Earlier this year, Black Panther became one of the biggest films of all time at the worldwide box office largely without China’s help. That, combined with the ongoing trend of Star Wars movies annually cracking a billion worldwide despite complete indifference from China, led many analysts to argue Hollywood needs to realize its blockbusters can still play everywhere without always pandering to Chinese tastes. Easier said than done, obviously.
But suddenly Ready Player One, Steven Spielberg’s VR-inclined ode to the 80s, has been saved by China, which is now responsible for 41% of the film’s worldwide gross (compared to just 8% of Black Panther‘s). Without its record-setting run in the Middle Kingdom, the highest for any Warner Bros. title and one of the biggest for any Hollywood movie ever, Ready Player One would be a financial disaster for the studio and its financier, Village Roadshow, which spent $175m on the budget and who knows how much more on marketing. It’s been estimated Ready needs to hit around $450m worldwide to be considered a success, and while it’s not quite there yet it will likely make it eventually. Without China, it wouldn’t have even come close.
It’s not the only time that’s happened this year, either. Tomb Raider and Pacific Rim: Uprising each made more in China than anywhere else. Still, it’s not always so simple. Tomb Raider’s domestic failure led to the sudden firing of the MGM boss responsible for the film and Uprising is still wildly underperforming.
So, who’s right? For Hollywood, is it China or bust? Or is there a path forward in blockbuster land where the question “Yeah, but how will this play in China?” doesn’t dominate? Can one really afford to ignore what will soon be the world’s leading film market?
Moreover, does China even want Hollywood blockbusters anymore? For the first time in history, China’s box office surpassed North America’s this past fiscal quarter, and it did so largely on the strength of its own films, with around two-thirds of the country’s overall gross coming from local productions. Our market is flat or contracting whereas theirs is again booming, surpassing us in quarterly revenue and even overall number of movie screens (54,000 versus our 45,000), and their local film industry has developed rapidly. As a result, two of the 2018’s biggest global grossers are Chinese: Operation Red Sea ($568m) and Detective Chinatown 2 ($395m).
Then there’s the Trump of it all.
As of this writing, we are not technically in a trade war with China, but we’re damn close. So, as the United States and China trade barbs en route to a potential trade war and nationalistic tendencies overwhelm both countries, Hollywood might just be cut off – not in the sense that our movies will be banned over there, more in the sense that China’s state-run film industry will make things especially hard for us – from its last true cash cow, if it hasn’t been already. What happens then?
Well, then you just move on to the next big fish, like rolling out the red carpet and trying to get into bed with a Middle East human rights violator who recently turned a Ritz Carlton into a prison for his country’s elite. That’s exactly what happened last week when Saudi Arabian crown prince Mohammed bin Salman was wined and dined at Rupert Murdoch’s house alongside fellow dinner guests like Disney’s Bob Iger, The Rock, and other Hollywood elite, including the heads of every major studio. Shortly after that, it was announced AMC – the Chinese-owned AMC, I’ll add – will be the ones to open the country’s first new theater on April 18, Black Panther will be the first film to screen in that theater, and it will soon be followed by Avengers: Infinity War.
Hollywood did this because Salman lifted the country’s 35-year cinema ban, thus setting off a veritable new gold rush of studio suits and exhibitors looking to plant their flag in what just might be the world’s last great untapped market – an oil-rich country of 32 million people, 70% of them under the age of 30. That means the majority of the people have grown up in a land where the only way to see a movie in a theater was to visit a nearby country or Dubai. The pent-up demand could catapult Saudi Arabia into becoming the world’s 10th biggest movie market within 5 years, if not sooner.
Deja vu, right? The same basic process has played out over the past couple of decades in various countries that have newly opened their borders to western films.
Now, it’s just on to the next target, business as usual. Because despite the perception of Hollywood being drive by liberal principles it is actually as capitalist as it gets, forever in pursuit of the almighty dollar, wherever that quest might lead. The history of Hollywood over the last half-century, after all, largely centers on the perpetual search for new sources of money. Each new source, be it due to technology, audience tastes, and/or general globalization trends, eventually dries up. Home video? Cable revenue? 3D? Even China? Not what they used to be. So, hello Saudi Arabia.
The irony here is that China’s locally made films thrive within their borders but do next to nothing outside of them whereas, increasingly, Hollywood’s native productions can’t pull nearly enough North Americans away from their Netflix accounts and have to desperately hope for salvation overseas, be it in China or just the entire international market combined.
