The Big Picture

by Ben Fritz

  The Student Becomes the Master

  The prior year, Sony had worked with the state-owned China Film Group to produce a remake of The Karate Kid starring Will Smith’s son, Jaden, along with Jackie Chan. China Film contributed $5 million of a $40 million budget and helped steer the film, shot in its country, so it wouldn’t ruffle any government feathers. A slightly different version was even put together in the editing room for Chinese release. The bullying sequences and a kiss between young characters were shown in the rest of the world but cut from the Chinese version.

  To get Men in Black 3 released in China, Sony trimmed several minutes from the 2012 film, deleting a shootout and its aftermath at a restaurant in New York’s Chinatown. After the gunfight, characters played by Will Smith and Tommy Lee Jones mind-wipe Chinese American bystanders, a moment some thought could be interpreted as a comment on China’s censorship of the Internet.

  A villain was cut from Pirates of the Caribbean: At World’s End for its China release because the native actor Chow Yun-fat played him—possibly suggesting negative things about Chinese character, which might displease government officials.

  Sometimes studios added content in an effort to please Chinese audiences and officials. For 2013’s Iron Man 3, Marvel worked with a Chinese production partner to add four minutes of footage, including two scenes featuring a doctor and his assistant played by Chinese actors and a news report on the superhero playing with Chinese schoolchildren. Reaction to the additions was largely negative in China, however, because it was so obviously superfluous and featured blatant product placement for a local energy drink. For 2016’s Passengers, Sony cut a glimpse of Chris Pratt’s bare backside to satisfy Chinese censors and added a scene of the star talking to a robot bartender in Mandarin.

  Soon it wasn’t rare at all to see Chinese stars like Fan Bingbing and Angelababy showing up in major Hollywood movies such as X-Men: Days of Future Past and Independence Day: Resurgence. Sony even put out a call to talent agencies for a Chinese actor to include in its planned reboot of the family movie Jumanji. What was the role? That wasn’t clear yet. “They want to have a Chinese component. They don’t necessarily know what it is,” said a talent agent.

  Still, trying to please Chinese government officials who decided which movies were allowed in under the quota, when they would be released, and how censorship rules would be applied was an impossible task. SARFT, its subsidiary China Film Bureau, and the state-owned China Film Group, all of which controlled the fate of Hollywood movies in the country, didn’t play by a consistent and predictable set of rules. Rather, they based their actions on their own interests at a particular moment.

  So when American movies started taking up too much of the box-office receipts in 2012 for the government’s liking, China Film decided it would be best to open The Dark Knight Rises and The Amazing Spider-Man on the same day, in a successful bid to limit their total returns. They’d force the two superhero pictures to compete. “We hope those protective measures will be able to create a space for domestic movies to survive and grow,” said the deputy head of the Film Bureau, describing this decision to the People’s Daily.

  Chinese bureaucrats turned to this gambit whenever locally made movies started falling below 50 percent of the country’s total box office. In 2015, the government released three American animated movies, Inside Out, Hotel Transylvania 2, and The Peanuts Movie, all within a month of one another, forcing them to fight for the same family audience. At other times, the government used one of its precious quota spots to import an American movie everyone knew would do no business in China. Sony’s remake of the musical Annie grossed just $500,000 in the country, and Fox’s Eddie the Eagle, a low-budget comedy about a hapless would-be Olympic skier, made just under $1 million.

  When it wanted to boost a particular local film, China wasn’t above stealing money from Hollywood. Box-office numbers were always somewhat questionable and difficult to audit in China, but at times it seemed these figures were blatantly manipulated. In September 2015, it was critical to the government that a propagandistic film, The Hundred Regiments Offensive, succeed at the box office; it portrayed a battle, in 1940, during which Communist armies defeated Japanese occupiers. And so, few in Hollywood were surprised when moviegoers who swore they saw the Hollywood sequel Terminator Genisys posted photos of the tickets they were given, which said Regiments instead. Some pictures even showed the word Terminator handwritten over a printed Regiments ticket. It was clear people were seeing Terminator but their box-office spending was being attributed to the Chinese movie.

