Part 2 of AWNtv’s fmx/09 interview with Magic Dumpling’s VP of Development Wen Feng and President Kevin Geiger, on the subject of Chinese animation, the global marketplace, and their upcoming animated feature film “Road to Home”.
Part 1 of AWNtv’s fmx/09 interview with Magic Dumpling’s VP of Development Wen Feng and President Kevin Geiger, on the subject of Chinese animation, the global marketplace, and their upcoming animated feature film “Road to Home”.
How are you facing the current economic situation?
Are you hunkering down until things blow over? Are you turning crisis into opportunity and branching out? Are you retraining for a different career (or a variation on your current theme)? Are you dialing back? Or is it business as usual for you? 
Animation Options LLC devises 2D & 3D production plans tailored to your specific artistic goals, format, schedule and budget. Contact us for further information on how you can increase quality and profit margins.
The 12th Shanghai International Film Festival and market wrapped this week. It goes without saying that many great films were screened. But what I found most intriguing was the festival’s FORUM program, which provided lively discussions on a range of topics related to Chinese film production and international co-production - including story development, financing, and IP protection.
Sunday’s keynote address, “Made In China: What Kind of Films Does the Chinese Market Want?”, provoked a lively debate among the directors and producers on the panel. Director Ning Hao provocatively declared, “Movie makers in China lag behind the U.S. and lack certain fundamentals. The American filmmakers plan much more in advance before shooting.” Most concurred that the next 5 years will be pivotal for the Chinese film industry as the attention of the world turns to the mainland. Yu Dong, CEO of the Polybona Film Company, forecast that it is only a matter of time before a mainland Chinese film turns in a $100 million USD box office. To put this in perspective, there are currently only a handful of Chinese directors in China’s “Million Dollar Club”, and that’s 100 million RMB, not USD (the exchange rate being about 6.84 RMB to 1 USD). Nevertheless, Yu Dong soundly observed, “You cannot force distributors to support you. You need to attend to your presentation.” Certainly, a dramatic increase in China’s 4,000 movie screens will be required to realize this prediction (the U.S. has 10 times as many screens with less than 1/4 of China’s population). As this blog observed in “My Forbidden Kingdom For A Screen!”, the mainland Chinese audience continues to be remarkably untapped. Chen Guowei, Vice General Manager of the Wanda Cinema Line Corporation, remarked that films must be entertaining and resonant in order to do well in the market. In other words, they should not only be tasty, but also nourishing. Director Wei Te-Sheng noted ruefully that, “Everything beautiful is being measured.” He blamed “market rules” for overwhelming producers and “killing” the creation and distribution of independent films. “And if you successfully break these rules, ” he laughed, “they call it an exception!” In China, as in Hollywood, some things never change.
Monday morning’s roundtable discussion on “Asian Regional Cooperation” covered the ins and outs of Chinese co-productions, including the importance of matching story to partner, and the pros & cons of written vs. oral agreements. Many on the roundtable concurred that while a good contract is essential to a successful co-production, not every contingency can be adequately covered on paper - mutual respect and trust are paramount. To this point, producer Wang Zhonglei candidly admitted, “When China began to collaborate with other countries, we didn’t take many things seriously.” Corona Pictures’ Julian Alcantara brought his experiences with the Indian film industry to bear, noting how the Indian government moved from recognizing film as an industry only 10 years ago, to quickly adopting a more Western style of planning, production and distribution - with multiple international co-production treaties. The remarkable example of “Slumdog Millionaire” was raised, where an Indian story, cast and crew combined with an English director (Danny Boyle) and production leadership. Yet Mr. Alcantara cautioned how close “Slumdog” came to never even making the theaters. He mused how many other wonderful films audiences will never see due to the vagaries of international co-productions and independent filmmaking in general. Polybona’s Yu Dong repeated that China’s cinema lines must be more productively arranged in order to capitalize on market potential and stated: “I think Chinese filmmakers should collaborate with overseas distributors before movies are made, to ensure a better product.” Julian Alcantara seconded this notion, which this blog has long advocated: “Distributors often complain that producers don’t come to talk to them sooner. The earlier producers and distributors correspond ensures the success of both sides.”
