in putting the new policies in place. None of the U.S. press articles I saw mentioned any implementation timetable.

Of course, if you’re an attentive reader of this blog you know that film-related announcements from China are often overblown, exaggerative, and sometimes just plain false. Everyone got it wrong—myself included—in speculating that Jeffrey Katzenberg had arranged for Vice President Xi Jinping to announce a $2 billion joint venture between Shanghai Media, China Media Capital and Dreamworks Animation. Instead Jeffrey made the announcement himself regarding a far more modest $330 million deal.

Even former MPAA chief Jack Valenti got egg on his face back in 1994 when he proclaimed that he had negotiated a contract to lift all Chinese quotas and completely open up the Chinese entertainment market to Hollywood content. He later learned to his disappointment that he had negotiated the deal with a CCP apparatchik who lacked any decision-making authority.

If and when the new quota rules do get implemented, the biggest winners won’t be American studios, independents, or filmmakers. The biggest winners will be China Film Group and the PRC’s theater operators. With 14 additional Hollywood films to release each year, they’ll collectively rake in some $600 million or $700 million in incremental box office during the first year alone, with much more in subsequent years. 75 percent of that amount will stay in their pockets, making them the real beneficiaries of China’s ‘conciliatory’ moves.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

February 17, 2012 from Beijing, China I’m happy to be reporting today from Beijing, where I’ve just finished a second day of investor meetings on my 10-day, multi-city China trip. Things are going quite well; the level of interest among investors wishing to fund films made outside of China is higher than I’ve ever experienced. With a little luck I’ll be making an announcement regarding my company, Pacific Bridge Pictures, in the coming weeks.

Of course, any announcement I might make would pale in comparison to the one apparently being engineered by Dreamworks Animation (DWA) CEO Jeffrey Katzenberg. Although it hasn’t happened yet, it’s been widely reported that Katzenberg has arranged to have China’s President-apparent Xi Jinping announce today the formation of a new three-way, Chinese government-backed, $2 billion joint-venture between DWA, Shanghai Media Group, and China Media Capital.

According to reports in the Chinese press, under the terms of the joint venture the three companies will construct a studio facility in Shanghai with the intent of developing and producing film, television and live stage productions aimed at the booming Chinese media market.

None of the partners has deigned to comment or confirm the reports, but we’ll presumably know today whether there is truth to the story.

Assuming it is true, I’m giving Jeffrey Katzenberg a virtual kowtow of admiration and respect for his exemplary showmanship. Enlisting China’s President-to-be as his emissary is a brilliant political and public relations coup, and a win-win both for him and for Xi. As he prepares to assume the mantle of leadership in the People’s Republic, Xi gets to demonstrate China’s largesse (and importance) to the U.S. by showering a major Hollywood company with a $2 billion ‘gift,’ while deflecting attention from China’s extremely one-sided behavior with respect to entertainment trade. For Katzenberg, Xi’s endorsement would cement his standing in China’s animation business, and also send an important signal to Hollywood that he sees China as his most important territory after North America.

Although they have been quieter until now than DWA, Hollywood’s other major animation companies should not by any means be counted out. It hasn’t escaped the attention of Universal’s Illumination or Disney’s Pixar that China’s family animation market tripled in size in 2011 versus the prior year.

With heavy government support and a voracious market for animated films and TV programs and related merchandise, China will likely become the world’s biggest territory for these companies–even bigger than the US–in less than a decade. Although fewer than a quarter of animated feature films released in China are made by U.S. companies, these films dominate the market with a nearly 75 percent share of the box office.

China has a lot of catching up to do before its animation production companies can compete in terms of storytelling, technical quality, and global commercial viability.  Because U.S. expertise is highly prized in China, America’s major animation companies can anticipate that their futures there will be very bright indeed.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

I’d like to share with you two brief clips from the interview here:

February 9, 2012

The Year of the Dragon so far looks to be the year China starts investing some serious coin in Hollywood. During the past week several purportedly major Chinese investment funds have burst onto the scene with intriguing announcements about the riches they intend to spread around the cash-starved American film business.

