China’s not over for Hollywood: It’s just the beginning
OVER the past 12 months, Hollywood’s posture towards China has gone from desperate embrace to awkward wariness and hand-wringing. After several years of fervid courtship were followed by a succession of megadeal disappointments in 2017, many in the US entertainment industry now seem to wish they simply could wash their hands of the whole China quandary altogether.
“I’ve sensed that this is a very real feeling that has grown over the last few months,” says Jonah Greenberg, president of motion pictures at CAA China.
On some level, Hollywood’s hot-and-cold attitude towards the Middle Kingdom is easy to understand — it closely tracks one of the key underlying economic realities. Chinese capital flow into the US entertainment industry exploded from US$1.13 billion in 2015 to US$4.78 billion last year; but it has plunged 90 per cent in 2017, totalling just US$489 million as of Sept. 30.
Still, industry leaders closest to the Chinese market caution that not only is the temptation to disengage misguided — for what globally minded entertainment concern can afford to spurn the world’s soon-to-be-biggest market? — but the gloomy prognostication about the boom cycle’s early demise also has obscured the subtle and ultimately more important signs that the two industries have been evolving towards a more sustainable and mutually beneficial footing.
“I can understand some of the fatigue, but it’s a much bigger and more exciting opportunity than what (the sceptics) are looking at,” says Greenberg. “The way we see things, this has only been the beginning.”
And yet, the landscape couldn’t have looked more different a year ago, when China was a major presence in Tinseltown and anyone with a bold-faced name and a little international savvy was set to get rich. At the time, every major studio, save Disney, had a Chinese financier or joint-venture relationship in place — or else was scurrying to secure one. And China’s then-richest man, Wang Jianlin, was swooping into Los Angeles aboard his Gulfstream 550 to boast about plans to inject billions into the slates of all six major US studios. All they had to do was take his money — and it was easy to believe him: He had paid US$3.5 billion for Legendary Entertainment in a January 2016 deal that came shortly after fellow conglomerate Fosun bankrolled Jeff Robinov’s Studio 8 and Jack Ma’s Alibaba Group injected millions into Steven Spielberg’s Amblin Entertainment.
But then the unthinkable happened: Beijing regulators turned off the tap, ordering state banks to stop financing the conglomerates’ overseas buying sprees and labelling the entertainment sector an officially restricted industry for outbound investment. The big-ticket Hollywood deals were quick to fall: Wanda’s US$1 billion purchase of Dick Clark Productions, Huahua Media’s US$1 billion investment at Paramount, US$345 million for Voltage Pictures, Avi Lerner’s US$100 million sale of Millennium to China’s Recon Group — all of them dead. This sent Hollywood’s moneymen and moneywomen into the paroxysm of hand-wringing that has yet to fully subside.
But if you ask the Chinese industry’s top film executives what they make of the clampdown and its aftermath, most will contend that the regulators did both sides a favour — and they aren’t just toeing the political line. “In general, we had gone backward regarding how we cooperate,” says James Wang, CEO of Huayi Brothers Entertainment.
“The recent activity gave Hollywood the misunderstanding that China has only two things to contribute: money and the market.”
Drunk on the allure of China’s fast and easy cash, the thinking goes, Hollywood studios and prominent independents had grown distracted by dreams of fast exits at high multiples or generously structured slate financing deals — neither of
The current restrictions have caused some companies to drop out, but I don’t think that’s a bad thing for the cooperation between China and Hollywood. — James Wang, Huayi Brothers Entertainment CEO