To bring things back to Black Panther and Ready Player One, i’s not like Black Panther didn’t pander at least a little bit to the Asian market with its South Korea-set casino-chase sequence. That helped it score $42m in South Korea, good enough for third biggest foreign total behind the UK and China. For its part, Ready Player One cast a Japanese pop star, Win Morisaki, in a vital supporting role, but it has yet to open in Japan. In fact, other than China (and North America), it’s not doing much of anything anywhere else, with South Korea its second-leading foreign market with a haul of just $8m.
What does this teach us? Mostly that it is still possible for blockbusters to make hay without leaning so heavily on China (look at Black Panther, Last Jedi, and Jumanji), but at the same time nothing can save a blockbuster from financial ruin quite like an unexpected run of good fortune in China. However, with China increasingly favoring homegrown product over foreign imports Hollywood is left in a quandary over what to do.
The simple answer is just to make better movies geared toward 2018 audiences, not 1998, but with budgets ever escalating and jobs on the line the too-many-cooks-in-the-kitchen problem has become increasingly systemic. That’s caused talent to run away screaming to the more artistically nourishing world of streaming and TV and left behind a bunch of MBAs to run the film studios, who all busy themselves with trying to make product that can be everything to everyone.
Meanwhile, audiences are just being pummeled with choices. Netflix added 100 new movies, TV shows, and specials in the last week alone! And the studios can’t compete with the new tech companies that operate according to completely different business models. The profit margins for theatrical distribution have always been thin, but that’s the business Hollywood is in, along with cable rights, merchandise, and streaming sales. MoviePass, Netflix, Amazon, and Apple, meanwhile, use long-term debt financing, loss leader principles, and simple tax return riches to pursue strategies where they don’t seem to sweat it if they lose money. How the heck can Hollywood hope to compete with that?
I see the traditional film industry in a bit of a death spiral and inevitable state of contraction. The future will be fewer films in theaters and fewer theaters overall. But that doesn’t mean good films, new and old, aren’t out there to be found. That’s why I’ve been focusing on reviewing so many streaming movies and shows, particularly the Netflix ones, recently. Veronica, if you somehow haven’t seen it yet, is among the finest films I’ve seen all year, and older classics like A.I. and The Omen are still waiting to be discovered by new audiences on various streaming services.
So, if you’re a longtime reader or even new reader of this site what do you want from me? Have you enjoyed the content curation mode I’ve switched to in recent months? Do you miss the industry analysis, like that provided in this very article, and editorials I used to churn out on a more regular basis? Or do you kind of wish I would either do both or pick one or the other and focus on that? Let me know in the comments. Also, out of curiosity, what’s the best thing you’ve watched recently? And was it in a theater?
We Minored in Film 
Honestly, I come here for the industrial analysis, because that is what I don’t get anywhere else in this quality. Reviews, well, there are a lot of people who create those. It is not like I don’t enjoy them, but they are also not exactly a draw.
And studios should simply focus on good movies. It is pretty much impossible to predict which audience will jump on what anyway.
They sure don’t act like these franchises are “saved” though. Pacific Rim Uprising will surely get the same treatment other “lesser” blockbusters have had the last several years, where they end up pulling in 300 million in profit, but are still considered failures because most of the money came from overseas, and so the properties and their planned sequels are scrapped because…why? Not enough potential merch sales in U.S.? Or maybe you’re on to something here and they’re being more forward thinking than I’d given them credit for and just don’t want to come to rely on China sales that might disappear at any moment?
Anyway, I’m relatively new here, but I don’t have any complaints about the format. Good to have some variety.
“so the properties and their planned sequels are scrapped because…why? Not enough potential merch sales in U.S.?”
A lot of it comes down to profit splits. Typically, the studios get around half of the ticket sales in the U.S. and Canada, which drops down to 40% in the rest of the world, and then plummets to 25% in China. Beyond that, box office fraud is rampant in China, and sometimes as part of a bargaining ploy in the middle of larger negotiations with the US, China will just straight up stop sending Hollywood their money for several months. So, try as Hollywood does to appeal to overseas audiences the truth is that from a simple profit/loss standpoint it is always better to be a huge hit in the U.S. and Canada. Then after that everything is gravy. But if you bomb or underperform at home the calculus for profitability overseas is much more complicated.
So, if you are then left with a Pacific Rim, Jack Reacher, Edge of Tomorrow, Terminator: Genisys situation where you maybe broke even or made a little bit thanks to overseas you have to figure out if moving forward with a sequel is really worth it if means largely leaving the domestic audience behind and playing to a global market. That’s ultimately why these sequels either morph into reboots, die on the vine, or take longer than usual to happen. Something like Uprising only really got made because its financier, Legendary, is China-owned now.