Could this be 2005 all over again? Back then Wall Street’s hedge funds fell all over themselves to fund slates and individual film projects, convinced they were smarter than the ‘rubes’ in Hollywood who didn’t know what they were selling. As a veteran banker friend put it to me then, “The Wall Street guys think they’ve discovered beachfront property under the noses of a bunch of west coast hicks and it’s there for the taking.”

Of course it didn’t take long to see who the real rubes were. After investing hundreds of millions of dollars with such companies as Relativity Media and Capitol Film, Wall Street got a costly lesson in what it’s like to deal with Hollywood’s dark side. If the hedge fund managers did indeed find a sunny beach anywhere, they got badly burned. Even though there were other, more honorable recipients of film funding, enough damage was inflicted that few of the Wall Street financiers who were new to the biz in 2005 will ever come back.

The spate of recent fund announcements from China (CMM, Harvest Seven Stars, Yao Ming, Paul Y Engineering, SAIF Partners, etc.) must have more than a few unscrupulous individuals in the U.S. scheming about ways to strip the fresh round of film investors clean of their dollars and renminbi. But China ain’t Wall Street, and it’s unlikely that the pickings will be quite so easy this time, if there is indeed a new wave of money coming.

For one thing, the Chinese investors may not know much about the global film industry or even how business is done in the U.S., but most are smart, savvy, and conservative with their capital. Having done business with numerous Chinese funds and high net worth individuals, I’ve found them to be way ahead of all the hedge fund kids I dealt with in their sophistication about the ways of the business world. Most of them survived the tumult of China’s Cultural Revolution, and have risen to the top of a business and political environment that has no rule of law and throws a multitude of roadblocks in the way of any individual’s success. To them, Hollywood’s con artists are amateur punks.

That’s not to say, of course, that Chinese investors are immune to mistakes or that they can’t be fooled. And that’s why, if we in Hollywood hope to have a long term relationship with China, we’re going to have to treat these investors differently. If you’ll indulge me in a bit of ‘Jerry Maguire’ style pontificating, we could all stand to be a little more enlightened about how we treat the money. I’m talking about working earnestly to understand the investors’ motivations and keeping their best interests in mind.  Being willing to meet them halfway. Let’s not poison the well this time. And let’s be mindful that, in Chinese, the word ‘greedy’ ( 貪 ) and the word ‘poor’ (貧) look almost the same.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

By Albert Wang for China Film Biz

February 8, 2012

For the second week in a row, Mission: Impossible 4 Ghost Protocol reigned at the Chinese box office, grossing a reported $39.4 million and bringing the film’s cumulative 9 day gross in mainland China to just under $56 million.

Out of the $24.3 million that MI:4 grossed over the weekend in the foreign theatrical circuit, $19.8 million came from China. To put the numbers in context, MI:4 grossed a mere $7.4 million in its opening weekend in Japan in December of 2011. Until recently, Japan was the world’s 2nd largest movie market. It took MI:4 film little over a week in China to gross as much as it did in a full month in Japan.

In second place was Sherlock Holmes: A Game of Shadows, which continues its decent showing in China with a gross of $3.56 million over the week, bringing the film’s 22 day total to $27.7 million.  Meanwhile, both The Viral Factor and All’s Well, Ends Well 2012 held on to the number three and four spots, grossing $2.9 million and $2.4 million, respectively.

The lone newcomer into the top five was Jonnie To’s Life Without Principle, which earned a rather mild $2.3 million over three days to claim the number five spot.

With the exception of To’s Life Without Principle, there was relatively little movement in the box office top 10.  And so this week it is worth noting the complete dominance Hollywood films have had in the Chinese market, with M:I 4 and Sherlock Holmes together accounting for a cool 75% of the mainland Chinese box office this week.

