China's Currency Crisis Creates Mixed Outlook for Hollywood
U.S. studios may see lower box-office revenue thanks to the yuan's devaluation, but buying into the second-largest global market just got cheaper.
A version of this story first appeared in the Aug. 28 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
With the Chinese currency suffering its biggest drop in more than 20 years — its valuation had decreased this month by 4.4 percent as of Aug. 15 — Hollywood studios are facing bad news and good news: A struggling Chinese economy could result in lower box-office revenue, but buying into the world's second biggest market suddenly has become cheaper. "China's currency change will likely hurt foreign revenue and cash flow generated overseas," notes the debt ratings agency Fitch, adding that "some beneficiaries [will] gain from cheaper imports."
That said, Hollywood movies dominated the first six months of the year in China, taking 53.5 percent of the box office. And the market was $3.22 billion by the end of June, up 50 percent over the first half of last year.
But no major U.S. tentpole has opened in China since the crisis (Terminator: Genisys and Mission: Impossible — Rogue Nation could be test cases). And with the yuan, also known as the renminbi, now worth less against the dollar, this could mean cost-conscious Hollywood producers will be rushing to replace Canada with China as their preferred destination for cheap shoots. But Harry Sutherland, a Vancouver-based indie film producer with ties to Chinese studios, says the devaluation so far is too small to offer meaningful savings for movies made in China. Sutherland, chair of the Whistler Film Festival's China Canada Gateway for Film competition, instead urges foreign producers to keep their eyes on China's huge pools of capital for movie financing, which he believes have barely shrunk in size. Says Sutherland: "There's so much investment money sloshing around that you need to look at the investment environment … far more than the currency."
Etan Vlessing contributed to this report.