  But American companies had no leverage over the Chinese government and no real way to protest, unless they were willing to put billions of dollars in annual revenue at risk. “I never even thought about China ten years ago,” said Adam Goodman, the former head of production for Paramount Pictures. “Now we’re at a point where Hollywood can’t exist without China.”

  And so by 2015 a race was apparently on as to which studio could best insinuate itself into powerful Chinese interests. For its fourth Transformers movie, in 2014, Paramount partnered with a pair of Chinese companies on a slew of local marketing and promotional partnerships. These included a reality show to cast four roles in the film, weeks of local shooting during which stars frequently were photographed on social media, and separate premieres in Hong Kong, Shanghai, and Beijing. One real estate firm even sued when the film didn’t include the expected twenty seconds of footage of one of its properties. But Paramount got results. Transformers: Age of Extinction grossed $320 million in China, a record at the time.

  By the next year, studios were starting to recognize an even easier way into China’s good graces: let it put money into films. China Film Group invested in the fantasy movie Seventh Son, the action sequel Furious 7, and Adam Sandler’s Pixels in 2015, providing about 10 percent of the production budgets in exchange for a stake in worldwide revenues. While studios often allow outside investors to put money into a slate of films, doing so on a one-off basis is rare, particularly for surefire hits like the seventh Fast & Furious movie. Although no explicit quid pro quo was stated in the deals, nobody was surprised when all three films got favorable release dates in China and performed well there—even Seventh Son and Pixels, which fizzled in most other countries. Furious 7 beat the Transformers record, grossing $391 million in China.

  In some cases, the Chinese box office completely transformed films’ financial outcomes. Warcraft, an adaptation of the hit video game from Wanda-owned Legendary Pictures, bombed in the United States and most foreign countries. But it made more money in China, $221 million, than it did everywhere else in the world combined. If Americans see a Warcraft 2 on their multiplex marquee in a few years, it will be entirely due to demand in China. The United States will be treated merely as a foreign adjunct, where the film might pick up a few extra dollars.

  As movies were being transformed by China, IMAX was too. In 2015, Gelfond’s company established a separate Chinese subsidiary. When it held a public IPO, it raised nearly $250 million. By late 2016 it had 371 screens open in China, with contracts to build 381 more. That was 45 percent of the company’s worldwide total. One of the advantages of the public stock listing, Gelfond noted, was that a number of IMAX’s top investors were now Chinese state-backed companies. “If they screw with us,” he said of the government, “they screw with themselves.”

  Funding the Future of Hollywood

  On a sunny September day in Beverly Hills, Adam Goodman was in a hotel suite, eager to talk about his new company. But the silver-haired, baby-faced executive had to wait until his partner and financier finished smoking a cigarette on the balcony. Very few people in Hollywood except actors still smoked, but now that everyone was doing business with the Chinese, the town’s moguls had to get used to the habit again.

  Goodman’s résumé was as American as they got in the movie business. After starting his career in his hometown, Chicago, as a production assistant on movies by John Hughes, the di
rector of The Breakfast Club and Ferris Bueller’s Day Off, Goodman made his way to L.A., where in 1996 he started as an assistant at Steven Spielberg’s DreamWorks studio. He quickly became a favorite of the director of E.T. and Jurassic Park, and by 2004 Goodman was the company’s president of production. Next came a similar job at Paramount Pictures, where Goodman oversaw hits, like films in the Star Trek and the Transformer series, but eventually took the blame for a bad run at the box office and was kicked out the door.

  At any other time in the history of Hollywood, Goodman would have followed the well-established path for ousted production chiefs: setting up shop as a producer and using his long-developed connections to make movies for studios, including his former employer. But by 2016, studios had slashed spending on outside producers, and anyone who wasn’t contractually connected to a big hit franchise was struggling.

  Goodman also knew from his time at Paramount that despite years of cutbacks, the major studios were still bloated, slow-moving institutions. Their only idea for adapting to modern consumer preferences and financial pressures was to search desperately for the next blockbuster cinematic universe that could make them a rival to Disney. Paramount in particular was having a hard time because, like Sony Pictures, its troubled parent company did not invest much in it for many years.

