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Beijing is relying on Hollywood to fill cinemas, despite a surge of investment in domestic industry
For years, China’s government has been waging a covert war against the undead. Thanks to obscure Communist party censorship guidelines that prohibit “promoting cults or superstition”, foreign films featuring zombies, vampires, werewolves, mummies and ghosts have almost uniformly been banned by the censors.
Last year Sony Pictures’ Ghostbusters was denied a release in the mainland, while Train to Busan, an acclaimed South Korean film about a zombie apocalypse, was not shown in Chinese theatres — but shot to popularity as a download.
But this year, the dead have had their revenge, at least in cinemas. First came the February release of post-apocalyptic thriller Resident Evil: The Final Chapter, which made Rmb1bn ($145m) in 13 days. Although Chinese censors cut seven minutes from the film, the wholesale machine-gunning of lurching zombies remained largely undisturbed.
The following month Fox International’s Logan, in which decapitated heads and other body parts fly liberally off the adamantine claws of the eponymous mutant, was also released in China to the surprise of many in the film industry.
Pirates of the Caribbean: Dead Men Tell No Tales, featuring a ghost ship captained by a skeletal Javier Bardem, is set to be released simultaneously in the US and China tomorrow. Its showing at Disney’s Shanghai resort on May 11 was the first time a Hollywood film premiered in mainland China.
Matt Damon stars in big-budget movie 'The Great Wall', which was blasted by critics © NBC/Universal
“Historically, hardly any zombie or ghost movies have been allowed in, and ultraviolence like Logan has been a no-go area,” says Richard Huang, an analyst at Nomura in Hong Kong. But since the start of this year “they have been taking a more relaxed approach when it comes to censorship” of foreign films, he adds.
The reason is clear to many in the industry: after years of vertiginous growth, China’s box office is in danger of slipping this year for the first time since the 1990s. Censorship rules have discreetly been widened to boost movie revenues and prevent this from happening.
***
Almost four decades of economic reforms in China have been accompanied by a persistent question — would the market change China, or would the Chinese political system tame the market? The zombie films are striking a blow for market forces.
The relaxation of the limits on foreign films in China points to the subtle power of the profit motive to open up China’s notoriously closed entertainment sector to more foreign movies and to a wider range of subject matter. But it has also spawned introspection about the failure to produce hits by the domestic film industry, which once produced such greats as Farewell My Concubine and Raise the Red Lantern.
“It is quite obvious for this year, the government wants the movie market to do better, they want to see faster box office growth, even though they haven’t publicly said this,” says Mr Huang.
China’s booming film demand was once expected to overtake the US as early as this year. But after expanding at double-digit rates every year since 1999, growth in domestic cinema revenues skidded almost to a halt last year, hit by a slowing economy and a dearth of hit movies. China’s annual box-office sales in 2016 rose just 3 per cent year on year compared with 49 per cent in 2015.
China movies in numbers
Chinese movie enthusiasts wear 3D glasses during a screening of 'Avatar' in 2010 © Getty
34 Annual quota of foreign films allowed to be shown in China
41,434 Cinema screens in China in 2016, compared with 1,845 in 2002
700 Chinese films produced in 2016 — 73 were co-productions with 14 other countries
Then came another shock: a 7 per cent drop in China’s first-quarter film revenues, to Rmb13.6bn ($2bn), raising the prospect of a potential full-year fall in the country’s box office takings.
Film industry specialists mainly blame a surge of investment into the entertainment industry, as companies from across the country have tried to chase the booming box office. “There has been a crazy burst of non-film related capital into the film industry, combined with an under-developed content creating system. That has created a massive bubble,” says Hou Zhihui, a Chinese film producer.
The boom in the movie sector has been accentuated by weak growth in China’s traditional industries. Over the past two years many rust-belt industries, anxious to boost sagging share prices, simply added the word “entertainment” to their names or bought a film studio to change their profile with investors, often with success.
Last year Anhui Xinke New Materials, a copper processing company, tried to buy the Hollywood production studio that made Oscar-winning film The Hurt Locker but the deal fell apart due to constraints on Chinese capital outflows. Zhejiang Jinke Peroxides, a chemical group that bought a gaming company and renamed itself Zhejiang Jinke Entertainment, saw its share price shoot up 70 per cent last August after the name change.
