Universal Film Chief Jeff Shell: "China Is More Exciting Than It Is Difficult"

Alex J. Berliner

Shell reckons China is still teeming with opportunities because "the pie is so big"

Jeff Shell, chairman of Universal Filmed Entertainment, said China was more exciting a market than it was a difficult one, and said India and Southeast Asian markets were much tougher.

"Look, [in China] there's a heritage of entertainment, there's a system set up where the rules are defined by which you can make money. So on the one hand obviously there is a quota and other things, but on the other hand, it's not as difficult as more emerging markets where you don't know how you get paid for your movies or how you distribute them," Shell told The Hollywood Reporter in an interview in downtown Beijing.

Shell was making his sixth visit to China to officially launch NBC Universal's Beijing office, which will be run by veteran Hollywood studio executive Jo Yan.

He was accompanied by Comcast CEO Brian Roberts as well as the group's international distribution president Duncan Clark.

"It's a very defined, organized market that a lot of strong companies are participating in. I actually think it's a more exciting market than it is a difficult market. India is more difficult, Southeast Asia is more difficult, this is just point growth," said Shell.

Universal's Fast & Furious 6 and Illumination Entertainment's Despicable Me 2 were huge hits here and the next installments open there next year, along with Jurassic World.

The office will also oversee Universal's consumer products group, and will also help establish strategic goals for Universal parent company NBC Universal and Comcast, including the $2.5 billion Universal theme park the company is building in the suburbs of Beijing.

Shell said growth had been an evolutionary process.

"This market was so under-screened that it's only now you are starting to reach a critical mass, and that's only in the big cities. In rural China you still have such a scarcity of movie screens that I think this is going to evolve over time," he said.

With no market growing faster than China, and with China set to surpass the U.S. at some point, the market was very attractive.

"It's number two in the world, it will probably pass U.S. at some point, but even then, the screens per person will be far below where they are in Europe or in the United States. We think there is a lot of growth left in this market. The pie is so big that there is growth for Hollywood movies and we also think there is a co-production local element that so far we've only dabbled in and we want to get more serious about."

The decision to open the office came after Universal had been represented in China by Hong Kong producer Bill Kong's Edko films, but it made sense to open a standalone office.

"We had been repped here for a long time, and we feel our product is very strong right now, we've had a good couple of years, we probably have the best slate coming up in our history and we felt China was so important that, just a film-only basis, having our own office to manage distribution made sense," said Shell.

Hollywood is abuzz with talk of co-productions, which do not come under the quota rules restricting the number of revenue-share movies to 32 per year, and like many other Hollywood companies, Universal is trying to find the stories in China that will not only be successful here in China but will be successful worldwide.

"You've got to find the right directors, the right talent, the right stories. I'm very excited we have this project The Great Wall that's got a lot of press with our partner Legendary with (Chinese director) Zhang Yimou and I think that's going to be an example of the things we're talking about," said Shell.

Censorship is not a major headache.

"Every market has its issues with content of movies, some are more liberal and some are less liberal. You always have to tailor your movies to the market, here you just have to go through an agency before you can have the stamp of approval. We are tailoring our markets depending on the cultural tastes of every one of our major markets," said Shell.

Things are improving dramatically on the piracy side, Shell said, citing the example of Disney which is now making money selling licensed product around the country.

"We were fortunate enough to have with Despicable Me 2  a movie that was bigger than Frozen here. I went to China Film Group today and the woman who walked me in had Agnes on her mobile phone. It is a beloved set of characters and this market is quickly, rapidly developing as legitimate licensing opportunities arise," said Shell.

"I see Minions everywhere I walk around town, that's a big opportunity for us, and obviously I'm excited about the theme park," he said.

With the quota set to expire in 2017, Shell does not anticipate a flood of Hollywood movies following the opening of the market.

"If you look at markets around the world that don't have quotas, the split between local movies and Hollywood movies are not actually all that different than in China. I'm not sure that things would dramatically change if there are no quotas. There is a strong and vibrant local market here and as talent grows it's going to get better and better. If the market wasn't growing, it would be an issue. The reason I'm not concerned is that it is growing so fast that there's going to be enough pie for everyone, global and Hollywood," said Shell.

Twitter: @cliffordcoonan