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Chinese Film Funds: A Cookie Without A Fortune

by Jeff Steele

It seems you don’t have to swing a dead cat very far to find a project that has Chinese money attached. What’s the lowdown on this foreign dough and is it for real?

Over the past couple of years, a number of sovereign funds have emerged in China, initially to exploit the television arena, and once that proved responsive, a new focus was directed on movie production. The number of theater screens has increased an impressive 50% in the past two years, proving that there are fast-growing outlets available for new content to be seen by Chinese audiences.

Unfortunately, the indigenous, government-backed film industry can’t survive on the intermittent successes of its big budget, mega-epic, sword-wielding, martial arts blockbusters, and the Government has therefore been looking to attract foreign productions to the country (the bigger the better).  This is seen as mandatory to China’s long-term media success.  Providing production services for foreign producers wishing to access cheap labor in China is certainly a win-win that helps satisfy the country’s mandate to provide jobs and training to their local film industry, while also providing a pipeline for mainstream, commercial movies that can fill its quickly multiplying theaters.

Recognizing that a reliance on foreign productions is never a good model for sustainability, the Chinese government has taken the extra step of subsidizing investment funds specializing in financing independent films. These sovereign-backed film funds (some which are “managed” by Hollywood insiders) are tasked with structuring Co-Productions with movie producers such that selected projects are provided with early stage, development funding; once the potential for a film’s success becomes tangible to a fund’s directors, additional money is allocated for its production.  The country’s largest film studio, China Film Group (CFGC), has a strong hand in the expansion of these programs.  The China Film Co-Production Corporation, a subsidiary of CFGC, is responsible for 100% of foreign co-productions (known as Sino-foreign co-productions).  According to the CFCC website, a Sino-foreign co-production is defined as a “contractual arrangement between a foreign party and a SARFT (State Administration of Radio, Film and Television) accredited Chinese party to conduct filming in China.” What’s important to note is that the China Film Group maintains not only the country’s largest studio, but also full control of a wide distribution network that owns a majority of China’s screens. This means that the “private” Chinese studios are forced to compete with the federal government to make the next big blockbuster.

SARFT, meanwhile, maintains ultimate control as the governing authority for any Sino-foreign co-production. To facilitate this, SARFT has appointed the China Film Co-Production Corporation as it’s “sole agent to assist in managing and coordinating the applications, conducting preliminary review of the screenplay and completed film, and other logistical matters relating to Sino-foreign co-productions.” Translation: The Chinese government ultimately controls everything.

Go back five years, and you’ll recall a time when hedge fund money was pouring into the coffers of studios and fly-by-night film funds.  Movies were being made because they could be, not because they should be.  Major, Mini-Major, and Independent films flooded the market.  Distributors had their pick of the litter, but it wasn’t a very pretty litter at that.  After passing on those films that shouldn’t have been made, the distributors were still saturated with films trying to find a market.  The bubble popped, the music stopped.

In the U.S., many high budget films with recognizable stars ended up going straight to DVD/VOD. Hundreds of millions of investment dollars evaporated almost overnight.

Fast forward to today, each week somebody new seems to have a Chinese film fund in their back pocket, looking for films with Chinese themes, that can be partially shot in China.  China-centric finance plans are combing the streets, looking for Chinese-esque movies.  You can be sure screenplays all over town are being rewritten in order to qualify as Chinese Co-Productions.  These new funds all claim to have money in the bank; so why then, despite all the hype and hope, are we not seeing movies actually going into production?  Because the scripts can’t pass censorship.  It’s no different than the myriad completed films that can’t get Chinese distribution.  He who has the gold makes the rules, and in this case the rules are that the screenplays needs to conform with Chinese political ideology (or at least not question, offend or threaten the governing ideology).  With some exceptions, films that meet those criteria tend to not engage mainstream audiences.  If indeed these films are going into production, then you will soon see a Sino-bubble rising in the East.

This is an alluring prospect for the average US producer who’s just looking to close their next deal.  I hear so many producers saying: “…as long as there is some sort of relevant Chinese content…”  Appealing as that is, I challenge you to not be the average US producer — be the above-average producer.  If you have a compelling project that organically checks all the boxes, then take a shot at some Chinese dough, but thoroughly understand that there are many strings attached, they can move the goal posts at will, their paper is generally not bankable, and you have no legal recourse to sue for anything, period.  If your project doesn’t check the boxes, then don’t waste your time pursuing a mirage.  You’ll never get that time back.

  • http://www.odethemovie.net BrianMathewKowalchuk

    Astute analysis, Jeff.

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  • http://www.rafaelguetta.com Rafael Guetta

    Another great article Jeff,
    4 Months ago we shot the first 15 minutes of a full feature to use as the main material in a funding application. A month ago my producer told me that he thinks he found a good way to get fairly quick and big funds; Chinese investors.

    It all sounded good and we started considering expending the story of one of the characters that is Chinese so we appeal more to the investors. This process is still in play, but, reading your article raises some questions:

    1. From what I heard, there are private investors looking for money, not all government funded. To your knowledge, are they as not trustworthy as the government bodies? Are they actually the government?