Money has also been injected into the sector by internet companies targeting market share in online ticket sales, which have subsidised seat prices by Rmb4bn to 5bn a year, according to the Beijing consultancy iResearch. Theatre construction has surged and the number of movie screens in China increased by 9,552 last year — a figure that is more than twice the total number of screens in the UK.
While domestic film production, funded by a horde of Chinese investors, nearly doubled from 2012 to 2016 last year according to EntGroup, the quality is debatable. “A great number of investors barely know anything about the movie industry,” says Mr Hou.
A series of big budget domestic films took a drubbing in China last year. The second world war epic For a Few Bullets did not recoup its Rmb100m production budget, and the acclaimed Xuanzang, about a Tang dynasty monk, was also a big budget failure, making only Rmb33m of a Rmb100m budget.
Meanwhile, the Chinese film with the biggest-ever budget, The Great Wall, starring Matt Damon, made its $150m production cost back but was panned by critics and failed to generate much interest abroad.
“We think it did not reach our expectations either in terms of content or the box office,” says Wang Jianlin, chairman of Dalian Wanda, the real estate and entertainment group that is the largest cinema owner in China, of the film Wanda co-produced. Since 2012 Wanda has invested heavily in entertainment: last year it bought Hollywood studio Legendary Entertainment for $3.5bn.
Mr Wang says the tidal wave of money, for which Wanda is partly responsible, has hurt the industry rather than making it better. “During the bubble, the industry ignored the content, thinking that no matter what, people will go to watch the movies,” he says. “In the end people realised that the content is lacking and viewers have stayed away. Now a lot of capital withdrew again and things have become more normal.”
***
With domestic film studios in disarray, Lei Ming, chief executive of ABD Entertainment, a digital entertainment company in Beijing, says that if China’s box office is saved this year, it will be by foreign films. “The market still has a strong demand for Hollywood blockbusters, while domestic movies are very weak this year,” he adds.
China's domestic film industry produced movie greats such as 'Farewell My Concubine'
Some analysts expect the annual quota of 34 foreign films allowed into China to be quietly widened this year. Based on the screening schedule, it appears that the tradition of “Domestic Film Protection Month” in July to August, where only domestic films are screened, will not take place this year.
Mr Huang of Nomura points to other subtle changes in box office accounting designed to add a few percentage points to film revenues: transaction fees collected by online ticket platforms previously were not counted, but now they are, he says. A government campaign against creative accounting by theatres, to prevent them from hiding revenues and thus pay fewer royalties, is also in full swing. Experts expect these measures to add a “few billion” in renminbi to the 2017 box office, says one expert.
But the main way to boost box offices seems to be to allow more foreign blockbuster films. And while China may be in the process of bending its rules to accommodate Hollywood, the US film industry has been only too happy to reciprocate. A number of recent US movies have Chinese storylines built into their plots to woo Beijing’s regulators and audiences. In the 2014 Michael Bay robot extravaganza Transformers: Age of Extinction, the Communist party was compared favourably with a bumbling, inept US government, while in the 2015 Ridley Scott epic The Martian, China’s space programme saves the day for an astronaut marooned on Mars.
The 2014 robot movie 'Transformers: Age of Extinction' © Paramount Pictures
The approach of courting Chinese audiences is working. “It’s funny, we know that foreign film makers are just trying to pander to us and sell to us. But we like it anyway,” says Jennifer Dong of Meridian Entertainment in Beijing. “It makes us happy that we get to be the saviours of the world in film after film.”
“What sells in China are big budget sci-fi and horror films — concept films,” as Ms Dong calls them. “They are a well-tried formula. You have a monster, or some aliens, a few Chinese actors and some Chinese elements.”
***
While Hollywood is benefiting from a momentary Chinese glasnost, Mr Hou says Chinese filmmakers are burdened by more onerous restrictions and ideological guidelines. “The sole topic among filmmakers, screen writers, producers and everybody else in domestic film making is how to get films to pass examination and censorship from regulators. Nobody cares about the creative side of the industry,” he says.
A new film law governing the industry came into effect this spring. It bans film content deemed harmful to the “dignity, honour and interests” of the country. It also encourages the promotion of “socialist core values” in film.
The government has also stepped in to temper some of the excesses, clamping downon irrational foreign investments by Chinese companies that have focused on the entertainment sector. Mr Wang’s Dalian Wanda, for example, was prevented by regulators from buying Dick Clark Productions, a US TV production company, for $1bn, while other deals have also fallen apart.
