«INTERNATIONAL PRODUCTION WITH CHINA Moderator Clifford COONAN - Asia Bureau Chief, The Hollywood Reporter Introductory speech HOU Po - Managing ...»
CANNES, TUESDAY MAY 19, 2015
Clifford COONAN - Asia Bureau Chief, The Hollywood Reporter
HOU Po - Managing Partner, TMT Leader of Deloitte China
Wendy REEDS - EVP, International Sales of Lionsgate International
SHI Nansun – Chairman of Distribution Workshop
Allen WANG Jun - Senior Partner of Yingke Law Firm
ZHOU Yuan – EVP of Linmon Pictures
Hello, good afternoon. I am David from the Marché du film. I'm very pleased to welcome you this afternoon for this roundtable about the international production with China. This is part of the first China Summit organised by the Marché du film in Cannes, and we hope that you will enjoy this program and this roundtable; I am sure, because it will be moderated by Clifford Coonan from the Hollywood Reporter, who is great to be our partner. So I will give you the microphone, and I will particularly thank also Mr. Po Hou from Deloitte for his help and introduction. He will proceed for you, and now this is the business of Clifford.
Thank you very much. Thank you very much for the introduction. To begin with, we're going to have some introductory remarks from Hou Po from Deloitte based in Shanghai. So maybe if we start off with that and then I will introduce the panel after that.
Is this working? Good. So my name is Po Hou, I am from Deloitte China, from Shanghai. It is interesting to see so many people from Shanghai to be in Cannes, so it has set the stage well for the international production, so we are truly an international occasion. I don't know who sent this picture, but I love it. Good days ahead. So I guess whoever selected the picture wanted to say that together we are more beautiful; let's see whether it is true. So I am not going to read out the small files, so don't worry about the text. If you want a copy of the presentation, please contact Clifford and maybe we can have a dialogue and share. First of all, ways the co-production concept coming from? It is from the regulation. It is designed as a vehicle to bypass the 64 film limitations. It is supposedly a vehicle. And to qualify for the co- production, almost every year there is an update on what qualifies, for example, you need to hire the people from China; you need to take the shooting some China, etc. The ratio is a little bit arbitrary, what it means; 30% of the staff is measured by head or measured by people's salaries: nobody really knows what...The chances are that it depends on the partner you choose. If you choose with a partner who has a better relationship with the regulators, which is [Saft 00:03:26], you have a better chance of passing the qualification procedure so that your film… The route is more meaningful to you. So nowadays, with the exception of very few nations, most large film production nations already have the co-production agreement with China; Probably with the exceptionof Japan, I think Japan is missing. For the other large nations they have the agreement with the Chinese government. So do to this shortage of supply, we see that co-production films, they are doing very well in China;
although they accounted for a limited number in terms of counts of titles, if you look at the right-hand side, the box office, they contribute very significant part of the China market. So that is not a surprise; co-production usually means good promise for higher quality than the average film produced by the domestic market. So the definition of co-production includes Hong Kong, traditionally. So Hong Kong, mainland China co-production used to be a phenomenon until recently – the Hong Kong influence has been eclipsed by pure Western directly co-production with Chinese producers. And if you look at Hong Kong, to still quite important, but the US, France, and South Korea, the combined volume already exceeds 50%. And I'm not going to bother you with the history of the co-production – long story short, co-production has been there for a while, and every year, almost every once in a while, there are new nations signing an agreement with [Saft 00:05:56] to use that vehicle to enter China.
And this is the most recent development in the US and Korea. So I'm going to stop my presentation pretty quickly, but by showing the two pictures here: the first is a pretty good performance, a co-production result - Wolf Totem – and this is an example, a pretty typical example of using the global resource, in this case a director from France, to produce with a International Production with China Page 1 of 24 Chinese counterparty, based on the bestseller, which is a Chinese originated content, using a combination of global actors – but the majority are Chinese actors – tailored to the China market. Of course they tried to export it elsewhere, as well. And we see that the box office is pretty good – 700 million RMB in 35 days; a pretty good result. But this model – what I will call made in China, for China, together – is still the old model. Primarily it is co-production to please the Chinese market. However, my personal belief is that there is probably a limit to
that. That's the limit. Then what is outside of this model's limit? I would say, how about this:
co-production in the future, made globally, for the global. And I'm going to explain why. To be blunt, anything that is designed just for China is very unlikely to go very far outside of China.
So if you invite a French chef to do Chinese cuisine, it may sell well in China, but there is absolutely no guarantee that it can sell well in New York. So the next chapter of coproduction in its current sense, we need to probably bypass the mind-set of it regarded as a vehicle to sell into China. So look at this. The box office, 2 billion in China alone in 15 days.
So chances are, if something is good globally – and forget about China for the moment – if it is made in China or not made in China, it is going to sell well as well. So Chinese investors, they are probably better off treating pro-production opportunities as a vehicle to serve the globe, rather than just to look at China, which is actually quite a narrow market. I'm going to stop here and hand over to Clifford.