This dominance by a pair of Hollywood films comes at a time when it seems that just about anyone and everyone with deep pockets in China is looking to develop a film fund.  This week saw the announcement of Bruno Wu’s $800 million Harvest Seven Stars Media Private Equity Fund, as well as the announcement of a Chinese government-backed film fund to be overseen by China Mainstream Media National Film Capital Hollywood Inc. (HSSMPEF and CMMNFCHI, respectively; good luck remembering those acronyms), the U.S. division of China National Film Capital Co. Ltd.  Even retired NBA star Yao Ming has been reported to be looking into developing a film fund in recent weeks.

The purported goal of most if not all of these film funds is to produce Chinese films with a more global appeal.  And yet as we see from the Chinese box office this week, Chinese films have yet to find a way to effectively compete with Hollywood films on their own turf.   This is due to a wide range of issues, from overly restrictive government regulations, to a lack of quality source material being developed in China for the big screen, to Chinese audience’s demonstrated preference for Hollywood’s film offerings.  However, I’d like to posit another problem a globally appealing Chinese cinema faces.

China, in spite of all the capital being thrown at film funds of late, lacks the necessary star power to promote its films globally.   M:I 4 had Tom Cruise, Holmes had Robert Downey, Jr.  Without those stars headlining their respective films, it’s difficult to imagine either film performing as well as it has on the foreign theatrical circuit.

And so in spite of all the promises the various film funds have made regarding a future global Chinese cinema in the making, a big question remains:  Who will be the Chinese Tom Cruise?  The Chinese Robert Downey, Jr.?  Or the Chinese Shia Lebouf?

Albert Wang is an aspiring producer of US-China film co-productions who joined the Pacific Bridge Pictures team in December, 2011. His previous blog on US-China films can be seen at hollymu.com.

February 7, 2012

Yesterday’s flurry of press articles regarding the newly announced Harvest Seven Stars Media Private Equity Fund (HSSMPEF) got me thinking about how easy it is these days to get tongues wagging regarding the promise of Chinese money for Hollywood movies, and how difficult the reality of putting that money to work can be.

The purported $800 million fund is a co-venture between private equity firms Harvest Alternative Investment Group and Sun Redrock Investment Group. The latter company is managed by Bruno Wu and Yang Lan, the Chinese media power couple who I profiled here last week.

The fund’s ambitions, as described by Wu, are lofty: to source and distribute “global movies, primarily English-language films that are not just going to be released in China, but really produced by Hollywood and released on a global basis.”

As a big booster of China-Hollywood cooperation, I’m pleased to see such an ambitious venture mounted. But on the other hand, I’ve seen too many of these sort of initiatives fail to get very excited about what is, after all, just a concept at this point. Other, far larger Chinese investors have attempted to accomplish the same feat that Wu and his partners say they’re pursuing, and all have so far failed to even get to the starting gate. I was close to two of these previous initiatives (confidentiality obligations prohibit me from naming them) and I’m wondering how the new fund will avoid the obstacles and pitfalls that doomed those prior undertakings.

Let’s start with this question: Is the $800 million really there? Is it really $400 million? $100 million? Is there really any committed capital at all? There’s no way to know for sure; China’s securities laws don’t allow for the sort of transparency that other countries require. The new fund’s principals have long track records and their continued success presumably rests on their reputations, so I’m willing to accept that the money’s there. But then again, if it isn’t, it wouldn’t be the first time in recent months that a ‘major’ Chinese-funded film investment partnership turned out to be nothing but vapor.

Another fundamental issue: where’s the film development, production or distribution experience in the HSSMPEF partnership? As far as I can tell, the principals of the two funds have made and released exactly one movie between them. A made-for-internet movie.

But money and experience aren’t even the biggest problems. There’s plenty of money in China, plenty of money interested in funding movies. And relevant experience can be bought (warning: don’t click that link if you’re easily offended by shameless acts of self-promotion). The real challenge, the one that has yet to be surmounted by Chinese investors or their co-production partners, is the creative challenge.

