2014: The year China's film industry got more industrial

Revenue boom

2014: The year China's film industry got more industrial

One might even say business is... booming?

Norman Chan remembers the moment when he knew he had to get out of the movie business.

A veteran director and producer of over 150 films in Hong Kong and mainland China, Norman Chan recalled having just put the wraps on production for "Happy Ghost V" back in the early 90's. Having sent the film off to colonial authorities for inspection, Chan began contacting distributors in East Asian countries where he'd sold distribution rights. But his man in Malaysia, who had already paid 30% of the total HK$1 million as a deposit, had bad news.

"The guy said 'Ah, Mr. Chan. I don't want your film—I'd rather lose my deposit,'" Chan said. The distributor told Chan that a pirated version of his unreleased film was already screening in theaters throughout Malaysia.

Chan wasn't the only one to have the rug pulled out from under him as a wave of piracy hit filmmakers in the region, but unlike many in his industry he saw an opportunity: Chan started a film equipment rental business, turning a profit in a sector where even owning the cameras and lights was a liability. Since then, whether by VHS, DVD or steaming online video, piracy has been frustrating the aspirations of filmmakers in greater China for decades.

Today things are changing, both in Hong Kong and China's film industry at large. Indeed, 2014 was in many ways a banner year for China's movie business. The country's total box office take grew more than 36% over the previous year to RMB 29.6 billion (US$4.76 billion), of which local films took an impressive 54.51%, according to data from the State Administration of Press, Publication, Radio, Film and Television. At last count there were 23,600 movie screens nationwide, of which 5,937 had been added in 2014, with more still to come. 

That growing number of theaters in smaller cities throughout the country is changing the makeup of the movie-going public, who in turn are upending the foundations of Chinese cinema itself. Last year saw marked changes in mainstream film quality, director origins and the boundaries by which movies themselves are divided. A film landscape dense with domestic cultural touchstones and strict government regulation remain serious obstacles to mainland films' appeal abroad and often at home. But improvements to copyright law enforcement, the emergence of mobile online video as its own format and introduction of more dynamic sources of funding and production now promise to further industrialize and revolutionize Chinese cinema—for better and worse.

Critically speaking

Few are as familiar with Chinese cinema as Raymond Zhou, longtime film critic and columnist for China’s biggest movie magazine, Movie View. Zhou, who recently published a book recapping the most influential films and industry trends of the last decade, pointed to what he viewed as the major development of 2014: Bad movies. Lots of them.

"It’s not just one man’s opinion. It’s well accepted that most of the bestselling films in 2014 were either bad or mediocre," Zhou said, adding that there was "almost a reverse correlation between quality and box office results."

Where years prior saw at least a few solid films make bank in China, Zhou said none of this year’s blockbusters attained any real critical success compared to the lower-brow likes of "The Breakup Guru" or "Where Are We Going, Dad?" He believed the chief cause of the drop in quality was a boom in newly-built movie theaters in China’s smaller cities, where the tastes of new audiences without much moviegoing experience departed drastically from those of relative cinephiles in Beijing and Shanghai.

"Yeah, the box office is going up—it’s almost half of the United States’ market right now. But the quality is nose-diving, and the thing is, if you say it too clearly, people will chew you out," he said.

Zhou's criticism of the 2013 film "Tiny Times" for its unabashed glorification of consumer culture famously drew the ire of innumerable online fans, but he is no longer quite so outnumbered. Organizers at the increasingly popular Golden Broom Awards, which polls the online public to pick China's worst movie every year, told The Wall Street Journal that last year marked “the most shameless, uncreative, dreadful” period in the country's cinematic history.

Stephen Cremin, publisher of Film Business Asia, said studios playing to smaller cities with critically panned movies like last year's "Tiny Times 3" and "The Breakup Guru" wasn't unique to mainland China, as the same trend could be seen in Taiwan and Vietnam as movie theaters achieved greater penetration. But he added that China has also seen the emergence of celebrity film directors such as star writers Han Han ("The Continent") and Guo Jingming ("Tiny Times" 1-3) and the actors Jiang Wen ("Gone With the Bullets") and Deng Chao ("The Breakup Guru").

Beyond director background and even film quality, though, there is another seismic shift in Chinese cinema that has upended the nature of the industry: Movie genres.

Genre boundaries

Both Zhou and Cremin pointed to the emergence of genre cinema as the dominant trend of the last three to four years as older generations' preferences lost their hold on studios' bottom lines, a change much like that seen in South Korea during the 1990s. This has freed up local directors to begin exploring more film genres such as romantic comedies, road movies, legal thrillers, horror films and (Eastern) Westerns, to name a few.

"If you look at the top ten local films in China last year, there's a remarkable range, especially when compared to the narrow range of films emerging from the Hollywood studios," Cremin said. "The top ten Hollywood films last year across Asia were basically fantasy/science fiction films."

Whether they're any good, or will play well abroad, is another matter. Michael Keane, a professor of Queensland University of Technology's creative industries faculty and author of an upcoming book on creativity in Chinese television and film said that the references made by some top-tier Chinese directors to get their message past censors' pens might hit home for theatergoers on the mainland, but can trip up a film's reception abroad.

