Bruce Willis Sees China Future as Hollywood Eyes Cinema Boom

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Visitors watch the new 3D movie theater at an international amusement industry exhibition in Shanghai, China.

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Photographer: Eugene Hoshiko/AP Photo

Visitors watch the new 3D movie theater at an international amusement industry exhibition in Shanghai, China. Close

Visitors watch the new 3D movie theater at an international amusement industry exhibition in Shanghai, China.

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Actors Jaden Smith, left, and Jackie Chan perform in a scene from the movie "The Karate Kid". Close

Actors Jaden Smith, left, and Jackie Chan perform in a scene from the movie "The Karate Kid".

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Actor Jackie Chan participates in a panel discussion at the 2009 Boao Forum for Asia in Boao, Hainan, China, April 18, 2009. Close

Actor Jackie Chan participates in a panel discussion at the 2009 Boao Forum for Asia in Boao, Hainan, China, April 18, 2009.

Photographer: Nelson Ching/Bloomberg

Movie-goers buy tickets at the Wanda Cinema in Beijing. Close

Movie-goers buy tickets at the Wanda Cinema in Beijing.

Photographer: Nelson Ching/Bloomberg

An Imax theater at the Wanda Cinema in Beijing. Close

An Imax theater at the Wanda Cinema in Beijing.

Photographer: Nelson Ching/Bloomberg

James Wang, chief executive officer of Huayi Brothers Media Corp. Close

James Wang, chief executive officer of Huayi Brothers Media Corp.

Bruce Willis’s mob hit-man travels to the future in next year’s movie “Looper.” Thanks to backing from Beijing’s DMG Entertainment, that future is in China.

DMG funded the production on condition the location was moved from France and a role was included for Chinese star Xu Qing. The requirements weren’t just to tap China’s burgeoning cinema audience. With the changes, the movie now qualifies as a Chinese co-production, exempting it from the nation’s 20-film- per year import quota and allowing backers to keep three times as much in box office receipts.

“We are trying to be relevant to a significant market,” said DMG Chief Executive Officer Dan Mintz by telephone from Beijing. “The industry is growing like a rocket ship.”

Looper is one of a rising wave of Sino-U.S. productions as Hollywood looks to expand in a market that’s adding more than 1,400 cinema screens a year. The 2010 remake of “Karate Kid,” starring Jackie Chan and Jaden Smith, was produced by Sony’s Columbia Tristar and state-owned China Film Group. Fox Searchlight and Beijing-based IDG China Media teamed up for “Snow Flower and the Secret Fan,” which lists Wendi Deng Murdoch as an executive producer. Walt Disney Co. (DIS) and Universal Studios Inc. have made Chinese co-productions.

“Everyone is coming in to join the bandwagon,” says Hong Kong-based Bill Kong, who co-produced the 2000 hit “Crouching Tiger, Hidden Dragon,” directed by Ang Lee. “Ten years ago if you made $3 million in China you would be jumping up and down. “Today it’s more like one or two hundred million.”

Rising Receipts

Box office receipts in China grew 64 percent last year to 10.2 billion yuan ($1.6 billion), according to the State Administration of Radio, Film and Television. While that’s still a fraction of the $10.6 billion receipts in the U.S., according to Box Office Mojo, it’s one of the biggest potential growth markets for Hollywood. U.S. ticket sales fell 0.3 percent in 2010.

China’s cinema-building will more than double the number of screens by 2015, from 6,200 at the end of 2010, says Mintz. At the end of 2009, the U.S. had 39,233 screens, up from 36,435 in 2004, according to the National Association of Theater Owners.

In many of the new cinemas, the Hollywood influence is visible at more than the box office. On a recent Thursday at the 9-screen Wanda Cinema in downtown Beijing, opened in 2006, fans lined up in the marble-floored lobby for 160 yuan ($25) tickets to “Transformers 3” or the latest Harry Potter film in 3-D Imax. They bought Starbucks coffees or popcorn and Coke overlooked by murals of Fred Astaire and the Empire State Building.

3-D Gains

China is now the second-largest market for Mississauga, Ontario-based Imax Corp. (IMAX), maker of digital projection and sound equipment. The number of Imax theaters in China will rise to 85 this year, from 40 at the end of 2010, Richard Gelfond, chief executive, said in a July 25 news release.