The creative challenge boils down to two fundamental sticking points that caused other, similar film investment schemes to fail. First, China’s censorship strictures. For anyone doing business in China who wishes to continue doing business in China, it is critically important not to anger the Chinese Communist Party (CCP). That means ensuring, with no risk for error, that none of the movies you fund will in any way violate the rules and taboos promulgated by SARFT, or make China or the CCP look bad.

This is a very big deal. Even a cursory review of the SARFT rules reveals that they are antithetical to popular, commercial filmmaking. Without sex, violence, horror, or crime, there’s not much room for entertainment in movies made for adult audiences. Any Chinese fund investing in films–whether made in China, in Hollywood, or anywhere else–will be held strictly accountable to these rules. But Hollywood filmmakers will find it almost impossible to be governed by them. Balancing these opposing tensions has proven an unattainable goal for previous Chinese investment fund hopefuls.

The second creative obstacle is the severe shortage of available co-production screenplays. Very few in Hollywood know how to write a script that can satisfy China’s censors while also serving as the basis for a film with appeal to Chinese audiences as well as global ones. Almost no one in China can do this either. My company, Pacific Bridge Pictures, has a team of writer-producers focused on this very challenge, and there are a few others who have the necessary cross-cultural backgrounds and development skills needed to thread that needle. But an $800 million fund is going to have a very difficult time finding or generating enough material to fill its production pipeline.

In short, for HSSMPEF to succeed, it will have to pull off a major balancing act. Wu, Yang, and their partners are all smart, capable, successful people, but they’re rushing headlong into uncharted territory on a tightrope.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

February 3, 2012

In mainland China, the seven-day-long Spring Festival is a holiday break to commemorate the Lunar New Year, and it is also the time when many make the long and arduous trip back home to celebrate with their families and relatives.  For about a hundred million  Chinese migrant workers this holiday break is one of the few times during the year they ever have a chance to visit home.  And so as one might expect, the Spring Holiday is an incredibly difficult travel season, regardless of whether one is traveling by plane or train.

If the week’s box office numbers are anything to go by, mainland Chinese are also increasingly taking time out of this hectic annual holiday break to enjoy movies at their local cinemas.  Weekly box office was up by about 25 percent (in US dollar terms) over the comparable holiday week last year, with a total of $62 million. The month of January was very strong, running 43 percent of January, 2011, though it should be noted that this is not a direct comp, since last year’s Spring Festival didn’t occur until the beginning of February.

The big winner for this week was the Brad Bird directed action picture Mission: Impossible 4 – Ghost Protocol, which in a span of only two days took in an estimated $15.8 million at the Chinese box office, or well over half of M:I 4’s $25 million weekend total on the foreign theatrical circuit.

Paramount claims that Mission: Impossible 4 took in a haul in China that was five times greater than that of 2006’s Mission: Impossible 3 opening weekend in China.  But this feat may not seem quite so impressive when one realizes that China’s box office has grown by more than six-fold during that period.

Rounding out the top 5 for last week were Sherlock Holmes: A Game of Shadows, The Viral Factor, All’s Well Ends Well 2012, and The Great Magician.

During the week-long holiday, the mainland Chinese box office totaled 390 million yuan (roughly $US 62 million), significantly higher than the Spring Holiday Week numbers from 2011 and 2010 (320 million yuan and 340 million yuan, respectively).

What makes this year noteworthy is the fact that non-domestic films dominated what has traditionally been a solid week for domestic Chinese films.

Typically, the Lunar New Year ushers in a selection of ensemble Chinese films headlined by big Chinese stars.  The All’s Well Ends Well series, for instance, is an example of this distinct genre; the franchise dates all the way back to 1992, when the original All’s Well Ends Well featured a massive Hong Kong cast that included Stephen Chow, Maggie Cheung, Leslie Cheung, Raymond Wong, Sandra Ng, and Teresa Mo.