    2. Can you point of any movie that was made and distributed with Chinese funds? I’d like to study the theme and subtext of those movies and see if they feel censored.

    3. Why would Hollywood execs back this scheme if they are not publishing any movie with that money? Unless, offcourse, they somehow transfer/launder the Chinese money to be used in uncensored productions or better yet for their new yacht :)

    Thanks again Jeff,
    Always intrigued to hear your opinion.

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  • Jonathan

    Jeff,
    You mentioned that scripts need to follow China’s political ideology. For writers just starting out, is there a ‘style’ guide or some such other material that we can review beforehand? It’d be nice to know up front what works and what doesn’t.
    -Jonathan

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    • Jeff Steele

      Actually there is such a document: it’s called The Little Red Book.

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      • http://NOMPCo.com Stan Gill

        OMG! “The Little Red Book.” THAT was funny. Sad, but true.

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      • Pierre Lapointe

        Damn Jeff, I nearly chocked on my egg roll.

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      • http://www.edgenfilms.com Leah

        LOL. Very insightful comment though, especially if you’ve ever sat through the translated commentary on a Chinese Film. At least a good 75% of the commentary is praising the Chinese Govt, Culture etc. Crouching Tiger is a beautiful example of this. I, for one minute ,cannot imagine an American Director waxing lyrical over the film making bureaucracy that “allowed” him to create such a vision. I would also posit rather than jumping through hoops for so called “easy” money, filmmakers should attain the strongest SCREENPLAY they can, attach and inspire A-List Actors, set up a tight financial plan, acquire funds, film and distribute. I know…I know..it’s a lot of hard work, but it is a proven business. :)

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    • http://www.cool-doo.com Peter Feng

      Emotional perception is still the key. Without the echo from people’s heart, nothing is meaningful.
      Respect to others is equally important to self-esteem.
      Use the common sense. For say, someone does not like his dad, but this guy may fight against anyone who insults his dad. Same as we want to make a movie to pursuing foreign market.
      Evil is in detail. Something funny here may turn to be an insult in foreign country. Always do enough home work.

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  • Bill

    You have to really go there, meet people, see the cultural and understand the differences. I’ve been there twice for expended periods of time with mostly Chinese friends in the business. It takes time. You can’t just change a script to be Chinese with a global search and replace. It’s like Hollywood in that it is about connections and connecting and having the right project that connects with their DNA AND can be international with some kind of financing on the int’l side coming along with the project.

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    • Jonathan

      Well sure Bill yea that’s the best way. But I’m asking for more of a cheat sheet. As in #1) don’t insult communism, 2) no nudity, etc etc. Obviously these aren’t great examples but you can get the gist of it. Perhaps there’s a popular movie that exemplifies all of these traits that I can watch stateside? anyone?

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      • Scott Hillman

        My advice is theres less of a list and more of watch what they produce(this is true about any financer and producer).

        I would advise watching the recent karate kid which is probabbly the highest profile movie of the initive. It also has a handy contrast in the original. Not that i am saying the diffrences between the movies are the product entirely of chinese money but intrest there.

        There is a definte tonality and mood diffrence thats there that makes it feel in someways like….a chinese movie, designed with the aim to play to the 1 billion people there as much as america.

        While i don’t think every movie there going to spend 100 million on or go as much for spectacle and making china look GREAT, i wouldn’t be suprised if thats what they are looking for.

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        • On second thought

          Of course Chinese audiences didn’t spark to a movie where the Chinese coach was unethical and the Chinese champ was beaten by a black kid. Might not be the best example.

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          • On second thought

            Unethical (darn iPhone)

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      • Jeff Steele

        See my previous Comment above…

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  • http://NOMPCo.com Stan Gill

    Jeff, your statement, “…there are many strings attached, they can move the goal posts at will, their paper is generally not bankable, and you have no legal recourse to sue for anything, period…,” reminds me of Hollywood.

    It seems to me, at first blush, historically-based films would be a target I’d see as creatively-viable under the Sino-foreign arrangement.

    The Chinese culture is so rich, I would see these genres as an area they might bite on.

    A Mao Tse Tung bio pic?

    Great insight.

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    • Jeff Steele

      Their culture is extremely rich and their history is fascinating; ergo, mega budget, epic historical films have been their cash cow so far. You’re better off leaving a Mao bio-pic to Mel Gibson, since he is the holiest of holies.

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  • Pierre Lapointe

    Another incisive post, Mr. Steele.
    It’s one thing to follow the money, it’s another to sacrifice everything for it. If a script needs to be considerably modified in order to comply for funds and in the process fundamentally lose any meaningful message or theme, what’s the real value of this project? It may get its funding, but may also have lost any appeal to other foreign markets.
    I think though that it’s just a question of time before contemporary stories (primarily comedies and dramas) make their way through the system and may have a better chance of getting approved.

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