Rupert Murdoch Calls on China to Allow More Foreign Films

Rupert Murdoch | News Corp.
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2010 Pay: $22.7 million (+2.3% from 2009)
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The CEOs of News Corp. and its Fox Filmed Entertainment believe China’s potential is not being fully reached due to the country's policies that limit market access and foreign investment.

SHANGHAI – Rupert Murdoch and Jim Gianopulos challenged China’s government film establishment on Sunday, at once praising the industry’s growth and potential and criticizing its barriers to entry and failure to protect intellectual property rights.

The CEOs of News Corp. and its Fox Filmed Entertainment unit each delivered messages of polite candor to a packed summit introduced by Zhang Pimin, vice minister of the State Administration of Radio Film and Television, at the 14th Shanghai International Film Festival.

Murdoch, whose wife Wendi Deng, a China-born U.S. citizen, just completed her first film, the English-language film Snow Flower and the Secret Fan, directed by Wayne Wang and starring Li Bingbing, Gianna Jeon and Vivian Wu, called Shanghai “one of the world’s most important film platforms.”

“There is no more exciting market in the world than this one…the Chinese people have transformed one of the world’s oldest cultures into the world’s fastest growing movie market,” Murdoch said, referring to box office receipts that hit $1.5 billion last year, up from $150 million in 2005.

After his praise, Murdoch said that News Corp. and Fox believe China’s potential is not being realized fully because of the policies of its one-party government that limit market access and foreign investment.

China was supposed to have allowed greater foreign participation in the distribution of films by a March deadline it agreed to at the World Trade Organization last year, but little progress has been made in breaking up the state’s control of the import and distribution of films.

“This creates incentives for people to steal what they do not have access to, which will only limit China’s growth in the long run,” Murdoch said.

Zhang, whose spoke before Murdoch and just days ahead of the release of the China Film Group’s latest big propaganda film celebrating the founding of the Chinese Communist Party on July 1, 1921, appeared to have prepared himself for the Western media mogul’s message.

“We will try our best to push state-owned and state-controlled film companies to go public through reorganization.  We have to make sure our films are innovative, aesthetic and full of artistic expression. Our goal is to provide cultural food for people around the world,” said Zhang, whose government employer, SARFT, has final say on the content of all films that wish to screen in China, and often cuts sex, violence and politics from films, leaving most titles in a safe but staid middle ground.

Gianopulos, for his part, at first also marveled aloud at the business to be done in China, saying that if the Chinese box office sustains its current growth rate it will overtake the U.S. in gross ticket sales “in five years, hitting $11 billion.” But then he, too, turned to the downsides of doing business in a country where the government has scant control over intellectual property theft. At Fox, “we respect the censorship and rating system of every country we operates in,” he said: “Unfortunately, pirates don’t.”

“An essential element to growth is the ability to monetize downstream ancillary economics and build film libraries, the building blocks of a successful business,” Gianopulos said, highlighting the total lack of revenue in China from home entertainment sales from films -- sales all eaten away by the government limiting legitimate film imports and thus encouraging pirated DVDs and illegal Internet downloads.

“Initiatives to protect intellectual property around the world are not just a Hollywood studio problem, they’re a problem for local filmmakers,” Gianopulous said, adding later on, “Hollywood will succeed here if China succeeds.”

The Murdoch-Gianopulos, one-two punch was delivered on the heels of the Fox film Water for Elephants being the first Hollywood film ever to open the Shanghai festival and with the knowledge that another Fox title, Avatar, grossed more than $200 million here last year to become the most successful film ever at China’s box office, kicking off a craze for 3D tickets to which exhibitors can charge a premium.

Zhang, for his part, predicted that with China adding 4.2 new movie screens per day, the country would have 8,000 screens by year’s end, up from about 6,200 mostly digital and 3D capable screens now. Building out that infrastructure, he acknowledged, would require a move away from central planning and toward capitalism.

“The capital markets have aroused lots of interest from investors but if we want to increase development we need a new mechanism for financing the industry and must bridge gap the capital market and the filmmakers,” Zhang said, sounding more like a mogul than bureaucrat.

“We will encourage small to medium size enterprises, private equity and venture capital to invest in the sector to cultivate strategic investors to make us more competitive,” Zhang said.