Just last year, the Spring Holiday week (Feb. 2-Feb.8, 2011) saw three Chinese films – All’s Well Ends Well 2011, My Own Swordsman, and What Women Want – take the top spots at the Chinese box office.

This year’s Spring Festival Holiday, however, saw fewer big domestic films in this genre.  The week’s top grossing Chinese language film, for instance, was the Hong Kong-produced The Viral Factor, which released a week prior to the Spring Holidays and had no thematic connection to the Lunar New Year celebrations.  The only newly opening non-Hollywood films to crack the top 10  last week—the Taiwan-made Perfect Two and the Shangjing-directed Fan Ju Ye Feng Kuang—opened to less than $5 million each.  The latter was in fact a Chinese New Year film directed by the director of My Own Swordsman, a comedy that played to big opening numbers last year.

It remains to be seen whether 2012 marked a fundamental shift in box office behavior over the Chinese New Year Holidays. It may be that the Chinese government prefers to see domestic films dominate this culturally important holiday week, and would thus implement policies to favor domestic films.  This could have been the reason that M:I 4’s release came at the tail end of the holiday. Then again, with so much money being spread around during the Spring Holidays, party officials may not mind sharing in the profits that a Hollywood blockbuster like M:I 4 or Sherlock Holmes can rake in.

Albert Wang is an aspiring producer of US-China film co-productions who joined the Pacific Bridge Pictures team in December, 2011. His previous blog on US-China films can be seen at hollymu.com.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

February 2, 2012

You heard it here first: China has surpassed Japan and is now the world’s biggest film territory outside the United States, as measured by total box office revenue.

For the past several months China has handily beaten Japan’s national box office take, and the gap is widening as China’s torrid pace of revenue growth continues.  Although China’s annual total of $2.05 billion for 2011 fell slightly behind Japan’s $2.29 billion, the last few months of 2011 and January of 2012 saw China surge ahead. 2012 will undoubtedly be the year in which China solidifies its position as the world’s number 2 market behind the United States.

.                    Source: Pacific Bridge Pictures research

.             Source: Pacific Bridge Pictures research

Now it is just a matter of time—about 6-7 years if current trends continue—before China overtakes the United States to permanently become the world’s biggest and perhaps most important movie territory.

For Japan, the lingering effects of the 8.9 magnitude earthquake and tsunami that devastated the country last March have certainly been a factor in its descent to #3. Hobbled by the damage to northeastern Japan’s infrastructure, and by a dampened national mood, box office dropped by 10 percent (nearly 18 percent in local Yen currency) from the record-breaking tally of $2.66 billion in 2010.

But even had there been no earthquake, Japan would have inevitably yielded the number two spot to China by 2013. Japan, like the U.S., has been a mature market for some time; even if we dismiss 2011 as an aberration, the annualized box office growth rate there has been in the low single digits for years. China, by contrast, has been growing by nearly 40 percent per year for a decade.

And aside from total box office, China outperforms Japan in other key measures. As a market for Hollywood films, China has the clear edge over Japan. Of the 26 Hollywood films that were released in both territories in 2011, 19 grossed more in China than they did in Japan, many by a very wide margin. Transformers 3 and Kung Fu Panda 2, for example, each grossed 3 times as much in China as they did in Japan. Had China allowed more American films into its theaters last year, it would have undoubtedly surpassed Japan in total box office in 2011.

.       Source: Pacific Bridge Pictures research

China also offers better upside for its domestic films than Japan does for its films. The top grossing Chinese films of the past year—The Flowers of War, Flying Swords of Dragon Gate, Let the Bullets Fly and Aftershock—have all earned more than $85 million in their domestic Chinese releases. During the same period, not one Japanese-made film cracked even $60 million in Japan.