Monday afternoon featured a high-octane keynote entitled, “Soft Power: Financial Innovation & Cinema Expansion”, helmed by none other than MPAA Chairman and former Clinton cabinet member Dan Glickman. Mr. Glickman’s amusingly direct speech went straight after the issues of piracy and market access restrictions on the Chinese mainland - not only linking the two, but noting the negative impact to domestic Chinese filmmakers as well as foreign filmmakers. Said Glickman, “If you don’t give audiences the front door, they’ll take the back door.” IDG’s Patrick McGovern, the “father of venture capital in China”, revealed that almost all of his company’s VC is vested in Asia. Touting the focus and benefits of IDG’s China Media Fund, McGovern remarked, “This is an opportunity for us to work with young directors and producers in China.” IDG is a founding investor in China’s Sohu.com, among other “community-based” media enterprises that target shared experience. Wellington Fung of the Hong Kong Film Council commented on the advantages of Hong Kong’s status as a “free port city for creation and investment”, but cautioned, “Small and mid-sized movies with lesser actors and new directors are higher risk - they attract fewer investors and need more support.” Lawyer Stephen Saltzman of Loeb & Loeb (who will open a Beijing office soon), followed up on this point with the observation that film financing and insurance sources are drying up for independents in the face of the global economic crisis (tell me about it). In a nutshell for Hollywood, foreign money was replaced by Wall Street money, which then fell out. And while Chinese banks and distributors are beginning to get on board with their domestic films, U.S. banks and distributors are conversely pulling back. Said Saltzman, “You might get 20-40% of your funding without a presale, but how do you get the rest?” Responded Patrick McGovern, “Private equity.” IDG typically looks for an average annual rate of return of 30-40% on their investments (to the amusement of some Chinese executives on the panel), but McGovern confided his faith in the principle that “20% of your investments will make 80% of your returns” - hence the importance of a diversified portfolio of media investments. The necessity of completion bonds as a reassurance to investors was discussed, but this concept seemed foreign to most of the Chinese filmmakers, who typically create their domestic movies without them. On the topic of intellectual property protection Stephen Saltzman remarked, “If children grow up thinking that content is free, content providers will have to make their revenue through other streams”. (We’re already seeing this scenario come to pass.) One audience member raised the ominous question for filmmakers of what will happen when these self-entitled children grow up to be the next generation of lawmakers. In closing, the most encouraging observation with respect to co-productions is that the “passive” nature of these relationships has become an increasingly “active” partnership - to the creative and financial benefit of both sides.
The co-pro mojo continued on Tuesday with the “Chinese-Foreign Film Co-Production Forum” keynote panel. Director Han Sanping noted China’s 30 major-market cities and bravely predicted that box office on the mainland will be 30 billion RMB in 10 years time. Julian Alcantara continued his poignant mantra: “We need to appreciate how easy it is for a film the world knows to be a film the world has never seen.” Alcantara declared that co-productions must not only encompass the financial, but also the organizational, artistic and technical. Noting that many non-U.S. filmmakers must go outside of their country to achieve success, he asked provocatively, “Are you Chinese filmmakers… or are you filmmakers who happen to be Chinese?” Zhang Zhao, president of Enlight Pictures, commented that regional distribution systems are required to achieve the box office numbers hoped for in China. On the subject of the global appeal of Chinese film he remarked, “Animated characters may have an international appeal that exceeds that of live-action actors.” This led to the question of whether Chinese audiences themselves like to watch Chinese films. Legendary director John Woo declared (to the appreciative laughter of the room), “We used to have good films, but no audience. Now we have a huge audience, but no good films.” Woo continued: “Most Asian audiences are not interested in Chinese-made epic films. They are considered too heavy. Hollywood is considered ‘The Best’. People will watch Hollywood films in the theaters, and watch their own country’s films on DVD. So, how do we make films that bring audiences to the theaters?”
That’s the $100 million USD question.
Twitch Film has posted the development teaser for the Chinese animated feature film “Road to Home” (created by Magic Dumpling and Xing Xing Digital), along with a related interview of yours truly that touches upon the progress of both the film and the Chinese animation industry.
