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China Poised To Play A Larger Role In Global Entertainment Business: IMAX CEO

Hollywood studios may be having a tough time in China this year due to a Covid-related shortage of global blockbuster releases, but one North American company with ties to the film business is doing well: IMAX.  Its China spinoff, IMAX China, earned a $19 million profit in the first half compared with a year-earlier loss, according to figures released last month.  Underscoring its success of late, two of the top three films at the Chinese box office this weekend were shot with IMAX cameras. 

The U.S.-Canadian film technology company is doing well in part because China has on the whole has limited the fallout this year from Covid-19 pandemic, boosting GDP growth. Yet it’s also a result of IMAX’s emphasis on working with local film studios and tapping into the popularity of animated films in China, CEO Rich Gelfond said at the 3rd annual U.S.-China Business Forum held online and organized by Forbes China on Tuesday.  That’s wise, since China’s role in the global entertainment industry is likely to only grow larger in the future, he also noted.

“You’d be a fool to underestimate the role of China – its 1.4 billion people, its increased demographics, its increased quality of film, its increased budgets, its increased box office,” Gelfond said. “In the modern world, money has a lot to do with trends.  The increased buying power, increased consumer demand and increased supply has to mean that China is going to play a larger role in the entertainment ecosystem.” 

IMAX started doing business in China in the 1990s by producing science-related documentaries used as education and learning tools; success came in part by working closely with government partners.  IMAX’s first customer in the country was a Shanghai government organization; its first picture was “China: The Panda Adventure.” Today, IMAX has 759 theaters in the country – well above 392 in the United States.  Worldwide, there are 1,654 IMAX theater systems operating in 85 countries and territories.

“We’ve been in China longer than most of Hollywood,” Gelfond said.  “I’ve been to China 57 times.  Our China company is a separate subsidiary which trades on the Hong Kong Stock Exchange, which we own 70% of. We do local language films.  We’ve gone out of our way to become part of the fabric of China and part of the ecosystem of the Chinese entertainment industry.  We work frequently with Chinese directors, Chinese talents, Chinese studios,” and as a company, IMAX has focused more on local language projects that before the pandemic, he said. “For many intents and purposes, we’re more a Chinese company in China than many Chinese companies themselves.”  

Animated films such as this year’s summer hit “White Snake 2,” which has taken in more than $100 million so far, and 2019’s “Na Zhe,” whose box office take exceeded $700 million, have done have done particularly well.  “Animation has become much more important in China over the last couple of years,” he said. “I think branching out into different genres whether it’s animation, or whether its science fiction with ‘Wandering Earth,’ or action adventure with ‘Wolf Warrior,’ I think local audience have become thrilled to see local language films in a variety of genres.   The quality and the budget have been going up, so I think you will see stronger and better local language films going forward as a result of this period.” IMAX China’s business got a notable lift earlier this year from “Detective Chinatown 3,” an IMAX-filmed comedy that also took in about $700 million whose release was delayed by a year in connection with the COVID-19 outbreak.

Gelfond doesn’t see China’s blockbusters coming at the expense of Hollywood.  “The U.S. hasn’t really been in a typical release pattern, a standard release pattern since pre-pandemic.  What I mean by a standard pattern is there’s a global release, there’s a red carpet, the stars go on the talk shows,  they travel all over the world, and these are global events. Think back to ‘Avengers,’ ‘Star Wars’ or ‘Mission Impossible.’  Since the pandemic started in March, there really hasn’t been a global worldwide opening.   The only movie that came a little close was ‘F9’, which was actually released in China first, and then it was released in the U.S. about six weeks later.  And that was a big success in China and a big success globally. It’s likely to do around $700 million.” 

“What’s happened in the U.S. is that there’s been a lot of piracy coming out of those releases, which isn’t shocking, considering that you’re putting a pristine copy on the internet the same time you’re releasing in the theatres. That’s had kind of a negative impact on the Chinese box office.  Among all of the countries in the world, China is at the higher end in piracy.   When you have perfectly pirated copies, it’s even worse,” he noted.  

“As a result, that model has tampered down the Chinese box office for Hollywood films.  And in some cases, Hollywood (films) haven’t even been admitted (by regulators).  China hasn’t announced a formal policy, but I suspect it’s partly on the release pattern.”   

That trend may be about to reserve, however. “That release pattern was mostly based on the pandemic in North America and the studios wanting to maximize their revenue during the pandemic.  Most of the studios including Warner Bros., Universal, Sony, Paramount have pretty much abandoned that model and there’s a 45-day exclusive theatrical window” for theatres, he said. In the next few months, big-name movies like “Bond” and “Top Gun” will be released, and the typical Hollywood release with a global event, Gelford predicted.

“At that point I think the Chinese box office for Hollywood films will return to normal,” and China’s dominance at the global box office won’t be assured. “I think China was No. 1 (last year) largely because Hollywood was shut down, and that may be the same in ’21,” he said. “But when we get back to a sense of normal – whatever that means — it will be more complicated than that. “ Some trends of the past two years in China, however, are likely to continue: “the public’s appetite for local language films, more blockbusters — filming with IMAX cameras – it wasn’t a coincidence,” he said. Local audiences have become happy to see local language films in a variety of genres — whether it’s animation, science fiction with “Wandering Earth,” or action adventure with “Wolf Warrior,” Gelford said.  “The quality and the budget have been going up, so I think you will see stronger and better local language films going forward as a result of this period.”  

That means the world may also see more exports of Chinese films. “The quality of the films would suggest yes.  You’re seeing a globalization of film releases not only with China, the UK and other places.  That points to momentum, especially with directors gaining more experience, more budgets and things like that,” Gelfond said.” On the other hand, Chinese films are subject to a more rigorous censorship process than they are in other parts of the world.  Things like violence and direct sexual references are more frowned upon.  I think it’s going to be a balance.  Frankly, films don’t have to be more violent to sell in other places.” 

The Delta variant is a wildcard, but Gelford hopes the worst has passed.   “ Every time we think we’ve got this pandemic behind us, we’re surprised by some kinds of variant that comes out.   I thought we were really all out of the woods in China.  The box office was off to such a great start.   In 2021, Chinese New Year was 30% better than it was in 2019, which was a record at that time.  So the year got off to such a strong start.  However, the variant has definitely had at least had a short-term impact.  About 20% of our theaters are closed down now.   There are some restrictions. A few of the movies have moved a month or a little bit forward in the second by the regulators because of the variant.”  

“But I’m a life-long optimist, and it’s served me pretty well.  And if you look at other areas of the world, the Delta variant seems to be tailing off rather quickly. I’m encouraged that that will happen in China and this will be a blip. Again, we have to make sure there aren’t other variants and people are careful and get vaccinated, and the regulators do contract tracing, which they’re great at in China.  If all of that happens, I think this will be a blimp,” he said.

Other speakers at today’s forum included (in alphabetical order): Craig Allen, president of the U.S.-China Business Council, Ken Jarrett, senior advisor at Albright Stonebridge Group,  Mark Lasry, chairman of Avenue Capital Group,  Dr. Bob Li, physician ambassador to China and Asia-Pacific, Sloan Kettering Memorial Cancer Center, Stella Li, executive vice president BYD, James Mi, Forbes Midas List member and managing partner of Lightspeed China, Dominic Ng, chairman, president and CEO, East West Bank, Laura Silver, senior researcher, Pew Research Group, George Wang, vice chairman, Zhonglu Group, and Dr. Henry Wang, founder and president, Center for China and Globalization.

See related posts:

IMAX Profit Rebounds In China

Trip.com Makes Content Push As Pandemic Limits International Travel

Follow me @rflannerychina

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