New cinemas and rising wealth have lifted potential revenue for filmmakers in China as much as 25-fold. James Wang said he and his older brother Dennis made their first movie, a comedy called “Party A, Party B,” when western films were first allowed in the mid 1990s. It earned $4 million, “a blockbuster at the time,” he said.

Last year the 41-year-old chief executive of Huayi Brothers Media Corp. (300027), China’s largest independent film producer, released “Aftershock”, a Feng Xiaogang film about the 1976 Tangshan earthquake. It made $105 million.

Part of what changed the industry was the government’s realization that China could help spread the nation’s culture abroad by limiting the entry of foreign movies and encouraging made-in-China joint productions.

Hollywood Help

“China is keen on promoting its soft power,” Shen Dingli, professor at the Center for American Studies at Shanghai’s Fudan University said in a telephone interview. Joint productions serve “the political purpose to promote our culture and systems with Hollywood’s competence.”

The government offered tax breaks to cinema builders and encouraged private funds to invest in cultural industries, said Kong. One fund, Xi’an Qujiang Film and TV Investment Group, hired Antoine Fuqua, director of Oscar-winning Training Day, to make a romantic drama set in the 8th Century Tang Dynasty.

DMG is raising $300 million for a fund to help U.S. film franchises qualify as co-productions in China. “The problem is they make money in China and cannot collect it,” said Mintz. “We are building a door to bring them in.”

Imported films get as little as 13.5 percent of box-office receipts, compared with 47 percent for a co-production.

‘Mummy 3’

Kong turned “Mummy 3” into a co-production with Universal Studios and China Film Group four years ago. “It wasn’t a great movie, but it utilized a big American franchise in China,” he said. “The time will come when there are more.”

The growing Chinese market is spawning other joint ventures. Huayi’s Wang teamed up with Thomas Tull, founder of Burbank, California-based Legendary Pictures whose hits include “The Dark Knight” and “The Hangover” to start Legendary East, which will make films in China targeting international and local audiences.

Legendary will raise $220.5 million in a deal that will see Hong Kong-based Paul Y. Engineering Group Ltd. take a 50 percent stake in Legendary, Paul Y said yesterday in a statement.

Relativity Media, the West Hollywood-based producer of “Cowboys & Aliens,” agreed On Aug. 14 to make and distribute movies in China with Beijing-based Huaxia Film Distribution Co.

Not all deals will pan out, says Nansun Shi, who sits on the board of Beijing-based Bona Film Group, which listed on Nasdaq in December. “This kind of growth is unprecedented anywhere in the world,” says Shi. “Many, many films are burned and do not make money.”

‘Avatar’ Success

Getting the formula right isn’t easy. U.S. hits such as “Avatar” and “Transformers 2” were box office successes in China, with “Avatar” becoming the country’s biggest grossing film, taking $216 million in ticket sales. By contrast, the Chinese version of “High School Musical,” made by Huayi with Disney in 2010, earned less than one million yuan ($155,000) because Chinese audiences don’t like musicals, says Wang.

There’s also the censorship. All scripts in China must be approved by state censors before shooting begins. Explicit sex, excessive violence and themes that cast the communist party or government in a negative light are banned, leading to an abundance of historical epics and martial arts films.

“The censorship is a problem for all outsiders,” says John Chong, chief executive of Hong Kong-based Media Asia Group, which is making “1911,” a film directed by and starring Jackie Chan to be released later this year. “We make a lot of costume films.”

Even if the film succeeds in China, it may fail abroad. The 2006 movie “Curse of the Golden Flower,” starring Gong Li and made by Edko and Sony Pictures Classics, cost $30 million, earned $35 million in China, and had minimal sales outside, said Kong.

“We are only mortals and will continue to look for that thin line that separates what pleases the western world and what pleases China,” said Kong. “There is no magic formula.”

To contact the writers of this story: Frederik Balfour in Hong Kong at Fbalfour@bloomberg.net; Ronald Grover in Los Angeles at rgrover5@bloomberg.net

To contact the editors responsible for this story: Bret Okeson at bokeson@bloomberg.net; Mark Beech at mbeech@bloomberg.net.

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