Have you ever heard of someone doing a “happy dance” over a $1.8 million USD box office gross? Well, they’re doing one in Kuala Lumpur, where Les Copaque’s first animated feature film “Geng” has snagged that revenue with a $1.15 million USD production budget and an $18,000 USD P&A expense, making Malaysian box office history in the process. Think about it: an entire 3D animated feature film produced for less than the cost of a major studio minute, and marketed for less than the cost of a Hollywood audio retake! “Geng” received a relatively “wide” release on 56 out of 83 Malaysian movie screens. This sounds like kid’s play compared to North America’s 39,000+ screens, but becomes compelling when you consider that a wide release in the U.S. still hits only about 10% of available screens (Pixar’s “Up” showed on 3,818 this weekend), while “Geng” had a Malaysian screen coverage of almost 70%. Top that off with a return-on-investment of over 50% (and counting), with plans to release the film in Brunei, Indonesia and India - and you have a pretty remarkable example of low-budget animated feature film success.
What makes this story even more amazing is that “Geng” owes its existence to the talents of a visionary producer, a few Malaysian animation entreprenuers and a team of 40 recent animation school graduates, using off-the-shelf software and cloned PCs. The film benefited from strong word of mouth among all age groups, and owes much to the popularity of its characters Upin & Ipin. Les Copaque seeded the ground well on this front by releasing a TV series based upon the mischievous twins, even as the feature film was in full production. Broadcast during Ramadan in 2007, the Upin & Ipin shows scored approximately 1.5 million Malaysian viewers per episode. These ratings resulted in Les Copaque producing 12 more episodes for 2008, and a run of 42 episodes for 2009. Unsurprisingly, the studio’s next animated feature film focuses entirely upon the Upin & Ipin characters, in a stereoscopic 3D production slated for 2011.
You can read more about the making of “Geng” here. Truly a case study in unmined territory and guerilla filmmaking.
I’ll be at the fmx/09 conference this coming week in Stuttgart, hosting the “Focus on China” program and participating in the following presentations. Don’t miss the premiere of the “Road to Home” development teaser, in glorious HD resolution.
“CULTURAL REVOLUTION, TAKE TWO” - 3pm, Meidinger Saal
When is a nation of more than 1.3 billion people a scrappy underdog? When it is China seeking to reclaim the animation legacy pioneered by the Wan Brothers in the early 20th century. Shanghaied by Mao Zedong’s Cultural Revolution and then crushed by the juggernaut of Japanese anime, Chinese animation has been reeling for decades in a punch-drunk, outsource-fueled haze of stifled creativity. Until now. A new generation of Chinese animation filmmakers - versed in influences from Chuck Jones to Tarkovsky - has entered the world stage, eager to reclaim lost creative territory with films that are in turn thrilling, hilarious, gorgeous and thoughtful.
“A LONG MARCH ON THE ROAD TO HOME” - 4pm, Meidinger Saal
Currently in development, “Road to Home” is China’s first environmentally-themed animated feature film. Set on the Qinghai plateau, the film portrays the unique cultural characteristics of Western China while addressing universal themes of identity and co-existence, taking the friendship of a young girl and a wolf cub as its throughline. Directed by Lijun Sun with creator Wen Feng from a screenplay by Yi Yan, “Road to Home” features painterly landscapes and engaging characters, and is representative of the new wave of original Chinese animated feature films.
“THE BEIJING FILM ACADEMY PRESENTS…” - 2pm, Raum Mannheim
The Beijing Film Academy is a world-renowned institution of cinematic education with cutting-edge facilities, comprehensive specialties, distinguished faculty, and innovative research & production. The Animation School of the Academy was one of the first nationally-accredited Animation Teaching and Research Bases in mainland China, descending from an animation specialty program established in 1952. Animation School Associate Professor Wen Feng and Guest Professor Kevin Geiger will discuss the current focus and future directions of the school, with recent examples of student and faculty work.
Hope to see you there.
Kevin Geiger
Beijing
Experts across the 3D industry reveal the tricks of the trade that can make all the difference when pitching a project to an agency, potential backer, broadcaster or movie studio - by Mark Ramshaw
The April 2009 issue of 3D World magazine features an article on project pitching that profiles the developing Chinese animated feature film, “Road to Home”, with observations on the process from Animation Options CEO Kevin Geiger. Full story here.
