Hollywood goes to China

Some Chinese companies are seeking a stake in Hollywood studios.
Dalian Wanda, China’s largest commercial property firm, wants to invest in Lions Gate Entertainment, maker of the popular Hunger Games films.
Alibaba, the giant e-commerce company, has been in talks with Sony to make films and last year Fosun acquired production house Studio 8.
Meanwhile, American entertainment companies such as DreamWorks and Universal are investing directly in China, while others such as Fox and Sony are co-producing and partnering with Chinese companies.
It’s very clear why China is interested in Hollywood, and Hollywood in China. China is the world’s second-largest film market after the US, and is catching up. Ticket sales are growing by 30 per cent there compared with 1 per cent in the US.
The China market has become critical to the commercial success of new Hollywood titles and popular Chinese actors are being included in films such as “Iron Man 3” so that they will do well in China.
China is also a critical market for online entertainment, which some industry experts consider to have five or six times the potential of the box office.
Alibaba certainly recognises this and has been investing in movie spin-offs such as games while mobile phone manufacturer Xiaomi is ploughing money heavily into video and TV contents.
One of the reasons for Hollywood’s investment in China is that the country has an annual quota of just 34 foreign films to be shown on its screens. If foreign investors have a Chinese co-partner, they qualify as local and can get around this restriction.
Building a strong, local industry is not just about boosting China’s image through soft power but also supporting the China brand and developing the creative economy.
As with purchases of technology companies and luxury brands, investments in the entertainment industry are a way to export know-how back to China.
For example, Fosun will use its investment in Studio 8 to introduce Hollywood’s technology and film-making techniques to China.
Despite its huge promise, the Chinese film industry faces challenges. The restriction on screening of foreign productions ends in two years so the industry will need to develop rapidly by then.
Chinese films, including the record-breaking “Lost in Thailand”, have had only limited success internationally. Another barrier to blockbusters is censorship, which constrains the types of films that can be made.
It will be interesting to see how China overcomes such hurdles. It will need to do so if it wants to become a major force in popular global culture.