China’s influence on Hollywood has been significantly increasing over the years, as well on screen as behind the scenes.
The country is set to become the largest market for the film industry, but only allows 34 foreign films per year. The challenge with this massive market lies in resonating with international audiences and the Chinese audience at the same time.
Before the 1990’s, the Chinese film market was closed to foreign film entries, and the only movies available to the public were produced by the government, with the objective to convey specific messages. However, movie sales started to plunge, and in 1994, the government permitted the release of ‘The Fugitive’, which was a turning point in history. The public acclaimed it and 10 other American films were released, so the US government kept pushing for higher quotas each year.
“In 2016, 27 new cinemas opened everyday in China.”
American film studios and entertainment companies can no longer ignore the growth and revenues potential on this market, hence the necessity to have their motion pictures approved by the Chinese government. Satisfying the Chinese opinion is critical for this matter, so much that it can change companies’ entire strategy for a film release, or even the film itself.
Companies can adopt 3 strategies to have their movies approved by the Chinese government.
This is the most common strategy adopted by American companies. In this scenario, Chinese theatres and distribution companies would receive the majority of the returns generated from the movie sales. Even though this seems like the most convenient methods, companies still need to incorporate positive Chinese story elements in their movies and are not immune to having their motion pictures rejected in the end.
Paying a “flat fee”
The second possibility for companies to have their movies played in Chinese theaters is to buy-out from them, by paying a flat fee and allowing Chinese companies to get 100% of the sales. This is however the least popular option.
The third option offers both Chinese and American companies to find a middle ground, by co-producing the entire movie. This procedure has strict guidelines that the American company has to follow (like having one third of the cast represented by Chinese actors, changing the script according to the Chinese film board’s demands and working with them through the whole production process) but ensures higher profits on the market. There have been many cases in which movies have been altered to meet censorship demands.
For instance, the science-ficition film ‘Looper’ was partially filmed in Shanghai instead of Paris, and the Chinese Renminbi was used as the currency of the future. ‘Red Dawn’ was shelved for two years after receiving criticism about a ‘Chinese invasion of the United States’. For the movie to be released, the producers had to change the villain from China to North Korea, by re-editing the entire film.
Sometimes American companies ultimately chose to release separate versions for China and for the international public, like for Iron Man 3.
Having all these options does not simplify the market entry of American movies on the Chinese market, as they are faced with another challenge, which is the domestic competition. In 2017, the Qingdao Oriental Movie Metropolis was opened, a studio facility built by the Dalian Wanda Group, with the objective of outplaying foreign competitors. The company already announced that 30 foreign films will be produced there in the upcoming years.
If Chinese entertainment giants were not enough competition, other companies want to play a bigger role on the movie scene.
Alibaba, which is worth as much as Disney and Time Warner combined, already produces movies and sells tickets on one of its many service platforms. Baidu has the power to dominate the marketing and promotion activities of movies in China by being the owner of two third of the video companies in the country. As for Tencent, the social media giant is also involved in producing entertainment content.
Without giving any spoilers, it is safe to say that the competition between Chinese and American movie producers and entertainment companies will become more intense. Now the question lies in whether the film industry will go under the same transformation other competitive sectors have gone through, through the implementation of new regulations, and who knows, the inquiry for foreign entrants to sign into a joint-venture for market access one day.