Your primer on the wonderful world of animation is just a mouse scroll away. 
THE GLOBAL ANIMATION INDUSTRY
The business of animation can be divided into two major enterprises: production and distribution. Production involves the development, financing and creation of animated content. Distribution involves the domestic and international marketing, licensing, promotion, physical reproduction, delivery and exhibition of that content. An animation distributor will typically license the rights to theatrical and broadcast exhibition, non-theatrical markets (such as educational markets, where applicable), home video (including DVD), cable and pay-per view channels and video-on-demand. Additional rights are licensed for soundtracks, games, toys, publications and other ancillary merchandise.
As a keystone of the global entertainment industry, animation is experiencing rapid development worldwide, with a compelling slate of multi-cultural intellectual property. Properties originating outside the United States are gaining distribution and finding financial success in the North American market and elsewhere, something that was rare a decade ago. The global nature of the animation business is particularly notable in the television industry, where co-productions are the norm. Licensing and financing considerations have made international co-productions and sales essential for producers seeking to maximize revenue streams. Interestingly, while the United States remains dominant in the realm of animated features, the U.S. market is considered secondary for certain television properties with strong international sales.
The global animation industry lies mainly in the U.S., Europe, Japan and South Korea, with China and India rising to prominence. Nevertheless, one may point to almost any country in the world for notable developments in animation within the last decade. The United States is the undisputed leader on the world animation stage. In the U.S. and Europe, the animation industry is worth billions of USD annually in intellectual property and related ancillary products. Canada is a main provider of global television production, with many co-production deals, a precedent of government support, and a track record of influential talent in animation studios around the world. In contrast, South America imports most of its animation content from the U.S., Europe and Japan.
As a major animation exporter, Japan has a precise industry chain and a mature operating mechanism. Japan’s animation industry ranks highly in the national economy, and the output value of Japanese animation products exceeds that of steel. Anime has a market value of nearly $2.5 billion USD in the United States alone, with global merchandising worth almost $5 billion USD. South Korea is second only to the U.S. and Japan in the output value of its animation industry, which has become one of the six “pillar industries” in South Korea’s national economy. By the same token, mainland China is aggressively building an animation industry with widespread state support. While lacking China’s level of government intervention, the animation industry in India benefits from production costs that are lower than almost any other country in the world.
Similarly, Spain offers the lowest production costs of any European country, while still maintaining a good quality level, most recently exemplified by Kandor Moon’s animated feature “The Missing Lynx”. The United Kingdom has a strong industry and audience for children’s animated television and DVD, while Germany is Europe’s third largest animation producer and largest TV market. France is the most prolific animation producer in Europe, with a strong system of government subsidies and tax breaks. Like China, France features strict quotas and regulations on foreign participation, which have alternately helped and hurt their animation industry. Eastern Europe, with a distinguished record of artistic achievement, is gradually catching up to the rest of the world in commercial animation production. So is the Middle East, with Israel taking a leading role. Finally, it is worth noting that Africa’s first animated feature film production, “The Legend of the Sky Kingdom” was released in 2002.
Around the world, independent animation has blossomed with the advent of digital technology and in response to the conventions of major studio filmmaking. With the increase in theaters, television channels and the use of digital satellites, the rapid growth of the Internet and a wide variety of other new technologies (including the latest advances in stereoscopic and large-format projection), distributors and programmers in nearly every country require more content than ever to fill consumer demand. China is a prime example of this phenomenon.
THE GLOBAL ANIMATION MARKET
Worldwide box office returns in 2007 amounted to almost $27 billion USD, a 5% increase over the previous year. Across all media, the global animation market was worth over $60 billion USD in 2006, and is projected to become a nearly $80-billion USD industry by 2010. 2008 saw approximately 100 animated feature films released worldwide, of which about 30 were produced or distributed in the U.S. This includes theatrical releases, and direct-to-DVD.
