Why You’re Not Doing Enough About China

And How to Get Into the Game

Harvardwood Salon Series

December 13, 2010

Robert Cain
StoryArk Media
[+1] 310-663-8811
storyarkmedia@gmail.com
Chinese Film Market Overview

•  For nearly a decade China has been the world’s fastest growing major
entertainment market

•  Domestic Chinese box office has exploded

•  Since 2003, compound annual growth of 43 percent
•  China has grown from 20th largest film market in 2004 to 5th largest in 2010

•  China will continue to be the world’s growth story for years to come
•  Huge and growing middle class
•  High ticket prices
•  Severely under-screened, with vast cinema expansion under way
•  5,000 modern movie screens in China – 1 screen for every 270,000 people
•  U.S. has 1 screen for every 7,500 people
•  In 3-4 years China will surpass Japan to become 2nd largest film market, after U.S.

StoryArk Media December 13, 2010

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China is by far the world’s fastest growing major territory
Box Office Growth Rate (CAGR) of in Major Territories 2004-2010

China
Russian Federation
India
Mexico
Italy
Australia
South Korea
Canada
Germany
France
Japan
Spain
UK
US

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

CAGR

Source: Screen Digest, Boxofficemojo.com

StoryArk Media December 13, 2010

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China’s Growth vs. Other Major Territories

Annual Box Office in China, France, UK and Germany

2004-2010

1,800

1,600

1,400

Box Office 1,200

($US MM) 1,000 France

UK
800 Germany
China
600

400

200

0
2004 2005 2006 2007 2008 2009 2010E

Source: Screen Digest, Boxofficemojo.com

StoryArk Media December 13, 2010

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Revenue of Hit Films Has Grown Exponentially

Box Office of #1 Film, 2007-2010

250

Avatar
200

Box Office 150

($US MM) $202m

100

Red Cliff, 2012

Transformers Part I
50
$67m
$37m $47m
0
2007 2008 2009 2010

Source: SARFT, Boxofficemojo.com

StoryArk Media December 13, 2010

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China has enormous appetite (and financing) for quality
films, but limited capacity to supply them

•  Plenty of funding is available for film production in China

•  In 2009, 456 feature films were produced in China, even though cinemas could
only handle 130
•  Several distributors (e.g., Huayi Bros, Poly Bona, Enlight, Galloping Horse) are
flush with cash; numerous funds and high net worth investors are ready to
finance films

•  But aside from cash, virtually every other factor input for making films is in
short supply
•  Creative capabilities are sparse
•  Skilled screenwriters are practically non-existent
•  Few experienced producers
•  Demand for capable directors, cinematographers, star actors, etc. far outstrips
supply
•  Limited executive talent in finance, legal, marketing, distribution, etc.

StoryArk Media December 13, 2010

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Avoiding the Censors—Taboo Subjects and Content

From a 2008 release on SARFT’s website:

•  Films that depict hardcore sexual activity, rape, prostitution or nudity.
Vulgar dialogue or music and sound effects with a sexual connotation
•  Any content involving murder, violence, horror, evil spirits and devils
•  Excessively terrifying scenes, conversations, background music and
sound effects"
•  Films that distort the civilization and history of China or other nations
•  Films that tarnish the image of revolutionary leaders, heroes, important
historic characters, members of the armed forces, police and judicial
bodies.
•  Films that reconstruct crimes
•  Films that reveal police investigatory techniques.
•  Movies that advocate nihilism, environmental damage, animal abuse and
the capture or killing of rare animals

StoryArk Media December 13, 2010

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How to Get in, and Succeed, in the Chinese Film Market

•  Focus on the needs of Chinese investors and distributors

•  Acute need for strong local language (Mandarin) films and co-productions
•  Securing distribution for foreign-made films in Chinese theaters is nearly
impossible if you are not a major Hollywood studio
•  Chinese investors will invest primarily based on what they think they can recoup
from the Chinese market– global markets are interesting, but scary for most
•  However, the right co-production can be attractive
•  Chinese can invest up to USD 5 - 10mm so long as the films can be shown
in China. If not, the most they will invest is about 10 percent of the budget

•  Understand and stay current on what is working in the Chinese market

•  Action, drama, fantasy have excelled in 2010
•  Top hits: Avatar, Aftershock (Chinese action/melodrama), Inception, Detective Dee…
(Chinese crime/action/thriller), Ip Man 2 (Hong Kong action film), Alice in Wonderland,
The Expendables, Harry Potter and the Deathly Hallows

•  Be prepared to commit time and energy to establishing a presence in China and

building a network
•  Work with local partners who know the ropes and are connected to government
and film industry decision-makers
StoryArk Media December 13, 2010
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