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Rags to Riches: The Making of a World-Class Film industry

Rags to Riches: The Making of a World-Class Film industry

A look at how the most populous country in the world built a film industry to challenge Hollywood’s place at the top.

Few regions have captivated my imagination and attention like the East- from China, to Japan, Korea, to Singapore. The far east (a familiar, if not, inaccurate descriptor)  stands as a region whose culture and history is so diverse, textured and complex that it would take several lifetimes to learn about it all. Even within a single nation, cultural and ethnic differences abound.

These differences are a great reason to examine how the film industry could take root, evolve, and compete when many believe it is dominated by the west. For decades the film and television industry was synonymous with Hollywood. U.S. blockbusters were essentially global blockbusters. Competitive markets were so far behind, in terms of box office numbers, that the US and Canada set the economic pace for so many other territories. However, we have watched over the last decade as consumer appetites shifted, becoming more diverse, at the same time other countries increased investment into local content production. Now, what many international content creators had hoped would come to pass, is a reality. The market for global content is widening, and the international audience has an appetite for more than Western fare.

In the summer of 2017, along with the breakout success of Wonder Woman in the U.S. and abroad, Chinese box office hit Wolf Warrior 2 levelled serious challenges for U.S. films. It cast a tremendous shadow with it’s 5.64 billion Yuan (US$855.02 million) summer earnings. The dual efforts of the government and private stakeholders over the course of the previous decade were materializing. China was pulling ahead and challenging the long-coveted position held so long by Hollywood.

Since then, yes,  Wolf Warrior 2 remains the highest grossing local film. However, a number of films like  Ne Zha, an animated feature set the 2019 box office on fire with 4.7 billion yuan ($750 million), showing the world that the industry is not a one hit wonder. The success of these films did not occur in a bubble. A number of factors led to its success.The key to some of these wins include Hollywood partnerships with Chinese creators maintaining control over the overall storyline, content ownership, updated exhibition policies, policies that encourage co-production, and an interest in growing the nation’s soft power.

A major player in the growth of the market is the Chinese government. The ability to move their film industry from relative obscurity to the second-ranked box office in the world warrants attention. By leaning into areas where it can encourage local content consumption and streamline production inputs like technology and talent, content creators are working with the best possible resources going in.

China on Film

Rags to Riches: The Making of a World-Class Film industry
My People, My Country

While it appears that the Chinese market is a unified media industry, in truth it is a regional phenomenon with Shanghai, Hong Kong, Taiwan, and Beijing as the epicenters of regional efforts. Broken by conflict and cultural/political transition, the evolution and growth of the “Chinese” film industry is a complex intermingling of continuously changing circumstances.

Cinema was introduced to China in 1896 but the first Chinese silent film, Dingjun Mountain, wasn’t made until 1905. Nearly thirty years later, during the Golden Age, the first movie with sound, Sing-Song Girl Red Peony, was made in 1931. The Golden Age came alive in Shanghai, a city viewed by the rest of the country as a “den of iniquity.” But that city gave rise to an audience which gravitated to film as a choice storytelling medium. The filmmakers embraced an “anything goes” attitude that, despite the censorship of the time, they helped the film industry shatter age-old taboos and establish an openness for the art.

The regional experiences of metro-centers like Shanghai, Hong Kong, Beijing, and Taiwan developed parallel to one another. Through war, the entrance of Hong Kong into the Republic, and the tentative resolution of Chinese-Taiwanese political tension, the landscape of the Chinese film industry is a combination of regional experiences evolving and speaking to one another, collectively telling the Chinese stories.

While the industry has had its share of turmoil, and times where heavy government censorship made authentic filmmaking challenging, creatives have always persevered. In each generation the storytellers do what they can to shine a light on the true China.

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For the purposes of this exploration we will look only at three elements of the Chinese film industry and how they have contributed to the rapid growth of the industry: Trade policies, Industry support, and equipment and technology.

Trade Games

Rags to Riches: The Making of a World-Class Film industry
Crazy Alien

Built into the strategy for China’s film industry was a very intentional preference for Chinese films, for domestic content. To actualize that preference, a foreign film quota was enacted. China presently limits the number of films distributed directly by foreign countries to 34. These films would have full distribution rights including profits sharing without restrictions. Outside of that, a film can be distributed within China for a flat fee, with no revenue sharing. This is like going to a store and buying bread at a set price regardless of how nice, or artisan it is, the price will not change. A third option is to sell the rights to exhibit a film in China for a fee, however, profit sharing is allowed if the film crosses a particular threshold.