While the international landscape has historically been dominated by the major U.S. studios, animation is becoming a truly global industry that promotes communication and exchange among different cultures, with broad development space and co-production opportunities between various nations. The international animation market has come a long way since the first public screenings of hand-painted sequences on celluloid strips. In the middle and late 20th century, developed countries began to evolve from production-oriented societies to entertainment-oriented societies. Locally produced animation properties began to succeed not only in their home territories but abroad as well, particularly in the areas of broadcast television and DVD sales. Compared to live-action, animation travels well: consumers around the world love animation, and it is relatively easy to tailor animated content to regional markets. This is not an option, but a necessity: animation companies in any country require international revenue in order to break even on their proprietary content, whether in film, television, the Internet or gaming. Many major studios owe more than half of their revenues to overseas theatrical distribution and ancillary sales. In television, international partnerships are essential to fund production, and many series can succeed in international markets without ever finding a domestic audience.
Foreign language films are often grouped with “art house films” and other independent films in U.S. DVD stores and movie listings. Unless dubbed into the native language (as most animation commonly is), foreign language films distributed in English-speaking regions usually have English subtitles. Films of this kind typically receive a limited U.S. release in coastal markets such as Los Angeles and New York. Accordingly, the marketing, popularity and gross revenues for these films are usually much less than for major Hollywood blockbusters. In addition, cultural differences between foreign and domestic films affect theatrical attendance and DVD sales. Many foreign language films never receive a DVD release outside of their home market, but foreign films that are particularly successful may be acquired by the major distribution companies for international DVD release on specialist labels. Foreign films can successfully cross cultural boundaries, particularly when the primal story, visual style and cinematic spectacle are compelling. Live-action films such as “Crouching Tiger, Hidden Dragon”, “Amélie” and “Brotherhood of the Wolf” have enjoyed great success in Western cinemas and DVD sales. The first foreign film to top the North American box office was “Hero” in the fall of 2004, while Hiyao Miyazaki’s animated feature film “Spirited Away” won the Academy Award for Best Animated Feature in 2003.
The general pace of international roll-outs is quicker than in the past, especially from the United States. “Day and date” releases, in which films launch simultaneously around the world (pioneered by DreamWorks’ animated feature “The Prince of Egypt” in 1998), are increasingly common. Distributors and exhibitors continue to find new ways to expand the box office revenue pool. The growth of multiplexes in Europe and an increase in the number of screens in Asia and Latin America have all contributed to this expansion. Other factors include the privatization of overseas television stations, the introduction of direct broadcast satellite services and increased cable penetration. It is important to note that in the major European territories, typical television license fees surpass video license fees. In some instances, a license fee for animated feature films may be up to three times the amount paid by a video distributor for the same picture. Territorial value around the world is defined by media sophistication, ticket and rental costs, economic strength, expendable income, currency exchange rates, and of course – audience size. Following is a selection of the major international entertainment markets by estimated population as of 2008:
(Interestingly, Australian audiences view more films than almost any country except the U.S.)
The 1980s and 1990s saw the emergence of a significant market in the form of home video. Films that performed poorly in their initial theatrical runs were now able to receive new life in the video market. The rise of the DVD format has become even more profitable to film studios, causing an explosion of “special editions” featuring extended versions, deleted scenes, “making of” segments, commentary tracks, and even original short films. Two key factors that affect home video success are the number of VCR and DVD players within a given territory, and the amount of content piracy in the region.
The Internet is by its very nature a global market that can be accessed from almost anywhere in the world. However, individual sites are not marketed equally in all countries, and computer usage, online access and download speeds vary from region to region. The Asia/Pacific region is the world’s largest Internet market, with most of the usage found in Japan, South Korea, China and India. While Internet users are quick to migrate to other sites when fees are charged for content, free access to online entertainment is commonly used as a “hook” for the advertising and sales of related products and services. Mobile wireless technology is also emerging as a potential distribution channel, though more in the gaming market than for animated entertainment. As opposed to web content, which consumers generally expect to access for free as they do television, there is evidence that a viable profit model exists for mobile game distribution and animated “mobisode” sales – with the potential of this market demonstrated by Apple’s highly successful $0.99 price point for music downloads.
Last, but certainly not least, the expansive global market for interactive gaming software encourages animation property owners to pursue this lucrative ancillary revenue stream by granting developers, publishers and distributors licenses for multiple computer & gaming console platforms on a global basis.
