Cannes: China Dealmaking Soars as Massive Market Diversifies

Natalie Portman in Vox Lux - Getty - H 2018
Alessio Botticelli/GC Images

Thanks to a growing appetite for midsized projects and a new model for working around the quota system, insiders say the Middle Kingdom "is now the most diverse and mature film market in the world"

A diminished appetite for midbudget moviemaking may be blighting film markets worldwide — Cannes 2018 being no exception — but one territory is bucking the trend: China.

An array of ambitious new Beijing-based distributors have emerged as some of the most aggressive acquirers of indie film projects large and small at the Cannes market this year. Collectively, they are offering a rare note of optimism to an industry otherwise wracked by disruption.

“It depends on the movie, but for some, China is a bigger market than the U.S.," says Martin Moszkowicz, chairman of Constantin Film, whose Resident Evil 6 earned more than $160 million there. “China also has the advantage of lower P&A cost,” he adds.

Notable deals during the first days of Cannes include Hishow Entertainment’s acquisition of Asghar Farhadi’s festival opener Everybody Knows and Turbo Film’s pickup of Terry Gilliam’s closer The Man Who Killed Don Quixote. Newly launched Sweet Charm Pictures, meanwhile, acquired all China rights to Johnny Depp’s City of Lies, and Vision Film Entertainment nabbed Sierra Affinity’s Vox Lux, starring Natalie Portman and Jude Law. StudioCanal’s The Child in Time with Benedict Cumberbatch also sold to China.

The market forces underlying the frenzy are readily apparent: During the first quarter of 2018, China surpassed North America as the world’s largest box-office territory, and distributors are hungry for content to sate the ever-growing market. Perhaps more significant for indie film sellers, the tastes of Chinese moviegoers have begun to diversify, creating new opportunity for foreign projects in shapes and sizes other than the Hollywood tentpole mold. Major Chinese box-office hits from 2017 — all of which would be inconceivable in North America — include Bollywood sports drama Dangal ($193 million in China), Thailand’s high school thriller Bad Genius ($41 million) and Spanish mystery thriller The Invisible Guest ($26 million).

“I would argue that China is now the most diverse and mature film market in the world,” says Indian producer Prasad Shetty, who helped arrange the China release of Bollywood drama Secret Superstar in January ($118 million). “When was the last time a foreign film earned anywhere near that much in North America?”

The influx and diversification has been accommodated by a slight relaxation of China’s notorious restrictions on foreign content imports. The U.S.-China film trade agreement expired in 2017, and the MPAA continues to advocate for an increase to both the quota and revenue share. But sources close to China Film Group have told THR that the Trump administration has made no effort, thus far, to advocate for increased market access for Hollywood. Nevertheless, market realities have meant that China needs more imported content to keep audiences satisfied and its cinema construction boom churning.

The answer has been a rapid evolution and expansion of China’s secondary film import model, known as the flat-fee system. Traditionally, Chinese buyers were supposed to pay a one-time fixed price for the theatrical rights to a foreign film. But in recent years, Chinese companies have begun offering an up-front minimum guarantee, along with built-in bonuses or revenue-sharing arrangements if a film crosses agreed- upon box-office thresholds. Chinese regulators have not only turned a blind eye to the fact that the so-called flat-fee system is now only nominally different from the quota-system enjoyed by studios, they’ve also allowed the number of such films allowed into the country to soar.

If Chinese buyers have any complaint in Cannes, it’s the same one that has been voiced along the Croisette by distributors from all corners of the world. “We just wish there was more premium content to buy,” says Yoyo Qu, CEO of Sweet Charm Pictures.

A version of this story appears in The Hollywood Reporter's May 12 daily issue from the Cannes Film Festival.