In a shifting distribution landscape, does Hollywood still need China?

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Once considered as the pot of gold at the end of the rainbow, here in 2022 does Hollywood need, or even want Chinese box office dollars?

Pore over the history of Hollywood and the passage of time makes one thing clear: as an industry where commercial prospects have always outweighed artistic principles, there’s always at least one fresh revenue stream that studios are hellbent on chasing in order to increase the surplus of their bottom lines. Like them or not, right now NFTs are one such example, not to mention rolling out your own streaming platform, but the history of Hollywood is littered with these golden geese. Some of them have made mountains of cash whilst, to the chagrin of studio bosses, others would remain frustratingly difficult to tap.

The DVD boom was one such land rush, bringing huge swathes of extra revenue into the industry, but by 2008 it had peaked due to a combination of digital sales, the global recession and the emergence of streaming services on the horizon. As such, Hollywood began to look for its next huge revenue stream and before long it found it in the form of the Chinese box office. China had first opened up its doors to foreign films back in 1994, allowing just ten into the country annually but by the mid-naughties, a number of factors meant that the times they were a-changing. 

Hollywood studios were already well-versed in adapting their productions to tap international markets, but for two decades China, with its tough censorship laws and prickly political ideology, had proved difficult to crack. Whilst Hollywood films found it difficult to make it into Chinese cinemas, pirated versions of those same movies flooded the country’s streets, retailing for as little as one US dollar.

Hollywood’s frustrations continued to grow and by 2007, representatives for the major studios had spent a decade campaigning the World Trade Organisation to step in – which they duly did, ruling in favour of Hollywood. The WTO’s decision marked something of a shift in attitude from China and over the next decade, each studio would reshape its blockbuster output to appease Chinese censors, appeal to Chinese audiences and look to tap into that lucrative market, which was quickly becoming one of the biggest cinema markets on the planet. 

A big win

Although it was by no means a sure thing, when it worked, it really worked. 2014’s Transformers: Age of Extinction included popular Chinese actors and locations, not to mention a hefty dose of Chinese product placement on its way to becoming the country’s highest-grossing film ever, adding a hefty $300m onto the production’s balance sheet and even out-earning its US take.

Such an approach may be nakedly cynical but hey, this is Hollywood. At worst though, this approach can become ethically problematic. Disney’s clear courting of the Chinese box office began with the Iron Man films, but the studio found itself on less sure footing when it changed the origin of character The Ancient One from Tibetan to Celtic in 2016’s Doctor Strange, a move purely engineered to appease Chinese censors. Despite facing a swathe of criticism for effectively supporting China’s occupation of Tibet through its writing and casting, the enormous economic potential of the country’s box office meant that Disney (and other Hollywood studios) would continue to overlook some of the more troubling aspects of appealing to the country, in the never-ending quest to turbocharge profits.

Transformers Age Of Extinction 

Changing times

Until now, that is. Recent times have marked something of a clear shift in the way that Hollywood views the Chinese film market. Perhaps the story which has caught the most traction of late to demonstrate this is Top Gun: Maverick. When the first trailer for the action sequel released in 2019, eagle-eyed fans spotted that Maverick’s iconic flag-clad bomber jacket had subtly changed since he last sported it in the 1986 original. Both the Japanese and Taiwanese flags had gone, a decision which was confirmed to be at the request of Tencent Pictures, the Chinese conglomerate who had poured a significant amount of financing into the production. 

However, a shift in the nature of China’s relationship with the US, not to mention Top Gun: Maverick’s pro-US stance would cause Tencent to quietly pull their funding from the picture. One side effect of that saga would be the reinstatement of the Japanese and Taiwanese flags on Maverick’s jacket. Whilst nobody will be commending Paramount for reinstating the flags after the Chinese money was pulled, the fact that the wider film wasn’t shaped to appease Chinese censors is key here.

For better and worse, Top Gun is Top Gun because of its unashamedly patriotic portrayal of US values, and to its credit, Maverick honoured its roots in an entertainingly self-aware way, grafting that 1980s American bombast onto the skeleton of the modern blockbuster formula. As a film, it created something that feels nostalgic yet modern, all at the same time but as a commercial project, it was equally remarkable for not straying from its roots to appease foreign investors.

To date, Top Gun: Maverick has grossed a whopping $1.3 billion dollars, with more to come by the time the movie finishes its long theatrical run and then presumably does decent business on home formats and streaming sales. Tellingly, not a cent of that revenue has come from China, with even Paramount have reportedly conceding that the film will not play in that market. 

So does the Chinese box office even matter anymore? Paramount aren’t the only studio of late who have refused to kowtow to Chinese censorship to get the film into the country. Disney has faced much criticism recently for its nebulous public position on progressive rights issues, with the Mouse House’s fence-sitting on the ‘Don’t Say Gay’ bill clearly being an attempt to offend as few stakeholders as possible in order to preserve profitability and as such, the company have been roundly chastised for it. 