The Chinese authorities seem to think they can save the domestic film industry using the same heavy-handed tools. Rather than trying to help it improve, the government has simply put pressure on critics to be more “patriotic” and to not criticise Chinese domestic films.
In December several state newspapers launched a co-ordinated attack on China’s film websites, alleging that movie rating algorithms based on user reviews were unfair to domestic films. The People’s Daily said negative reviews of Chinese films were “grossly inaccurate” and made clear that ratings should rise. They did.
One film review website, Maoyan, deleted the portion of its platform that assigns ratings to films, apparently under pressure from the government.
In this respect, China’s government seems to have learnt the lesson that the answer to problems caused by censorship is simple — more censorship.
Cultural gap: In search of a successful co-production
Hollywood franchises such as The Fast and the Furious and Transformers have been huge commercial successes in China, straddling the Pacific with simple storylines, adrenalin-pumping stunts and lots of special effects, but the magic formula does not appear to work in reverse.
US-China co-productions — many filmed in China but aimed at domestic and foreign audiences — are rarely commercial successes. The Great Wall, a Matt Damon vehicle co-produced by Dalian Wanda’s US studio Legendary Entertainment and other US and Chinese companies, recouped its $150m production budget but failed to meet revenue expectations. Dalian Wanda chairman Wang Jianlin was less than charitable about the film.
But fuelled by an influx of investment into China’s film sector, Hollywood and China are still searching for the holy grail of the successful co-production: Xinhua news agency reported in April that, of 700 Chinese films produced in 2016, 73 were Chinese-foreign co-productions with 14 other countries.
Co-productions are seen as a way to get around quotas on foreign films, but they are also a potentially lucrative way to straddle Chinese and US markets. Commercially, they are still mainly disappointments. According to EntGroup, the Beijing-based entertainment consultancy, most joint productions lost money in 2016. Rock Dog, an animated comedy produced by Huayi Brothers Media Group and DreamWorks at a cost of Rmb410m ($60m), grossed only $20m worldwide.
Jennifer Dong of Meridian Entertainment, another Beijing consultancy, says that while Hollywood blockbusters seem to translate from one culture to another, more subtle genres do not. “There has never been a successful foreign comedy here in China. It’s just that the humour does not translate.”
Beijing is relying on Hollywood to fill cinemas, despite a surge of investment in domestic industry
For years, China’s government has been waging a covert war against the undead. Thanks to obscure Communist party censorship guidelines that prohibit “promoting cults or superstition”, foreign films featuring zombies, vampires, werewolves, mummies and ghosts have almost uniformly been banned by the censors.
Last year Sony Pictures’ Ghostbusters was denied a release in the mainland, while Train to Busan, an acclaimed South Korean film about a zombie apocalypse, was not shown in Chinese theatres — but shot to popularity as a download.
But this year, the dead have had their revenge, at least in cinemas. First came the February release of post-apocalyptic thriller Resident Evil: The Final Chapter, which made Rmb1bn ($145m) in 13 days. Although Chinese censors cut seven minutes from the film, the wholesale machine-gunning of lurching zombies remained largely undisturbed.
The following month Fox International’s Logan, in which decapitated heads and other body parts fly liberally off the adamantine claws of the eponymous mutant, was also released in China to the surprise of many in the film industry.
Pirates of the Caribbean: Dead Men Tell No Tales, featuring a ghost ship captained by a skeletal Javier Bardem, is set to be released simultaneously in the US and China tomorrow. Its showing at Disney’s Shanghai resort on May 11 was the first time a Hollywood film premiered in mainland China.
Matt Damon stars in big-budget movie 'The Great Wall', which was blasted by critics © NBC/Universal
“Historically, hardly any zombie or ghost movies have been allowed in, and ultraviolence like Logan has been a no-go area,” says Richard Huang, an analyst at Nomura in Hong Kong. But since the start of this year “they have been taking a more relaxed approach when it comes to censorship” of foreign films, he adds.
The reason is clear to many in the industry: after years of vertiginous growth, China’s box office is in danger of slipping this year for the first time since the 1990s. Censorship rules have discreetly been widened to boost movie revenues and prevent this from happening.
***
Almost four decades of economic reforms in China have been accompanied by a persistent question — would the market change China, or would the Chinese political system tame the market? The zombie films are striking a blow for market forces.