"This makes it very hard to internationalize Chinese culture because there's so much parody and there's so much depth in Chinese culture that doesn't translate," Keane said. Few foreign viewers, for example, would likely recognize director Feng Xiaogang's "Back to 1942"—a seemingly anti-Kuomintang film set in a starving village during World War II—for its symbolic portrayal of the mass starvation caused by Mao's Great Leap Forward. For Chinese viewers, though, some dialog was so resonant that regulators were said to be demanding line changes up to the last minute.

Keane said that while some directors are able to wrangle more wriggle room out of authorities during filming, the script submission and approval process required to even begin production ensured that there would remain hard limits on what content could be screened—at the cost of popular approval. The government's current anti-vulgarity campaign, which clashes with domestic audiences' tastes, has also become a concern.

"The two biggest December releases, Jiang Wen's 'Gone with the Bullets' and Tsui Hark's 'The Taking of Tiger Mountain 3D’ both had difficulties negotiating censorship," Cremin said. "And a real concern going forward is one of self-censorship, if producers and investors play safe and don't push boundaries."

Generally, 90% or more of revenue has to come from theatrical release, with exhibitors—the companies that actually screen the films—generally taking 50% of box office, and 8% going to various taxes, Cremin said. What's left mostly goes to distributors, who still face marketing, production and acquisition costs and potentially have to share profits with copyright holders. Only once these profits are portioned out do private investors—who are responsible for the majority of movie funding domestically—get their share. That has helped push investors to favor safer bets over groundbreaking new efforts.

Norman Chan, now a lecturer with Hong Kong Baptist University's Academy of Film, said he expected more mainland investors to funnel funds to Hong Kong studios. There, he said, Hong Kong-Chinese co-productions could take advantage of less stringent content controls and local directors' willingness to take on movies that might not get produced on the mainland, but could still see a release there.

But here, as with many sectors in China, the Internet may be set to upend once-safe assumptions and traditional revenue streams.

Beyond box office

The recent emergence of movie funding from domestic Internet firms reflects the future of the medium as consumption in China goes online and mobile. Where once video streaming was a lawless frontier of rampant piracy on mainland sites, it is now significantly more regulated by hosting services keen to enforce IP laws in pursuit of profit.

Mathew Alderson, an IP lawyer with Harris & Moure, PLLC and author of a series at China Law Blog  on the country's online film industry, said that a 2009 copyright lawsuit involving Coca-Cola and Pepsi advertisements associated with pirated content on video-streaming site Youku (now Youku Tudou) had clued it and other such sites into the fact that free content from unchecked piracy came at a cost.

"In that case the plaintiffs went after foreign advertisers and held them responsible for contributing to the infringements that were occurring on the platforms on which they advertised," Alderson said. Faced with rapid evaporation of their advertising revenue, Chinese providers of such platforms "started to clean up their act and the result was an explosion in license fees for content that had previously been pirated."

That boom has been a boon for many popular American and Chinese shows and movies. According to figures sourced to the Beijing Daily, online license fees for some popular Chinese dramas rose from RMB10,000 an episode in 2009 to RMB1.85 million in 2011. Alderson said that in China films' ancillaries—profits beyond the box office, such as paid downloads or streaming services— has been stunted in part by a lack of copyright protection through legal and technological means. Now, though, "Chinese companies are now suing each other over copyright all over the place. Gone are the days when copyright was a kind of stick wielded by Hollywood alone."

A theater near you

These developments mean that ancillaries could swell to form a revenue stream as significant to China's film industry as they are in Hollywood, where they are sometimes said to account for 75% of total revenue. In contrast, one recent industry overview estimated that ancillaries made up just 10% of China's total film profits in 2013.

That puts China's Internet behemoths in a position to insert themselves into the industry's future, one where they can serve as producers, distributors and exhibitors. During last year's Shanghai International Film Festival, Chinese studio Bona Film's chairman Yu Dong said that the dominant film studios of the future could be Baidu, Tencent and Alibaba (commonly referred to as "BAT"), with all the current top studios such as Bona, Wanda Media and Huayi Brothers servicing them. Cremin said Alibaba in particular was "thinking big with the launch of Alibaba Pictures, partnering with key filmmakers in the region, including Wong Kar-wai, Stephen Chow and Peter Chan."

"After a lot of talk in 2014, this is the year that Alibaba Pictures—and also Tencent Pictures, iQiyi Films and Youku-Tudou's Heyi Pictures—will have to position themselves in the market," he said. Tudou's Gary Wang has also joined the scrum by funding Light Chaser Studios, a new animation outfit he hopes will one day give dominant western animation studios a run for their money.

Cinema's traditional viewing format may also see a shakeup, though it is unlikely feature-length films are on their way out. Alderson said he expected handheld viewing could naturally facilitate production of shorter programs with different aspect ratios, but that "is not to say that the theatrical format itself is threatened. I think there will always be a place for it and the Chinese are certainly demonstrating a zeal for movie-going."

While BAT-produced content consumed on the go may become the future face of the country's filmmaking industry, Zhou said he wasn't holding out much hope it would serve as Chinese cinema's salvation.

"They use data, and data tells them what kind of movies should be made," Zhou said. "I think that's pushing filmmaking even more in that direction that's already being worsened by the booming of movie theaters in small cities."

The future of Chinese film may well be more groundbreaking, dynamic and responsive to consumer demands than ever before. That doesn't mean it will start churning out critically successful movies any time soon, but as Transformers 4's record-smashing US$300 million box office gross in China last year showed, critical quality and profit quantity need not go hand-in-hand. 

Author: Hudson Lockett (@KangHexin)