However, in the wake of that controversy, Disney have taken what will be seen by many as a step in the right direction, refusing to accede to Chinese authorities when they demanded that a same-sex kissing scene be removed from the Toy Story spin-off, Lightyear. Like Paramount, Disney have now privately written off the chances of Lightyear receiving a Chinese release, essentially giving up on the opportunity to make tens, even hundreds of millions of dollars in order to instead protect its image with the rest of the world. 

It certainly makes for an interesting philosophical reverse. Whereas a decade ago, productions like Iron Man 3 and the aforementioned Transformers: Age of Extinction were using all means available to charm their way into China, the same studios that produced those films, Disney and Paramount, seem far more reticent to go to the same lengths here in 2022. However, there are a few factors at play here to consider when examining such a marked shift in the way US studios approach the Chinese market. 

Buzz Lightyear in Lightyear

A new state of being

Firstly, China’s domestic film industry has exploded in the last decade as film production in the country has ramped up considerably. Chinese audiences now have more choice and greater quality in cinemas and as such, are far more likely to go watch a Chinese production than they were ten years ago. In fact, 2016’s The Great Wall marked an interesting reversal in the relationship between Hollywood and China, with the Matt Damon film being a Chinese production that was made to court US audiences rather than the other way around. 

Secondly is the lack of guarantee. With only 34 or so foreign productions allowed to screen in the country annually, getting a film into the Chinese market is something of a lottery. Just ask MGM, who spent a million dollars retrofitting 2012’s Red Dawn to change the film’s antagonists from China to North Korea in an effort to get the film into the Chinese market. Ultimately, it proved to be a doomed venture and the spent cash was wasted. Even co-productions, long seen as the ‘guaranteed’ route into China are becoming increasingly tricky. Top Gun: Maverick is an example of such a venture that didn’t work out and, on the whole, US and Chinese co-productions have trickled down to almost nothing over the last couple of years.

The third factor to consider is the ongoing implications of Covid. China continues to enforce some of the strictest anti-Covid measures in the world and as such, public venues like cinemas are often the first to be hit with sanctions. In short, the Chinese box office is by no means the guaranteed billion-dollar market it used to be, meaning that for some studios reworking their films for a wildly volatile market just isn’t worth the effort. 

Finally? The headache. 2016’s Doctor Strange marked the warning shot for Hollywood when the aforementioned casting of Tilda Swinton as The Ancient One blew up in Disney’s face. The company had been particularly sensitive about upsetting Chinese authorities after being effectively blacklisted from the country for years following the release of Martin Scorsese’s Kundun in the late 90s, a film seen as sympathetic to the plight of the Dalai Lama. The switching of The Ancient One’s origin from Tibetan to Celtic was designed to appease Chinese censors, but became a significant PR issue for the company when as a result, it found itself being accused of whitewashing by segments of fans outside of China. 

Skirting the firestorm

As you can imagine, this isn’t an isolated issue either. When the company released its live action remake of Mulan last year, protests were sparked when it emerged that the province of Xinjiang, the region in China where Uighur Muslims have been imprisoned in internment camps, was a key location in the film’s production. As China and the US continue to find differences in opinion with each other, especially on the topic of human rights, the process of Hollywood studios fashioning their output to appeal to China is being thrown into increasingly sharp relief. Add to that the ongoing culture war that continues to rage in the online world and for some studios, the potential PR firestorm simply isn’t worth the gamble. 

Whilst some studios like Warner Bros, who recently cut an allusion to a gay relationship from Fantastic Beasts: The Secrets Of Dumbledore for its Chinese release, are willing to risk the backlash in the hopes of getting its film into the Chinese market, others are not. Sony is one such company who have made that choice, electing not to recut last year’s Spider-Man: No Way Home when Chinese authorities requested that sequences featuring the Statue of Liberty from the film’s climax were altered so the iconic American landmark was less prominent. Sony declined, and wisely too, we’d argue. Any potential financial upsides to such a move could be very easily offset by the kind of outrage that can be poison to a franchise’s future earning potential. Not that evidence of that maxim is required, but just take a look at the dwindling profits of the Fantastic Beasts films following J.K Rowling’s well-publicised comments to see how alienating the core fanbase can easily signal the death knell of any franchise, even one deemed as ‘too big to fail.’ 

With US congress currently coercing studios to pledge resistance to Chinese censorship, not to mention risking the kind of potential online backlash that can leave reputations (and profits) in tatters, it appears the golden days of the Chinese box office as a means of further earning potential may be in the rear-view mirror for Hollywood. Not to worry though, as ever, the canny studios always have another potential revenue stream or three up their sleeves… which is probably why we keep hearing about 3D making yet another comeback. Whatever happens next though, the film distribution relationship between China and the US has for the moment at least, significantly shifted. 

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