The relaxation of the limits on foreign films in China points to the subtle power of the profit motive to open up China’s notoriously closed entertainment sector to more foreign movies and to a wider range of subject matter. But it has also spawned introspection about the failure to produce hits by the domestic film industry, which once produced such greats as Farewell My Concubine and Raise the Red Lantern.
“It is quite obvious for this year, the government wants the movie market to do better, they want to see faster box office growth, even though they haven’t publicly said this,” says Mr Huang.
China’s booming film demand was once expected to overtake the US as early as this year. But after expanding at double-digit rates every year since 1999, growth in domestic cinema revenues skidded almost to a halt last year, hit by a slowing economy and a dearth of hit movies. China’s annual box-office sales in 2016 rose just 3 per cent year on year compared with 49 per cent in 2015.
China movies in numbers
Chinese movie enthusiasts wear 3D glasses during a screening of 'Avatar' in 2010 © Getty
34 Annual quota of foreign films allowed to be shown in China
41,434 Cinema screens in China in 2016, compared with 1,845 in 2002
700 Chinese films produced in 2016 — 73 were co-productions with 14 other countries
Then came another shock: a 7 per cent drop in China’s first-quarter film revenues, to Rmb13.6bn ($2bn), raising the prospect of a potential full-year fall in the country’s box office takings.
Film industry specialists mainly blame a surge of investment into the entertainment industry, as companies from across the country have tried to chase the booming box office. “There has been a crazy burst of non-film related capital into the film industry, combined with an under-developed content creating system. That has created a massive bubble,” says Hou Zhihui, a Chinese film producer.
The boom in the movie sector has been accentuated by weak growth in China’s traditional industries. Over the past two years many rust-belt industries, anxious to boost sagging share prices, simply added the word “entertainment” to their names or bought a film studio to change their profile with investors, often with success.
Last year Anhui Xinke New Materials, a copper processing company, tried to buy the Hollywood production studio that made Oscar-winning film The Hurt Locker but the deal fell apart due to constraints on Chinese capital outflows. Zhejiang Jinke Peroxides, a chemical group that bought a gaming company and renamed itself Zhejiang Jinke Entertainment, saw its share price shoot up 70 per cent last August after the name change.
Money has also been injected into the sector by internet companies targeting market share in online ticket sales, which have subsidised seat prices by Rmb4bn to 5bn a year, according to the Beijing consultancy iResearch. Theatre construction has surged and the number of movie screens in China increased by 9,552 last year — a figure that is more than twice the total number of screens in the UK.
While domestic film production, funded by a horde of Chinese investors, nearly doubled from 2012 to 2016 last year according to EntGroup, the quality is debatable. “A great number of investors barely know anything about the movie industry,” says Mr Hou.
A series of big budget domestic films took a drubbing in China last year. The second world war epic For a Few Bullets did not recoup its Rmb100m production budget, and the acclaimed Xuanzang, about a Tang dynasty monk, was also a big budget failure, making only Rmb33m of a Rmb100m budget.
Meanwhile, the Chinese film with the biggest-ever budget, The Great Wall, starring Matt Damon, made its $150m production cost back but was panned by critics and failed to generate much interest abroad.
“We think it did not reach our expectations either in terms of content or the box office,” says Wang Jianlin, chairman of Dalian Wanda, the real estate and entertainment group that is the largest cinema owner in China, of the film Wanda co-produced. Since 2012 Wanda has invested heavily in entertainment: last year it bought Hollywood studio Legendary Entertainment for $3.5bn.
Mr Wang says the tidal wave of money, for which Wanda is partly responsible, has hurt the industry rather than making it better. “During the bubble, the industry ignored the content, thinking that no matter what, people will go to watch the movies,” he says. “In the end people realised that the content is lacking and viewers have stayed away. Now a lot of capital withdrew again and things have become more normal.”
***
With domestic film studios in disarray, Lei Ming, chief executive of ABD Entertainment, a digital entertainment company in Beijing, says that if China’s box office is saved this year, it will be by foreign films. “The market still has a strong demand for Hollywood blockbusters, while domestic movies are very weak this year,” he adds.
China's domestic film industry produced movie greats such as 'Farewell My Concubine'
Some analysts expect the annual quota of 34 foreign films allowed into China to be quietly widened this year. Based on the screening schedule, it appears that the tradition of “Domestic Film Protection Month” in July to August, where only domestic films are screened, will not take place this year.
