The China Clusterf--k: Is Hollywood Fed Up?

7:00 AM PST 04/24/2013 by Kim Masters
Quentin Tarantino's "Django Unchained" was pulled from theaters in China on April 11.

Erratic decisions, murky agendas: Frustrated studios are up against a not-so-secret agenda of the world's second-biggest box office market as they try to build their own entertainment studio system.

This story first appeared in the May 3 issue of The Hollywood Reporter magazine.

At a time when securing film financing is harder than ever, Hollywood desperately is searching for a pot of gold. And there it sits in China -- if only the studios can figure out how to get their hands on it.

But increasingly, whether seeking a big investment in a slate of movies or a far smaller commitment to an individual film, they are meeting with frustration. "A lot of people in China talk about wanting to invest, and ultimately, for whatever reason, it doesn't seem to happen," says the head of one entertainment company. "It's unclear to me what they think they're getting going in and, when it doesn't happen, what's caused them to change their minds."

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By now, many studio executives have given up on the idea that authorities will ever permit a Chinese company to invest broadly in a studio whose films might not suit the state-run China Film Group. Many have actively pursued deals including, recently, Sony Pictures and Universal. (Some are said to be under pressure from parent companies in this respect.) Financier-producer Legendary Pictures also is said to be in pursuit of Chinese money.

Among contenders, perhaps DreamWorks Animation, with its family films, has fared best. It has released more than a dozen films in China without a hitch and has announced plans to team with Chinese partners to build a production facility in Shanghai. Kung Fu Panda 3 is set to be the first animated co-production in China.

Others have learned that even a partnership with a Chinese company on a film doesn't ensure their movie will be designated an official co-production, which allows studios to get a bigger cut of the box-office gross.

In fact, even if studios expect nothing more than the chance to play a movie in Chinese theaters and believe all hurdles have been cleared, sudden obstacles can arise. Such was Sony's experience with Quentin Tarantino's Django Unchained, pulled from theaters in China on April 11 literally moments after it began to play.

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Still, the lure of China is strong. The country has become the world's No. 2 movie market (behind the U.S.), on track to become No. 1 by 2020. (China generated box office of $2.7 billion in 2012, up more than 30 percent from the previous year, and the country is still adding screens fast.) Although China typically returns only 20 to 25 percent of box-office grosses to U.S. studios on films allowed in -- less than other foreign markets -- a smaller cut of a bigger pot is well worth pursuing, especially in these hungry times.

But some say the climate in China seems to be getting worse, despite the easing of its quota system to allow into the market 34 foreign films a year instead of 20. There have been frequent censorship issues to contend with, as well as the Chinese desire to tilt the board in favor of homegrown product. In August, when The Amazing Spider-Man was forced to open opposite The Dark Knight Rises, MPAA head Christopher Dodd called the Chinese embassy in Washington to ask why.

There's growing awareness that the Chinese agenda in dealing with American studios is largely about creating China's own version of Hollywood. "I think they have a real ambition to build up a film industry, a real studio business," says Sony Entertainment CEO Michael Lynton. "They hope to learn a lot about how movies are made and marketed." Such thinking is said to have been behind Dalian Wanda Group's $2.6 billion acquisition of U.S. theater circuit AMC Entertainment in 2012.

A top U.S. executive says he believes China's primary intent is not to make money but "to create an industry equal to Hollywood, but in a way that reflects Chinese culture and sensibility and history." And the goal is for those films to play globally, as American movies do.

Given all this, plus a shifting political landscape that is opaque to most Westerners, one Hollywood exec sums up the situation bluntly: “China is way too big to ignore and way too f--ed up to expect anything.”

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For studios, the immediate question is: What do the Chinese really want? When it comes to co-productions, U.S. studios have learned that injecting a few Chinese elements into a film does not suffice. DMG Entertainment, the Chinese company that partnered with Disney's Marvel on Iron Man 3, had touted the movie as a co-production, but questions arose as to whether the film would meet China's ill-defined criteria. (One problem: Ben Kingsley plays a villain called The Mandarin.) Marvel ultimately decided not to seek co-production status; instead it will release a tailored version of the film in China.

Even if a studio is not dreaming of getting co-production status but simply wants the best chance for a release in China, there may be unforeseen issues, as Sony found with Django. No reasons were given for pulling the film, but several American executives are surprised that its extreme violence and nudity had made it past Chinese censors in the first place. (Several doubt the film will ever be released in China.)

Last year, Tarantino lent his name as a “presenter” on the martial arts film The Man with the Iron Fists starring Russell Crowe and Lucy Liu. Chinese authorities reviewed the script for the $15 million movie and allowed the entire picture to be filmed in China. The only issue raised was an oblique objection to a Chinese actor who apparently was out of favor. (The actor was not cast.)

But producer Marc Abraham says Chinese authorities ultimately declined to allow the film to play there for reasons that were never explained. “Filming in China was a great experience but it was beyond my skill set to understand or fathom the inner workings of the Chinese government,” Abraham says.

In light of the challenges, some studios have adjusted their thinking. Paramount will partner with two Chinese entities on Transformers 4 and cast four roles with Chinese actors selected through a reality television show whose panel of judges includes producer Lorenzo di Bonaventura, casting director Denise Chamian, Paramount executive Megan Colligan and former Academy head Sid Ganis.

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Nonetheless, Paramount is not counting on Transformers 4 to be a co-production, says studio vice chairman Rob Moore. Doing that would be a mistake. "We're taking a different approach," he says. "We are only counting on the fact that we have identified partners that we believe will help us make the best, most playable movie for China. If we have a more playable movie in China, we're going to be happy with that."

Email: Kim.Masters@thr.com

Twitter: @KimMasters

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