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SPADA 2012: getting into China

Pukeko Pictures’ Martin Baynton, Grand Entertainment’s Trevor Morris and Wuxi Stdios/Xing Xing Digital’s Lifeng Wang presented on the opportunities and traps for young players in accessing the world’s most populous market.

The success stories of China’s growth in its screen businesses aren’t hard to find. For the past three years, exhibitors have been opening an average of three new screens a day and the country is still nowhere near saturation point. Discretionary spending is up, and cinemas are benefitting from that. The box office record topples to a new title on a regular basis.

Budgets have been rising, quality has been improving – not least due to the regular flow of crew from Hong Kong to work on mainland films and mainland-HK co-productions – and piracy is diminishing. And there’s plenty of money, much of it government cash, available for the right projects both domestic and co-produced internationally.

There’s also an increase in the number and quality of facilities (including several in train as a result of deals with US studios). Lifeng Wang is an Executive Director at Wuxi, outside of Shanghai, which has 11 sound stages and a RMB1 billion/US$190 million fund with which to help attract co-production business to the studio.

From the NZ perspective, there’s a free trade agreement and a film co-production treaty in place, and a TV co-production treaty on the way, although that’s taking more time than envisaged as China’s never done one of those before.

As a destination, China is also cheaper to access and cheaper to do business in than NZ’s traditional partners of the motherland and the US.

So, with all that going for it, pragmatic session chair Victoria Spackman asked about the challenges.

Censorship was certainly one, Wang acknowledged, noting that not many projects were being written with China in mind as a co-production partner. Since censorship in China occurs at various stages along the way from script to final cut, it was important to include significant Chinese content and input from the get-go, rather than bolting it on at a later stage.

The “location incentive rewrite”, aka if it’s Tuesday it must be Louisiana, increasingly popular with US TV shows, doesn’t really cut the mustard with China’s film agency SARFT.

With China as for anywhere else, there needed to be a compelling reason to enter into a co-production arrangement, said Baynton. Arguably, an even more compelling reason is needed with China than with other territories since navigating its regulatory processes can be more challenging than in other territories.

The obvious solution, acknowledged by all parties, was to work with a Chinese partner – whether aiming specifically for a formal co-production agreement or not.

Whether or not that should be a mainland China partner was debated.

Wang was, naturally enough, perfectly comfortable with the idea of people bringing projects directly to him. Indeed he already has one from NZ in the Shanghai-set form of Michael Bennett and Maile Daugherty’s 3D animated family action adventure feature Downside Story, which Michael Stephens introduced to Wang at the Shanghai International Film Festival.

Trevor Morris was equally supportive of the “Hong Kong as gateway” approach to mainland China. There was, he suggested, a high degree of comfort in dealing with a legal system very similar to New Zealand’s, certain tax and structural benefits to headquartering a company doing business in the region in Hong Kong, and a level of comfort and familiarity for mainland Chinese in having Hong Kongese partners.

Morris worked for Disney in China during a period where they attempted to Chinese-ify their existing branded product, High School Musical China being perhaps the most notorious example of the approach. His experience of the process, which he suggests came about from ignorance rather than any less noble intentions, has given him a greater appreciation of the benefits of finding the right property and doing business with the right people in the right way.

One of those right properties with which Grand Entertainment works is Pukeko’s WotWots TV show. As Baynton explained, it was conceived to be “as culturally non-specific as possible”, with little language, no humanoid characters and therefore no suggestions of race. Since it’s sold to 103 countries, there’s no argument that it’s succeeded in delivering on its intentions.

Pukeko has deliberately chosen the “gateway” route into China and, indeed, other parts of Asia. Although, for reasons noted above, the company established with Grand Entertainment is headquartered in Hong Kong, much of its activity is carried out on the mainland, including manufacturing of merchandise.

Pukeko has in development six other shows, all intended for export, some with a significant Chinese component and one, Baynton noted, in the Game of Thrones space. Having a partner in Hong Kong makes good sense, since Pukeko’s is a long-term multi-property business plan.

It doesn’t necessarily sit as easily with the single-purpose entity more common for film production in NZ and elsewhere, but it still works.