Mr Huang of Nomura points to other subtle changes in box office accounting designed to add a few percentage points to film revenues: transaction fees collected by online ticket platforms previously were not counted, but now they are, he says. A government campaign against creative accounting by theatres, to prevent them from hiding revenues and thus pay fewer royalties, is also in full swing. Experts expect these measures to add a “few billion” in renminbi to the 2017 box office, says one expert.
But the main way to boost box offices seems to be to allow more foreign blockbuster films. And while China may be in the process of bending its rules to accommodate Hollywood, the US film industry has been only too happy to reciprocate. A number of recent US movies have Chinese storylines built into their plots to woo Beijing’s regulators and audiences. In the 2014 Michael Bay robot extravaganza Transformers: Age of Extinction, the Communist party was compared favourably with a bumbling, inept US government, while in the 2015 Ridley Scott epic The Martian, China’s space programme saves the day for an astronaut marooned on Mars.
The 2014 robot movie 'Transformers: Age of Extinction' © Paramount Pictures
The approach of courting Chinese audiences is working. “It’s funny, we know that foreign film makers are just trying to pander to us and sell to us. But we like it anyway,” says Jennifer Dong of Meridian Entertainment in Beijing. “It makes us happy that we get to be the saviours of the world in film after film.”
“What sells in China are big budget sci-fi and horror films — concept films,” as Ms Dong calls them. “They are a well-tried formula. You have a monster, or some aliens, a few Chinese actors and some Chinese elements.”
***
While Hollywood is benefiting from a momentary Chinese glasnost, Mr Hou says Chinese filmmakers are burdened by more onerous restrictions and ideological guidelines. “The sole topic among filmmakers, screen writers, producers and everybody else in domestic film making is how to get films to pass examination and censorship from regulators. Nobody cares about the creative side of the industry,” he says.
A new film law governing the industry came into effect this spring. It bans film content deemed harmful to the “dignity, honour and interests” of the country. It also encourages the promotion of “socialist core values” in film.
The government has also stepped in to temper some of the excesses, clamping downon irrational foreign investments by Chinese companies that have focused on the entertainment sector. Mr Wang’s Dalian Wanda, for example, was prevented by regulators from buying Dick Clark Productions, a US TV production company, for $1bn, while other deals have also fallen apart.
The Chinese authorities seem to think they can save the domestic film industry using the same heavy-handed tools. Rather than trying to help it improve, the government has simply put pressure on critics to be more “patriotic” and to not criticise Chinese domestic films.
In December several state newspapers launched a co-ordinated attack on China’s film websites, alleging that movie rating algorithms based on user reviews were unfair to domestic films. The People’s Daily said negative reviews of Chinese films were “grossly inaccurate” and made clear that ratings should rise. They did.
One film review website, Maoyan, deleted the portion of its platform that assigns ratings to films, apparently under pressure from the government.
In this respect, China’s government seems to have learnt the lesson that the answer to problems caused by censorship is simple — more censorship.
Cultural gap: In search of a successful co-production
Hollywood franchises such as The Fast and the Furious and Transformers have been huge commercial successes in China, straddling the Pacific with simple storylines, adrenalin-pumping stunts and lots of special effects, but the magic formula does not appear to work in reverse.
US-China co-productions — many filmed in China but aimed at domestic and foreign audiences — are rarely commercial successes. The Great Wall, a Matt Damon vehicle co-produced by Dalian Wanda’s US studio Legendary Entertainment and other US and Chinese companies, recouped its $150m production budget but failed to meet revenue expectations. Dalian Wanda chairman Wang Jianlin was less than charitable about the film.
But fuelled by an influx of investment into China’s film sector, Hollywood and China are still searching for the holy grail of the successful co-production: Xinhua news agency reported in April that, of 700 Chinese films produced in 2016, 73 were Chinese-foreign co-productions with 14 other countries.
Co-productions are seen as a way to get around quotas on foreign films, but they are also a potentially lucrative way to straddle Chinese and US markets. Commercially, they are still mainly disappointments. According to EntGroup, the Beijing-based entertainment consultancy, most joint productions lost money in 2016. Rock Dog, an animated comedy produced by Huayi Brothers Media Group and DreamWorks at a cost of Rmb410m ($60m), grossed only $20m worldwide.
Jennifer Dong of Meridian Entertainment, another Beijing consultancy, says that while Hollywood blockbusters seem to translate from one culture to another, more subtle genres do not. “There has never been a successful foreign comedy here in China. It’s just that the humour does not translate.”
