China is inching closer to becoming the world's largest entertainment market and Hollywood studios are struggling to adapt. Cameos by Chinese film stars are being jammed, often nonsensically, into Western movies. Studio executives are flying in for meetings with rising moguls. Praise of China in Hollywood films has become commonplace.
Add to this the increasing flood of Chinese money coming into Hollywood. Co-marketing arrangements have led to co-production deals and acquisitions. Jack Ma and Steven Spielberg are now business partners. The purchase of a major Hollywood studio by a Chinese company is a real possibility, with Wang Jianlin of Dalian Wanda Group the keenest to buy.
But the phenomenon that will impact Hollywood the most is the wave of artists, animators and other creative professionals now emerging in China. Of the 19 million students enrolled in Chinese universities in 2009, over 1 million were studying art and design, a higher total than for science, law, education or economics. These students are now entering the workforce in droves.
We are witnessing the rise of a huge new creative class in China: literally millions of artists, designers, animators and other creative professionals. This is increasingly disrupting the world's entertainment market, something that can best be seen at Oriental DreamWorks in Shanghai.
Alongside DreamWorks Animation, Oriental DreamWorks co-produced "Kung Fu Panda 3," which set a new record early this year as the top-grossing animated movie in China. It's a good indication of what is to come: world-class animated movies made mostly by Chinese talent and with Chinese characteristics.
A joint venture between U.S. studio DreamWorks, state-owned Shanghai Media Group and investment group China Media Capital, Oriental DreamWorks was put together by company chiefs Jeffrey Katzenberg and Li Ruigang. Today, it has a creative team of about 150 artists and animators in Shanghai. Some 90% of the artists are native Chinese, most trained in local art and design schools. The staff overseeing project development are roughly an equal mix of native Chinese and Chinese-Americans with Hollywood experience.
This "best of both worlds" team structure and Oriental DreamWorks creative chief Peilin Chou are good examples of what "creative China" will look like. It will be made up of very large numbers of domestically trained artists working with creative teams with both Hollywood and China experience. While it is tempting to think of these teams as business units, in practice they function more like artist colonies which can deliver unique and compelling works. Given the sheer volume of Chinese talent, there will likely be thousands of these teams emerging, creating films and shows. For example, during the National Day holiday week in early October alone, seven new animated movies were released into Chinese theaters.
"There is just a tremendous amount of talent here," Chou said. "I would say the biggest difference between artists here and artists that have worked on major Hollywood films is not lack of talent or lack of drive or ambition. It's just that they haven't had the opportunity yet to work on world-class quality animated films until now."
Hollywood's relatively few Asian-Americans have also become increasingly critical for the industry's China ambitions. It turns out making films that resonate strongly with Chinese families requires actual experience in Chinese families, or at least in the culture.
Chou is a good symbol of this. Born in Taiwan and raised in northern California, she graduated from the University of California, Los Angeles' communications department the same year that Katzenberg, then head of Walt Disney Studios, launched an internship program to bring minorities into the studio system. That first year's crop included Chou, who was placed at Touchstone Pictures, and Leo Chu, who ended up at what is now Walt Disney Animation Studios. The two soon discovered they were just about the only Asian-Americans executives in Hollywood.
Chou recalls her first meeting of Coalition of Asian Pacifics in Entertainment, an industry advocacy group. "There were maybe a dozen of us at most, and most were assistants," she said. "CAPE just celebrated its 25th anniversary this year with a gala event filled with hundreds. It's so gratifying and exciting to see."
Over the following decades, Chou worked in development at Touchstone Pictures and Walt Disney Animation as well as at several television networks and on Broadway theater productions. She was one of the executives responsible for overseeing the Walt Disney film "Mulan," the first animated movie based on a Chinese character, and around the same time lobbied her studio to hire a then-unknown Taiwanese director named Ang Lee.
Twenty years later, Katzenberg would ask Chou to come to Shanghai to oversee creative development at Oriental DreamWorks, making her one of a select group of executives who have run creative development at both Hollywood and Chinese studios. Indeed, the few Asian-Americans in Hollywood with development experience now find themselves in great demand as studios struggle with how to appeal to Chinese viewers, especially given the challenges of navigating China and its rapidly changing viewers.
"The studio system in L.A. today is very different than when my career started," Chou said. "Hollywood now is pretty exclusively focused on tentpole films and superhero movies, star actor or director vehicles. The more modestly budgeted romantic comedies, for example, are not really part of the game anymore. In China, the opposite is true. Every year, more and more movies are getting made. People are taking chances, and it's really exciting to be a part of an industry that's growing and expanding, and have the opportunity to be part of a culture that is still development-driven by great ideas and stories first."
In utilizing the resources of creative China, studios can deploy far more artists than they do in Hollywood as the volume of talent is simply far greater. Making productions within China also allows Hollywood studios to get around the country's restrictions on film imports, but it's also important for studios to develop projects that have international appeal. To some degree this helps avoid overexposure to the political uncertainties of the local market which can indirectly limit creativity.
Hollywood is now likely in a golden age in the China market. Chinese consumers have arrived with money and are flocking to theaters to see the studios' latest films. Serious Chinese competitors have not yet arrived, but this period is going to end soon, just as it did for so many other industries. As domestic studios increase production quality, they are likely going to wipe out much of Hollywood's current success in China.
The most likely structure for mass creativity in China is lots more creative teams, operating at a much lower cost base than Hollywood against far greater domestic competition. It will be a larger, faster and more ruthless industry than its U.S. counterpart. Stay tuned.
Jeffrey Towson is a professor of investment at Peking University's Guanghua School of Management and co-author of "The One Hour China Book."