Hollywood’s big bet on China is backfiring


The film industry wants to make blockbusters that work in the U.S. and overseas, but the plan is tanking.

The Transformers movie franchise has been a reliable cash cow in China since it debuted in 2007 with a $710 million gross around the world. The first four movies in the five-movie series made progressively more in the country with each title, including Age of Extinction (2014), which set a record there for highest box-office gross ever.

Then something changed. Transformers: The Last Knight, the latest sequel about giant talking robots and starring Mark Wahlberg, rolled out in China over the summer amid the typical fanfare, including life-size Optimus Prime replicas standing in cities around the country. The movie had a strong opening weekend, netting $126 million, but interest in The Last Knight quickly fizzled out. Viewers reportedly laughed openly at obvious, forced Chinese product placement, like Wahlberg drinking the dairy drink Mengniu in a South Dakota scrapyard, and seemed to have trouble making sense of a plot that includes the Transformers helping Harriet Tubman with Merlin’s staff. The movie grossed $229 million in China compared to its predecessor’s $320 million. “The stunning decline,” The Hollywood Reporter wrote, “is a disappointment to both Paramount and the three Chinese companies… that took equity stakes in the film and partnered on its marketing and promotion.”

It’s no secret that Hollywood has been trying to make up for shrinking ticket sales in the U.S. and Canada by turning to China, where the box office is booming. China’s government has been increasingly receptive to foreign films, lifting its quota for the number of titles that could be allowed in from 10 per year in the 90s to 34. The revenue cut for Hollywood has grown, too, from 10 percent to 25 percent, incentivizing studios to make formulaic films based on existing properties well-known from North America to East Asia, with little room for nuance that might be lost on audiences in any one market. Some of those movies, like Furious 7 and Warcrafthave done even better in China, furthering the stereotype that Chinese audiences want big, loud, flashy, unsophisticated films, and that brand recognition always beats out story or human connection.

But instead of surpassing the U.S. as the biggest box office in the world by 2017, as experts predicted, China’s movie market growth slowed down. Analysts blamed the slowdown on a number of factors, including a drop in subsidies from online ticket sellers and the government’s crackdown on fraud that inflated ticket sales.

Another problem is that the movies just suck.

In 2017, blockbuster after blockbuster has flopped in both North America and China. The Mummy starring Tom Cruise landed with a thud. The live-action remake of the popular Japanese anime Ghost in the Shell starring Scarlett Johansson (which had investment from Chinese companies, a practice that has become more common in recent years as Hollywood and the Chinese film industry seek to work together) enjoyed a whitewashing casting controversybefore it grossed a paltry $70 million at the US and Chinese box offices combined, failing to recoup its $110 million budget.

When asked if Hollywood’s current strategy of trying to appease American and Chinese audiences simultaneously right now is working, a high-level source who works with major studios, including on deals with Chinese companies, answered flatly, “No.” (The source spoke anonymously because their job does not authorize them to speak publicly.) Studios have delicately tried to appeal to tastes at home and abroad with universal, archetypal stories everyone can relate to, all while also flattering China’s authoritarian Communist government, whose censors are notoriously whimsical about what they approve and wary of foreign influence or any perceived criticism of the country. (Transformers: Age of Extinction even included an approving shoutout to the Chinese leadership.)

Now Hollywood is seeing the limits of that strategy. “That’s what happens when you’re geared toward being a global business, and the goal of studio filmmaking in 2017 is making something that’s a C+ for as many people in the world as possible,” the studio source said. “When you have a population in America that has a lot of entertainment options, they’re not necessarily going to settle for a product just because it’s there… I have to pay $15 to see a movie at the theaters. Why would I do that when you have an incredibly strong base of content on Netflix or Amazon or HBO? There’s way too much content as it is. I’d much rather catch up on something on TV than watch a movie.” The same can be said of China, where Netflix entered this year via a Chinese streaming giant with nearly 500 million monthly viewers and where a movie theater ticket can run you over $20.

Studios have run into other, more complex headaches on the business side. Chinese companies have aggressively stepped up their investment in American entertainment in the past few years, including most notably Wanda Group buying AMC, making it the biggest theater chain in both China and the U.S. Chinese co-funding of blockbusters like Ghost in the Shell helps those movies get released and promoted there, according to Stanley Rosen, a professor at USC specializing in US-China relations, but several major deals fell apart this year. Wanda’s $1 billion deal to buy Dick Clark Productions, which produces the Golden Globes broadcast, was scrapped when Dick Clark’s owner said Wanda failed to meet its contractual obligations. Paramount made a deal to get $1 billion in investment from Huahua Media, but the studio said last month that it missed an expected payment from the financing partner. Looming over these deals is the government, which exerts tighter control over the economy in China. Every deal is different, “but you always have China’s government capable of stepping in and vetoing anything,” Rosen said. “The money’s never real until it’s in your bank account, and the movie’s never real until it’s shooting,” the studio source said.

On the US side, 16 bipartisan members of Congress last year called for greater scrutiny of Chinese investment in Hollywood and its potential for exerting “propaganda controls on American media.” And President Donald Trump has been rhetorically tough on trade deals, especially with China — though it’s unclear if he has any interest in actually meddling in the affairs of Hollywood, which is far outside his base.

The solutions to Hollywood’s mess aren’t easy, but that won’t stop it from trying. It would be foolish not to. As the Fast and Furious franchise showed, the Chinese market can take a blockbuster over the edge into becoming a global behemoth (the most recent entry, The Fate of the Furious, made $1.2 billion worldwide, with $393 million coming from China versus a relatively weak $226 million in the US). But that only happens if it’s done right. Whatever you think of those movies, they’ve tightly held onto their passionate fan base where others like Transformers have faltered. “People are getting blockbuster sequel fatigue,” Rosen said. “They’re still looking for quality in any film market.”

As obvious as it seems, the path to success in both China and the US might mean going back to basics. Wolf Warrior 2, a Chinese production that shattered box-office records in the country this year, steals from the Die Hardplaybook with its blend of patriotism and rousing action. It’s also just a fun, competently made movie. It earned a 70 percent approval rating on Rotten Tomatoes, far above The Last Knight’s 15 percent and The Mummy’s 16 percent.

“Go back to the core: story, story, story. Invest time in the blueprint of the film, the script. Pixar, Blumhouse, and Marvel have been consistently delivering solid revenue streams because they incubate their projects and don’t take shortcuts,” Jeff Bock, senior box office analyst at Exhibitor Relations, said. “Let’s be honest: Hollywood has known this since the dawn of film, but there’s always someone who thinks making a quick buck is the path to riches. It can occasionally work, sure, but it’s not the yellow brick road to box-office salvation.”

By Paul Schrodt
the Outline


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