Film production budgets in Hong Kong and China are generally closer to the levels NZ is used to working with than is the case with the US and several European countries, although Chinese producers have been grumbling of late at the level of fees now expected by their A list talent.

The Chinese market for film is becoming increasingly name-driven so, while demands for increased fees are perhaps not surprising, the box office can still deliver strong returns.

Both Wang and Morris spent some time addressing the various levels of joint activity from formal co-production (few and far between to date but offering the best return), assisted production (not officially a co-production but has some Chinese participation – beyond finance – and has a good shot at getting a quota release, such as Iron Man 3), to the wild west or, perhaps, east of taking one’s chances and seeing what happened.

In a separate session, Wang gave more detail of Wuxi’s fund and the criteria for accessing it (basically formal co-production status, maximum 50% investment from fund, and bear in mind one of the fund’s intentions is to attract work to Wuxi Studios).

Wang also noted that the Chinese government was becoming more open to creative approaches when putting together co-productions. If it was necessary to boost the level of Chinese participation in work activity to meet the expected 50%, SARFT was open to looking at elements that supported a project, such as accompanying online activity including games.

As part of a formal co-production arrangement, China requires that 50% of main cast are Chinese, although in the last two years SARFT has become a little more lenient in accepting Hong Kong and Taiwanese actors with some standing in prior mainland-released films as Chinese.

A challenge for international partners, whether seeking a long-term relationship or a single project, is finding the right partner – although both often come down to the same thing in Asia.

Both Wang and Morris talked of the importance of your relationships in China. It was important to find someone who was an enabler, someone with good relationships with plenty of existing contacts themselves – and the higher up the chain the better.

A challenge for those contemplating a single-project deal is that business isn’t so much done in that way in much of Asia. The relationship comes first. Several producers who’ve been visiting the region for years will share tales of spending nights with prospective business partners getting drunk, giving less than stellar karaoke performances, attending banquets and meeting family members – all before deals were on the table.

Stephens’ introduction of Bennett and Daugherty to Wang in Shanghai didn’t come about on the spur on the moment. Stephens and Wang have known one another for some years through the Shanghai Festival, where Stephens is serving a three-year term as an international advisor.

Baynton, while not divulging his karaoke credentials, spoke of receiving approaches from over 100 Chinese companies when Pukeko started to look to China, and of the amount of time spent doing due diligence.

He and Spackman also noted that, since this is business, there’s help available from government agencies and NZ businesses operating in the region. Here, the HKNZBA isn’t a bad place to start.

Morris also noted Hong Kong’s market event, Filmart, one of whose representatives, Clare Chap, was in the audience along with Bonnie Shek, the Australia-NZ director of Filmart’s organiser, the Hong Kong Trade Development Council.

The importance of attending international market events to establish and develop relationships (as well as to buy and sell) was noted by speakers at several other SPADA sessions with an international perspective.

Filmart, as the world’s third biggest and (by a considerable distance) Asia’s largest market event, is an obvious choice of such an event for those wanting a good taster of the region’s possibilities. The TDC has a broader business focus than just film, and works here with NZTE to develop business opportunities between HK and NZ. That broader focus means that for Filmart it’s more experienced and pro-active than some other market organisers in helping make introductions and arrange meetings for visitors.

On a bang for buck basis, the market offers access to more attendees than Shanghai, Tokyo and Busan combined. Morris also noted that accompanying events the HAF financing forum, Hong Kong Film Festival and Asian Film Awards (all running the same week) made it almost impossible not to cross paths with a significant proportion of the region’s industry players.

For rugby-loving Kiwis it also probably doesn’t hurt to mention that Filmart runs in the week leading up to the Hong Kong Sevens every March.

Wang was diplomatic in his response to the “gateway” approach, acknowledging that China has historically been difficult to access directly, but was improving rapidly, and noting that “the most important thing is finding the right partner. It’s a long game.”

Not quite so long as Kiwis might be used to, however. The Wuxi Studio-controlled fund likes to put projects through development and into production in 12-15 months, he revealed in a separate session. It will be music to the ears of those who’ve long complained about the amount of time their babies spend gestating in development hell.

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