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Made In China: The Lucrative Future Of Film In The Middle Kingdom

This article is more than 7 years old.

Warcraft. Jurassic World. Interstellar. Pacific Rim. These blockbusters rank among the top 50 highest-grossing films of all-time in China. Each was produced by the American company Legendary Pictures, acquired this year by the China-based Dalian Wanda Group. This and other acquisitions over the course of the past four years reveals a deliberate move by Dalian Wanda to position themselves as a global film powerhouse. Are we entering an age where big-budget ‘Hollywood’ blockbusters will be made in China?

Partnerships with Chinese filmmakers began innocuously enough. Teaming up with foreign producers, distributors, and co-financing partners alleviates financial risks while simultaneously expanding the reach of international films. Hollywood understandably wanted to capitalize on an untapped market, expand revenue, and minimize losses if a big budget production went belly up. Each film property developed and produced in this manner is a carefully calculated business decision - essentially, a temporary partnership for mutual gain.

These deals aren’t negotiated except when there’s great potential for success. For a conglomerate like Dalian Wanda to satisfy their ambitions to become a global entertainment leader, the most efficient method is to forge permanent ‘partnerships’. Why build a film production company from the ground up when you could purchase a massively successful and well-regarded company instead? These acquisitions have become the go-to tactic in the Dalian Wanda playbook. First they acquired U.S.-based AMC Theatres in 2012, then Australia’s cinema chain Hoyts Group in 2015, and now this year they’ve acquired Legendary Pictures - making Wanda Film Holdings the largest revenue-generating film company in the world.

Legendary Pictures and Universal Studios were undoubtedly aware of World of Warcraft’s Chinese popularity when they positioned the Warcraft film’s release. The risk was spread across a number of co-financing partners. Legendary (now owned by Dalian Wanda) financed 45% of the project, while Universal contributed 25%. The rest was provided by three Chinese ventures: 15% from Tencent (the company that acquired Riot Games, creator of eSports giant League of Legends), 10% from state-owned China Film Group, 5% from Huayi, and a nominal stake from Taihe. To date, $220.8 million of the total $430.1 million global gross earnings came from China. A significant portion of the money fronted to produce Warcraft came from Chinese-owned companies. Is it any surprise the film was positioned toward a monumental Chinese opening, backed by an unparalleled Chinese marketing campaign?

What might be called an American flop appears to be a calculated decision. Were the gross earnings of China and the United States reversed, the film would likely be considered a domestic success. The foreign success of the film was based on two primary factors: location and relationship. At its height, Blizzard’s game World of Warcraft was extremely popular in the United States and China - October 2010 marked 12 million worldwide subscribers. 3.2 million of these came from the Chinese market, making its share the largest by approximately 200,000. The strong Chinese interest in the Warcraft franchise made it the ideal location for a wide film release. In only 5 days, the Warcraft film made $156 million in China alone. The film has grossed more than $430 million worldwide ($46 million in the U.S.), resulting in Warcraft nabbing the title of “most successful video-game adaptation of all-time.”

Legendary Pictures is Dalian Wanda’s linchpin acquisition toward starting a box-office revolution. The Chinese success of Warcraft demonstrates that there could be a day when China’s film industry doesn’t need American collaboration to be successful – in fact, that day may already be here.

Legendary’s next East-West collaboration is the action blockbuster The Great Wall, filmed entirely in Qingdao, China. It’s headlined by Matt Damon and Andy Lau, and set for release Feb. 17, 2017. Despite occurring before the company switched hands, the production of this film is worth examining because it may represent a pivot point for Legendary Pictures. Hiring American crews, staff, and screenwriters becomes an unnecessary expense for productions filmed on location in China. Dalian Wanda is banking on Legendary’s brand recognition and history of success - their track record also includes The Dark Knight trilogy and Man of Steel. It’s an under-the-radar decision that will likely pay dividends. Each new production has the benefit of marketing labels like, “from the producer of Inception

On a foundational level this could subtly change recurring themes and messages in films from Legendary. From the moment a spec script lands on a reader’s desk, the main goal is choosing a screenplay with the best profit potential for that studio. Before production a script must answer questions like, “where is the market for this film, and will the potential revenue justify the investment?” The scripts chosen by Legendary will align with Dalian Wanda’s goals of global reach and profitability.

Legendary Pictures recently acquired the rights to develop a live-action Pokémon movie called Great Detective Pikachu. The timing is not a coincidence. Nintendo stock initially soared some $9 billion higher following the release of Pokémon Go, an augmented reality app that’s taken the world by storm. This is another calculated and potentially lucrative deal, one that will undoubtedly have a large focus on the global film markets. Acquiring the rights to Pokémon is icing on the cake for the conglomerate that’s already home to the world’s largest revenue-generating film company. Such an adaptation is perfectly timed to capitalize on the first-ever Chinese mainland release of a Pokémon game, made possible by the lifting of a 14-year ban on video games last year.

One thing is clear: we’ve entered a period of Chinese film industry prominence. Only time will tell whether blockbusters made in China will find staggering success in the United States, or instead follow in the footsteps of Warcraft and dominate primarily in the Chinese box office.

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