“Or maybe you’re on to something here and they’re being more forward thinking than I’d given them credit for and just don’t want to come to rely on China sales that might disappear at any moment”
It’s a real possibility. What we’ve had happen around the world over the past couple of decades is countries which didn’t use to get Hollywood movies now have rapidly developing economies and suddenly Hollywood came a-calling. At first, everything was great in exactly the way it naturally would be if it feels like you’re seeing something for the very first time. But eventually that wears off, and those countries want to make their own movies. By that point, it’s too late for Hollywood to turn back. The US TV and streaming industry has already exploded by addressing the inefficiencies in the film business and giving audiences the type of high-quality entertainment the studios abandoned long ago. All Hollywood has left to do is to continue cranking out language neutral blockbusters and micro-budget horror movies. But as the local film industries in countries like South Korea and China mature and the nationalistic political winds of the day cause the rest of the world to look less kindly on America there’s going to be fewer “saved by China” stories and more flat-out flops.
Plus, frankly, doing business with China is a pain in the ass. They dick the studios around on release dates, hire old Hollywood hacks like Renny Harlin to teach them how to make movies so they’ll have less need of Hollywood in the future, make deals they quickly back out of for inscrutable reasons (often because the govt. steps in to force the companies to invest locally instead of abroad), don’t do nearly enough to combat box office fraud (which is when local movie theaters underreport ticket sales and pocket the overage for themselves), and have local customs and preferences which are difficult to please or predict, such when Last Jedi was rejected and criticized over there because the cast wasn’t attractive enough. So, yeah, if not for the huge money to be had Hollywood would probably just prefer to not mess with China at all.
“Anyway, I’m relatively new here, but I don’t have any complaints about the format. Good to have some variety.”
Noted. Glad you’re liking it. I will probably just keep on with it then.
I miss the industry analysis like this. That is what brought me to the site in the first place. Your insight on the movie business and box office is one of the better ones.
But this is all a lot of work, write what you care about.
I’m currently reading…and this will make more sense in a minute…a book about the making of the first Friday the 13th movie. It’s a relatively recent publication and is one of the deepest production history dives I have ever seen. I’m only halfway through, but one of the most consistent parts so far is how the film’s director, Sean Cunningham, only ever viewed films as products, not works of art. It was the driving force behind everything he did in the 70s, and finally, with Friday he read the market right and got the film of his career. Even after that, though, he had no higher aspiration than to make movies which made money. Anything other than that was an indulgence he couldn’t be bothered with.
I feel like for a good long while I slipped into that mindset as well. I was fascinated by film as an industry in perilous transition and the individual merits of movies were secondary to their larger social and economic significance. Films were product and I wrote of them as such. What I’ve been doing this year with more content curation and reviews is kind of me stepping back to remind myself, “Oh, yeah. I fucking love movies.” I’ll re-watch a bunch of Spielberg and write about it because it reminds me of when I was in college and that’s the kind of thing we’d do in film classes.
In truth, though, when you say “I miss the industry analysis like this” it heartens me because I miss writing articles like this. I think it’s actually what I’m best at, and I intend to do more of it, getting back to more of an even mix between reviews and analysis.
I prefer to read the industry analysis and particularly like your use of data. When I started my postgrad course in journalism, there was a class about data journalism and how good/great journalism can come from just data. I spent chunks of weekends looking at publicly available data and most of the time it was just numbers to me (I almost wrote an article about a substantially higher rate of illegal prostitution in a rural region of New South Wales).
The last film that impressed me was “Three Billboards Outside Ebbing”. I’ve watched some mediocrity this year (“Tomb Raider”) and truly awful (“Red Sparrow”). As for TV, “Mary Kills People” has been interesting. The best TV I have seen recently is available on YouTube – I have been watching Triumph the Insult Comic Dog’s “analysis” and commentary on the 2016 USA election and loving the “Cunk on…” series such as “Cunk on Britain”.
To hell with China (its leadership and those who help them abuse their minorities for not worshipping the party). If they want their local films more to an increasing exclusion if ours, good riddance to them. Their nationalists are truly little people for not taking any criticism—especially due criticism. Let’s make the “Red Dawn” movie the way it was intended: with China as the invaders. You know it won’t be over if they get Taiwan. I miss when Japan was trying to dominate us economically. They could at least not interfere with our memory of their aggressions before, during and after Pearl Harbor.