China Headlines: China's growing presence in Hollywood film market

The news that "The Revenant" won Oscars for directing, cinematography and best actor is exciting, particularly for an animation and entertainment firm in south China's Guangdong Province.

At the end of 2014, Guangdong Alpha Group, the co-funder and co-distributer of the film, established a partnership with New Regency Productions, the film's production company. It agreed to invest up to 60 million U.S. dollars in three movies that New Regency would produce, including "The Revenant."

"In return, Alpha receives a share of the global box office takings. This partnership also increases our presence in the global film market," said Chen Derong, CEO of Alpha's interactive entertainment division.

Alpha is among a number of Chinese firms looking to secure a share of the Hollywood film industry and increase their global presence through joint ventures, investment or buyouts.

GROWING GLOBAL FOOTPRINT

"It is difficult to market Chinese films in Hollywood, but our investment could go first and pave the way," said Xiong Yuesheng, deputy general manager of the investment and management division of China's Hunan TV and Broadcast Intermediary Co. LTD.

Many Chinese companies are already doing what Xiong has suggested. Property and entertainment giant Dalian Wanda Group in January announced its acquisition of Hollywood film producer Legendary Entertainment for as much as 3.5 billion U.S. dollars, the largest overseas "cultural acquisition" by a Chinese company to date.

Several Chinese cultural firms had seen the opportunities even before this acquisition.

Last September, China Media Capital (CMC) and Warner Bros. Entertainment announced Flagship Entertainment Group Ltd., a joint venture that will fund and develop Chinese and English-language movies for the international market.

Also in 2015, production company Huayi Brothers signed a deal with STX Entertainment to co-finance, co-produce and retain distribution rights of more than 18 films. Huayi will retain the copyright to the co-produced films.

"Investing in IP returns the most profits in the film industry. But it is unusual for Chinese firms to secure the copyright of Hollywood films," said Zhang Yijun, PR director of Huayi Brothers, adding that holding the copyright has made all the difference to their North American subsidiary.

WHAT ATTRACTS HOLLYWOOD?

It is undeniable that major Hollywood production companies are now eyeing the opportunities offered in China for cooperation, thanks to a varied pool of investors and a dynamic domestic film market.

China has one of the fastest growing film markets in the world. Box office revenue last year was 44 billion yuan (around 6.7 billion U.S. dollars), up 48.7 percent over 2014, while 1.26 billion people went to the cinema last year, a year-on-year increase of 51.08 percent.

It is expected to overtake the United States to become the world's largest film market in 2017.

A total of 8,035 movie screens were installed in China last year alone at a rate of 22 screens every day. Its screen count currently sits at 31,627.

"This means that China's ticket sales are too big for major Hollywood studios to ignore," said Zhang Huiyu, associate researcher with the Chinese National Academy of Arts.

NEED STORIES TO BE WELL TOLD

Cinema also offers an opportunity to promote Chinese culture but this is no easy task.

In 2012, "Lost in Thailand," a low-budget comedy, earned 1.25 billion yuan in China, yet it only generated a paltry 57,000 U.S. dollars during its U.S. theatrical release.

Zhang said that the subject, storytelling and marketing all affect a movie's performance. "For example, China's martial arts films are better received by foreign audiences."

In order to cater to Chinese consumers, Hollywood producers usually use locations in China, or Chinese crew. Obviously, "Chinese elements" alone are not enough.

Chinese film producers hope to learn from Hollywood and apply some of its film production, technology and marketing methods through co-production deals.

"Our final purpose is to create movies like 'Kung Fu Panda' by ourselves. The key will be finding a good Chinese story and telling it appropriately," Chen Derong said. Endi