Additionally, foreign content is strongly restricted during particular times of the year, this is considered the ‘Blackout’. Therefore, when families and children are out of school and more likely to consume films, the majority of films in the cinema are Chinese films. This increases the likelihood that Chinese films will get national exposure.

This particular policy has significant implications. If a family has limited time and disposable income to view a film, the Hollywood blockbuster carries the gravitas of the West and will take preference over the local content creator. Without policies like these, even the best local filmmakers are overshadowed by Hollywood simply because there is little or no exposure. By blocking out popular cinema periods for local filmmakers, it allows the scales to balance. Knowing that people will find time to watch the Hollywood film, granting popular time slots like holidays to Chinese films allows national exposure for local talent. More recently, China has unofficially loosen some of its quota requirements which allows more foreign content to screen in their theaters. This of course is welcome news to Hollywood since the Chinese market continues to grow. However, there has been a move by the Chinese government to move all forms of media under the regulation of the Chinese Propaganda Department. The impact of such a move will soon be felt not only by local content creators but also foreign content creators looking for a piece of the Chinese audience’s attention.

As an alternative way to engage with the market, co-production is encouraged between Chinese and foreign countries by the China Co-Production Corporation. Enticing foreign filmmakers to co-produce films in China with local filmmakers opens doors for international distribution. This is significant for the industry as it elevates local filmmakers by exposing global audiences to their talent. It is also worth noting that Hollywood, with its magic and history, is still the gold standard of the industry. By conceiving a means for Chinese filmmakers to align themselves with Hollywood and the west without the content being entirely foreign, China fosters the steady advancement of industry practitioners, and the industry as a whole.

Wolf Warrior 2, while not an obvious collaboration had significant assistance from Hollywood action royalty. Marvel co-creators of the Captain-America franchise, Joe and Anthony Russo consulted on the project through their Chinese studio venture Anthem & Song. The studio has a partnership with Beijing Culture and Media, the film’s lead producer, which gave the pair room to provide the Hollywood action flair that wowed audiences. In this way Hollywood has been able to engage intimately with local Chinese creators to help elevate varying aspects of the craft, while maintaining control over the stories they wish to tell.

That being said, foreign productions are careful to keep cultural considerations in mind when setting their film for the Chinese market. Sometimes, it is a tweak to the marketing material, and in other cases it is being careful in casting particular characters. The now delayed release of Disney’s live-action Mulan, is an example of a film that paid very close attention to cultural sensitivities. Despite the property’s US ownership, the story is Chinese, and when Disney decided to tell the story again, they decided to make a significant effort to embrace feedback from their second largest audience. The film has not been without controversy, but the hope is that it will be well received when it finally premiers.

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Build It and…

Rags to Riches: The Making of a World-Class Film industry
Better Days

The success of an industry is not built entirely on the talent of the content creators. There must be structural supports in place. Outside of trade policies listed above, it is important to understand the relative prominence and respect the film industry has in China, and how other factors allowed rapid growth in recent history.

First, as previously mentioned, the government’s dedication to the industry is evident in the way the administrative hierarchy is built to provide support from conception to exhibition. The country is home to actors’ guild, crew associations, and a strategic distribution network that includes thousands of urban and rural theaters, many of which were built in 2011 when China really ramped up construction for new facilities. Now, the country boasts more screens than the US at 70,000.The intentional advantages provided for the success of the film industry are abundantly clear. More screens in more cities allows the government to strengthen Chinese values locally, provide much needed recreation in some communities but also gain economically. As more people move from poverty to working class status or higher, their disposable income increases.  Movies present an opportunity to spend that ‘extra cash’ via movie tickets, concession, which in term stimulates the nation’s economy.

The investment in infrastructure provides access, certainly, but what guarantee do you have that people will watch your movie? What do you know about your audiences? This is where China’s big tech companies come in. A significant input some underestimate is the investment from large data companies like Tencent and Alibaba. Before Facebook, Apple, and Amazon joined the content fray, Chinese-based companies Alibaba and Tencent began investing in Hollywood as well as film productions in China.

Wolf Warrior 2, the big star of the 2017 summer run in China, had the support of Alibaba Pictures and Beijing Jingxi Culture & Tourism. While the partnership resulted in a Box Office win, Alibaba realized that it shouldn’t be in the movie making business. The data that the tech giant collect could be far more valuable if used by content creators to make better business decisions about their creative products. The objective now is to get these two partners to participate in content investment, promotion, and distribution.