The implications of China’s rapid ascension are enormous for the global entertainment business. As China’s theatrical business grows, so will its television and home video industries. In the coming years China’s global share of the entertainment pie will expand from the low single digits to 20 percent and higher, and China’s buyers will rapidly gain clout in deciding which films get made, and how and where they are produced. The flows of capital for production and marketing of movies will increasingly come from China. By simple attrition, U.S. tastes will become less dominant, and Chinese tastes will become more influential.

Hollywood’s major studios have been extraordinarily slow to respond to China’s emergence. It is no longer reasonable for them to expect that China will play by their rules, or that Hollywood will remain the world entertainment industry’s center of gravity for much longer. Any of us who hope to enjoy career longevity in the global film business had better start thinking and acting more with China firmly in mind.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

January 31, 2012

Note: Due to an unexpected week’s delay in China’s box office reporting, we’re just now putting out the report for the week ending January 22^nd, with the report for the week ending January 29^th to come shortly.

We can only speculate as to why China’s box office numbers were delayed last week. The hold-up may have been related to SARFT’s recent crackdown on box office misreporting and under-reporting. Apparently new systems are currently being implemented to prevent the widespread practice of selling tickets for one film and then writing the name of another film on the face of the ticket. This sort of manipulation allows monies paid by the ticket buyer for one film to be funneled to another.

When the numbers were finally released they showed Warner Bros’ Sherlock Holmes: A Game of Shadows to be last week’s big winner at the mainland Chinese box office with a decent $10 million gross. This may come as a bit of a surprise, given that the original Sherlock Holmes movie was viewed by some as a relative flop in mainland China when it was released in 2010. NYMag, for instance, pointed out that while Avatar earned in China about one-third of what it made in the US, the original Sherlock movie’s China release earned just one-eighteenth of its US box office haul.

Perhaps the first film’s underperformance can be attributed to China’s unfamiliarity with the Sherlock Holmes brand, but Sherlock Holmes: A Game of Shadows has had no such marketing woes. The sequel is on pace to significantly outdo the original at the Chinese box office.

In second place with $7.3 million was Dante Lam’s newly released thriller The Viral Factor, reportedly Taiwan megastar Jay Chou’s last starring role in an action movie. The film also stars Nicholas Tse in yet another gritty and nuanced “bad guy” role. Stylish Hong Kong director Lam, whose most acclaimed film is 2008’s Beast Stalker (also starring Nicholas Tse), is known for making his films chock full of car chases and explosions — not to mention the occasional male actor literally crying his heart out.

The rest of the Chinese box office leaders include the previous week’s top film, The Great Magician (starring Tony Leung and Zhou Xun), the animated film Pleasant Goat and Big Big Wolf 4, and the 2012 installment of the All’s Well Ends Well series, the Chinese New Year comedy that stars many of Hong Kong’s biggest stars. With an opening weekend tally of just $2.2 million, an 80 percent drop from the 2011 edition’s first week result, the numbers for All’s Well Ends Well 2012 don’t bode well for continuation of the series.

The Taiwanese romance You Are the Apple of My Eye, while dropping five places to the eighth spot at last week’s box office, continues its strong showing, having already grossed more than all 2011 Taiwanese releases in mainland China combined.

Meanwhile Zhang Yimou’s war epic The Flowers of War has wound down its theatrical run on the mainland with a cumulative gross just below the $100M mark. Assuming the reported numbers are accurate, even though Flowers stands as the 3rd highest grossing film ever in the PRC, the film’s initial theatrical returns will fail to repay even half of its $90 million production cost.

Cumulative box office for the week was $40.8 million, up by 13 percent as measured in dollars (up 7 percent in Chinese yuan) over the same period last year. This would be a nice bump in most territories, but given that the mainland’s screen count has risen by 50 percent since January, 2011, theater operators will undoubtedly be disappointed with the weekly result.

Albert Wang is an aspiring producer of US-China film co-productions who joined the Pacific Bridge Pictures team in December, 2011. His previous blog on US-China films can be seen at hollymu.com.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.