After Hollywood’s decades of exploration in the culturally and politically complicated Chinese market, the third annual U.S.-China Film & TV Industry (UCFTI) Expo took place in downtown Los Angeles on Nov. 2-4. Business insiders shared their key insights into this sophisticated market from a variety of angles: Why are some film markets growing fast in China, but Hollywood just does not make money there? Will an expensive wide release China recoup Hollywood?
Instead of having a wide release in China, Hollywood should strategically target specific cities
Chinese executives at the Expo repeatedly noted that domestic films as a whole still perform better than foreign imports, particularly in third- and fourth-tier cities, which have received the greatest increase in new screens and are the fastest-growing film markets in China. Audiences in these cities tend to be less interested in Hollywood films than those in tier 1 cities like Beijing and Shanghai. Hollywood, therefore should allocate more resources to those cities. “
People in tier 1 cities are willing to accept American cultures. But people in small cities don’t know much American cultures, so they don’t understand Hollywood stories,” said Jiang Defu, general manager of Wanda Pictures. “Before having a wide release in China, Hollywood needs to conduct comprehensive and detailed data analysis about Chinese audience’s preference and spend more money and energy nurturing the audience in specific cities.”
What China needs most is qualified film professionals
More than financial capital, Jiang said that what the Chinese entertainment industry lacks most is professional human resources. Although American companies employ English-speaking Chinese nationals to work in their China offices, “they actually don’t know the Chinese market at all,” Jiang said. “The Chinese market has been growing very fast without qualified professionals. Not anyone with a film dream is capable of doing this business. [The lack of qualified manpower] is a big pity for the Chinese film industry.”
Chinese audiences have developed highly discriminating film taste – thanks to piracy
China’s rampant piracy problem has borne an unexpected benefit: By having virtually unrestricted access to a variety of films around the world, Chinese audiences have become highly experienced film watchers. “Chinese audiences are the most sophisticated, discriminating, and creative audience in the world,” said Village Roadshow Asia president and CEO Ellen Eliasoph. “They have a great appetite for every kind of film [genre] and know how to judge what is good.”
Chinese films save a lot on marketing because of the power of social media
Compared to Hollywood movies, which spend a huge proportion of their budgets on P&A costs, the marketing spend on Chinese films is a relative fraction of the whole. It’s even been possible for Chinese movies to become massive hits on virtually no marketing budget. This is because of the country’s high level of social media engagement (514 million social network users in 2016), which allows a well-liked film to go viral more easily.
This was the case of the 2014 animated film The Monkey King, whose producer ran out of funds to run an adequate advertising campaign, according to Jing Cao, counsel at O’Melveny & Myers. “But people who saw this film complimented it on WeChat. They promoted this movie voluntarily,” she said, and Monkey King went on to gross $167 million in the country. “It’s fascinating to see how much promotion came from the fan base.”
Eliasoph recommends that U.S. studios learn to save money on marketing their movies in China. “There are much smarter cost-effective ways of marketing movies than Hollywood has done in the past,“ she said. “There’s so much we can learn if we pay attention to the audiences there.”