Fan Luyuan, Chief Executive officer of Alibaba Pictures Group, founded in 2014, said the company’s internet presence and online marketing platforms are well positioned to help young filmmakers in China. More interesting is that Fan believes that producing content for the mainland market in China, is not just patriotic, it is good business. By leveraging the interests of the homeland population, box office success can be replicated. As we can see, since Wolf Warrior 2, there have been other successful locally produced projects, and the likelihood is that there will be more.

Data access from heavy-hitter Alibaba is a crucial element because Alibaba Pictures has an intimate understanding of demographics, likes, and dislikes in every county and province in China due to the data repository of its parent company, Alibaba Group. Coupled with an understanding of the kind of advertising that is successful, film promotion becomes as much a science as it is an art.

The Road Ahead

Rags to Riches: The Making of a World-Class Film industry
The Wandering Earth

As the Chinese market grows, there are few things to consider. While local consumption of local films is always a great thing for the Chinese economy, what might the end goal be? The Chinese government has not hidden its interest in exerting soft power by exporting its culture in the way the US has done for decades. The US has told the world a story about how magnificent it is to live here. The land of opportunity. The melting pot. Because of these stories people from all over the world travel to these shores to start over, hoping that they too can have the American dream. Thereby causing significant brain-drain for other nations decrying a loss of their best and brightest. With those immigrating to the US went talent, innovation, and economic activity that sometimes will not return.

So, if China wants the opportunity to impact the global narrative, and what it has to offer the world, then local content will have to become global content. For right now the only locally produced properties I have seen available outside of China has been through streaming platforms Netflix. It may be too soon to say whether a Chinese film will set a theatrical release in the US the way the US does in China. If that happens, that kind of production would certainly turn the tide.

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From a business standpoint many believed that 2020 would be the year that China would surpass the US market. Unfortunately, in the wake of COVID-19, China will likely take a significant hit. Attempts at a steady return to production has suffered several start and stops. In the general public, the virus has yet to be contained. As the day of this publication, Beijing has grounded several flights and cancelled school for local students as once contained local pandemic resurges. The impact of the virus will have far reaching consequences for the country as a whole, the way it will for much of the world. The global entertainment sector is estimated to take a $160 Billion dollar hit, and no country is exempt from that.

Outside of global factors, local theaters are seeing decreasing attendance. The average moviegoer in China went to see a movie 1 time in the last year. For locals, the continued decline in theater goers seems to mean there is some inefficiency in the local exhibition strategy that needs to be accounted for. Furthermore, the growing online film sector, or streaming sector is seeing incredible growth, similar to other markets. So, China, like other territories, will have to navigate the streaming vs. exhibition debate as well.

All in all, China has a rich cultural and creativity history that stretches back centuries. They have invested untold sums in elevating their artists to a global standard. Infrastructure and data feature heavily in the race to the top, and policies that focus on and feature local content creators during the growth and evolution of the industry gave the local market time to grow rapidly, learn, and now compete. The future is anyone’s guess when it comes to entertainment, but China’s ability to build their film industry should give other developing nations hope that strategic investments in this sector can have real dividends. With a world hungry for new stories, the content business could really be anyone’s game.

The Content Biz Bailout

  1. Deloitte dives into the Chinese market and more recent development in this report
  2. For a walk down memory lane, read this report on the history of the Chinese film market
  3. To read reports issued by the Motion Picture Association Asia Pacific Chapter on Asia Pacific markets like China, Japan, Korea, and Taiwan click here
  4. The Number 2 highest grossing film Ne Zha is an animated film loosely based on the Ming Dynasty novel called Fengshen Yanyi (The Investiture of the Gods). It is very much a story about deciding your own destiny. It was a joy to watch! Thanks to the magic of Netflix, you can check it out here.
  5. Collecting information on the Chinese market can be tricky, and all the information is not necessarily in one place. This website is one that attempts to gather information about doing business in China and is also up to date.
  6. In case you’ve only heard of Crouching Tiger, Hidden Dragon, you may want to check out these lists. They boast both historical and contemporary Chinese movies to watch: List 1List 2List 3List 4

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Article written by Chinwe Ohanele, Esq: tech-savvy, business-legal professional, entertainment law consultant, international speaker and IP writer.
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