The Animation Options Blog

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.