Thanks very much for that. That is a very interesting take on co-productions, which is quite a dizzying subject in many ways because it covers so many different areas, has different meanings to different people at different times, but is also something that is incredibly appealing now, both within China and from outside China. So when we were organising this event, and I was trying to think of people who would take part, I thought what would be the most interesting and perhaps the most valuable for people coming to see the roundtable would be to get people with a very varied take on co-productions and on the Chinese film market generally. Because co-production is, in international terms, the face of the Chinese film market. But it obviously covers a lot of different areas, whether it be production, the legal area, whether it be financing; there are so many different areas to look at. So that's why I think we have a really good panel today. So maybe if I start calling people up one by one. So Wendy is executive vice president at Lionsgate, and she has just been involved in one of the bigger deals in the Chinese film business with Hunan TV, which was a ground-breaking event, and maybe we can ask her to fill us in a little bit on that now, because the dust has settled a bit, and maybe we have a bit of perspective. And next, Nansun Shi, who is chairman of Distribution Workshop, among other titles, and who has produced many blockbusters, most recently Taking of Tiger Mountain; but there is a long, long list. And she has experienced both of working in Hong Kong and in mainland China, and she has a lot of insights into working in these two fascinating markets. And then next is Allen Wang Jun, who is a senior partner at the Yingke Law Firm in China. As you know, one of the things that has happened in China in recent years, I mean, a lot of this stuff is new, and a lot of entertainment laws are new; there were no precedents before, and they have had to write the rulebook going along in some ways, and Allen has been involved in writing that particular rulebook, so maybe he can give us some insights there. And then Zhou Yuan, who is executive vice president of Linmon Pictures, who told me at lunch that he lived in Toulouse for many years; he speaks wonderful French, although I think today he will probably present in English. He has a lot of experience in the industry, having been head of motion pictures at Shanghai Media Group for a while, and really developed that, and now is working with Linmon, which is invested by Tencent, which is one of these booming Internet companies in China. So again, that is another aspect of the film industry. What we thought as well would International Production with China Page 2 of 24 be interesting – or what I would like to hear anyway... Maybe I will just say a little bit about myself. I have been in China for around 11 years, working with various publications, and currently for the Hollywood Reporter, covering the entertainment industry. And today I was writing my box office story, our weekly box office story, and it occurred to me that Furious 7 made more than the entire Chinese box office in 2007. So this is a sign of just how dramatic the rise in the Chinese film market has been. Just two films in the last month have made $540 million in China, which is an astonishing figure when you consider when I moved to China in 2003, Hong Kong box office was bigger than mainland China. So these are dizzying figures. Driving that, as we were seeing from the presentation, had been co-productions in some sense, but mostly a lot of Hollywood and domestic productions. But co-productions are definitely seen as the way forward. So when I was thinking about what might be an interesting way to kind of bring this idea to life, I thought maybe to get as much anecdotal evidence from people as possible, because I think it's kind of interesting to hear what people's experiences are like on the ground trying to deal with co-productions. And then also to try and get a sense of what is a co-production. So basically to start off – I'm going to take my seat now – but I'm going to start off and ask people to just give their definition of what a co-production means to them. So Wendy, do you want to start?
Great. So Lionsgate does a lot of co-productions around the world, and it usually means teaming up with a partner in another country and making the movie. In China, it is slightly different because obviously to have a co-production you have to have certain Chinese cultural elements, and there are certain rules. But there are roles in every country: like in Canada, if you want to do a co-production, you have to have a certain percentage of the crew or the writer or the director Canadian; every country has its own rules. But basically, a co-production is finding a partner in another country and making a movie together. That's it.
Okay. I started making my first co-production film in China in 1991. The rules at the time are
still very similar to what they are now, which was what Mr. Hou mentioned just now:
basically, that China should have some investment in a Chinese partner, and for the onscreen talent to be one third Chinese, and that the story has to have relevance to China in some way. You can shoot the film entirely in New York, provided you are talking about Chinese immigrants in New York, for instance. But in 1991, China was economic not what it is today. And I remember very clearly when you have an agreement you sign, theoretically the Chinese party has to invest; but they had no money at the time. But then of course, our laws – if we can put it that way – are very flexible. There is a clause which says, "Other matters can be discussed in a supplementary agreement. The supplementary agreement you do not have to present." So that would give the kind of exit, the door for you to have a separate agreement which says the Chinese party is not paying a penny; but IP, we own the rights. But of course, fast forward very quickly, nowadays, I'm not sure whether you know, but many films in China, the big budget films – let's say, at least 20 a year – are made at US$20 million, US$25 million, US$30 million, and they are made 100% equity. Nobody has heard of cap financing, whatever financing: never heard of it. I think one of the reasons that everybody is trying to do co-production in China, is very practical. For the longest time, until two years ago, if you are in imported films, co-production films are considered as the same status when you distribute the film in China as a local film. Then for imported films, there is a quota – I don't want to go into the different stages of what happened – but now at this moment, 20 films is the quota where you can import a film on the revenue sharing basis.