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Media & Entertainment

'Hobbs & Shaw' given rare access to China's summer box office

Hollywood cashes in as Beijing cracks down on its own industry

Stars Dwayne Johnson and Jason Statham arrive at the premiere of "Fast & Furious Presents: Hobbs & Shaw" in Los Angeles. The film will hit the theaters in China on Aug. 23.   © Reuters

NEW YORK -- Hollywood blockbuster "Fast & Furious Presents: Hobbs & Shaw" raked in $180 million globally on its opening weekend, and is expected to receive another major boost when it hits Chinese theaters on Aug. 23.

It will be an unexpected windfall for Universal Pictures. Traditionally, the summer box office season in China, the world's second-largest movie market, has been reserved for domestic films, forcing Hollywood studios to wait until September to release their summer hits.

This year, however, American movies are getting a lucky break. At least four Chinese movies have been yanked from the lineup for "technical" or "market" reasons, including the highly anticipated war movie "The Eight Hundred," as the Communist Party tightens its grip on content ahead of the 70th anniversary of the founding of the People's Republic of China on Oct. 1.

This has created a shortage of Chinese films and led to the green light for Hollywood films, despite the bruising U.S.-China trade war.

"Hobbs & Shaw" will be looking to follow the success of Disney's "The Lion King," which has racked up a global box office of nearly $1.2 billion, according to cinema database Box Office Mojo.

Since the computer-animated film's release in mid-July, 64% of its box office revenue has come from international markets, with China accounting for $114.7 million, the single biggest share of the movie's overseas revenue, Mojo data shows. 

"If 'The Eight Hundred' was playing, there is no way 'The Lion King' would have the same amount of screens that they are playing on right now," said TJ Green, CEO of Apex International Cinemas, which operates theaters in China through a strategic alliance with state-owned media giant China Film Group. 

Green, a former Warner Bros. executive, said that a big blockbuster like "Hobbs and Shaw," a spinoff of the popular "Fast and Furious" franchise, normally would not be able to squeeze into the late-summer lineup, as China usually protects its domestic films from June to August.

"The Lion King," which was released in China on July 12, will extend its screening period till September 10, Chinese media reported on Aug. 5. 

Other American movies shown in China this summer have done well, too. Marvel's "Spiderman: Far From Home" made roughly $204 million while Illumination's "The Secret Life of Pets 2" brought in over $22 million, according to Mojo. 

Other canceled Chinese movies include "The Hidden Sword," "Better Days" and "Last Wish." 

Those cancellations are thought to be behind the reason why four more American films were permitted to show in the summer season this year compared to 2018 and 2017. A Netflix original film, "The Silence," which premiered on the streaming platform in the U.S. in April, will also hit the theaters in China on Aug. 30.

"The Eight Hundred," "Last Wish," "The Hidden Sword" and "Better Days" have all had their initial summer release dates canceled. 

China allows up to 34 "revenue-sharing" foreign films to be imported each year.Under this arrangement, foreign film studios take 25% of the box office revenue and Chinese distribution companies keep the rest. Only state-owned enterprises China Film Group and Huaxia Film Distribution have the authority to distribute foreign films. The country also allows a limited number of "flate-rate" foreign film imports each year, in which Chinese companies pay a one-time fee to purchase a film and keep all the domestic profit.

"Big revenue-sharing movies would receive priority when it comes to summer release dates," an analyst at Chinese film industry analysis firm Dianying Qingbaochu (which can be translated into Films Intelligence), told the Nikkei Asian Review. "Flat-rate films like 'The Silence' usually wouldn't get noticed," the analyst, who goes by the blogger name Tank, said. "But there are not many [importable] Hollywood films left in late summer, so this movie succeeded in squeezing in."

This comes after China's box office fell 2.7% on the year to roughly $4.5 billion in the first half of 2019, while cinema attendance in the country decreased 10.3%, according to a recent report published by Chinese cinema analysis firm EntGroup. 

"I think [the government] did that to help the cinemas. So yes, it helps [Hollywood as well]," Green said of the increased number of foreign films.

"However, I would caution that having a vibrant local film industry is so critical for China," Green continued. "If you had 'The Eight Hundred' playing, a lot more people would go to the cinema. There's actually a knock-on effect that people would go to see other films as well. It creates a healthy ecosystem for cinemas."

China's entertainment industry has gone through much turbulence in recent years. The economic slowdown has affected the financing of projects and a major tax scandal rattled the industry. Famous Chinese actress Fan Bingbing and award-winning director Feng Xiaogang were criticized last year for using so-called Yin-Yang contracts to evade taxes. The Chinese government cracked down on the entertainment industry following the scandal and required actors and entertainment companies to pay what they owed.

By the end of 2018, the entertainment industry had paid  roughly $1.7 billion in overdue taxes, Chinese media reported. 

Huayi Brothers, the top Chinese film group at the center of the tax scandal, suffered heavily, reporting a loss of roughly $158 million in 2018. 

Chinese entertainment giants like Huayi were counting on their big-budget blockbusters to turn a profit. Huayi's $80 million installment "The Eight Hundred" was scheduled to debut on July 5 as the opening film of the prestigious Shanghai International Film Festival. Huayi also timed the war film as a gift to celebrate the Communist Party's 98th anniversary on July 1. The film's release was canceled at the eleventh hour amid rumors that authorities were unhappy that it failed to portray the party as the heroes. The official reason was given as "technical reasons."

The release of Huayi's "Last Wish" was also canceled. Days later, the film studio decided to welcome the Communist Party into its operation, creating a party committee inside the company.

Although the lack of domestic blockbusters damaged China's box office performance this summer, PwC analysts still predict that it will surpass that of the U.S. by 2020. 

"In the event that one major blockbuster is not released as planned, although it may have a negative impact on growth in isolation, it does not fundamentally change our forecasts," said CJ Bangah, a spokesperson for PwC. "One movie being released or not does not fundamentally change our data given the assumption [that the availability of] alternate movies and cinema-going experiences that are similar enough will augment the revenue forecast in totality."

This means that Hollywood movies could potentially gain a bigger market share in China if their domestic rivals continue to struggle to get into theaters. Chinese consumers are expected to continue going to the movies, especially as the younger generations mature into consumers with pocket money to spare.

The generation born after 2000 is showing a strong interest in watching movies, according to Taylor Lam, leader of the telecom, media and entertainment sectors at Deloitte China. "They will also be the main players in the movie-watching market in the future."

In other words, Chinese demand is expected to grow with or without domestic filmmakers.

At the same time, as the U.S.-China trade war escalates and protests in Hong Kong continue, Beijing appears increasingly sensitive about maintaining unity and strengthening patriotic sentiment at home in the months leading up to the Oct. 1 anniversary. 

China's National Radio and Television Administration, which approves domestic TV shows and movies, recently announced on WeChat that television channels are banned from broadcasting shows that are "too entertaining" over the next 100 days, especially historical costume dramas and romantic stories starring popular idols.

"The 100-day initiative has provided a list of 86 programs that television channels can purchase and broadcast starting in August," the agency said. 

Chinese films that are in the pipeline for August and September are mainly sci-fi, comedy and thriller movies. Some films celebrate national heroes, such as "The Chinese Pilot" and "The Climbers," while others have historical significance, including "Chairman Mao 1949."

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