  Goodman initially called his new production venture Dichotomy, because he wanted to focus on two types of films: big-budget blockbusters and “micro-budget” movies. The first type undeniably generated bigger profits when they succeeded because global audiences loved them. Micro-budget movies, meanwhile, had no stars, lavish sets, or impressive visual effects, and could be made for a few hundred thousand to a few million dollars. If well executed, such a film could be the next Paranormal Activity, a horror sensation that was one of Goodman’s proudest successes at Paramount. And if they turned out poorly, studios could release micro-budget movies directly on DVD and video-on-demand, losing little money due to the films’ minuscule cost.

  Since studios were reluctant to cut producers like Goodman in on the action on franchise films and didn’t believe in his vision for micro-budgets, he would need outside money to help fund the movies he wanted to do. Just a few years ago, that would have been impossible if his father wasn’t Larry Ellison. The only sources of money for movies had been Warner Bros., Disney, or Paramount.

  But now, it was obvious what he would have to do: look to China.

  Over the prior few years, the trickle of Chinese money into Hollywood had turned into a torrent. At first, this move seemed strategic: for example, Wanda’s purchase of AMC Theatres was a way to consolidate the global exhibition business. Then it got more interesting: Chinese investors funded new companies run by Jeff Robinov, the former production chief of Warner Bros., and Dick Cook, the former chairman of Walt Disney Studios. They invested in Steven Spielberg’s new company, Amblin Partners. They also started putting money into individual films, including sequels to Star Trek and Mission: Impossible, and committing hundreds of millions of dollars to fund a portion of nearly every movie made at Lionsgate and Universal Pictures.

  Some viewed Chinese investors as the latest “dumb money” to hit Hollywood. It is no doubt true that financing movies is not the smartest way for any investor, from anywhere in the world, to earn the best returns. Others had a different theory—that some wealthy Chinese individuals and businesses were seeking to get their money out of China, where an autocratic government could still steal anyone’s wealth at any time, for any reason. Certainly Hollywood had long been a destination for legal money laundering. But those who worked most closely with the Chinese knew that the biggest reason for these investments was a form of reverse-colonialism. After more than a decade as a place for Hollywood to make money, China wanted to turn the tables.

  The United States had already proved the power of pop culture to help establish a nation’s global dominance. Now China wanted to do the same. The Beijing government considered art and culture to be a form of “soft power,” whereby it could extend influence around the world without the use of weapons.

  Over the past few years, locally produced Chinese films had become more successful at the box office there. But most were culturally specific comedies and love stories that didn’t translate anywhere else. China had yet to produce a global blockbuster. And with box-office growth in that country slowing in 2016 and early 2017, hits that resonated internationally would be critical if the Communist nation was to grow its movie business and use it to become the kind of global power it wanted to be.

  So Chinese companies, with the backing of the government, started investing in Hollywood, with a mission to learn how experienced hands there made blockbusters that thrived worldwide. Within a few years, they figured, China would learn how to do that without anyone’s help. “Working with a company like Universal will help us elevate our skill set in moviemaking,” the head of the Chinese entertainment company Perfect World Pictures said, while investing $250 million in a slate of upcoming films from the American studio.

  Getting there wouldn’t be easy. One of the highest-profile efforts to produce a worldwide hit out of China was The Great Wall, starring Matt Damon and made by Wanda’s Legendary Pictures. The $150 million film, about a war against monsters set on the Chinese historic landmark, grossed an underwhelming $171 million and a disastrous $45 million in the United States. Then, to create another obstacle, Chinese government currency controls established in early 2017 slowed, at least temporarily, the flow of money from China into Hollywood.

  But by then it was too late to turn back. As seemed to always be true when it came to Hollywood’s relationship with China, the Americans had no choice but to keep playing along. Nobody else was willing to pour billions of dollars into the struggling movie business in the mid-2010s, particularly for original or lower-budget productions.

  “This is really one of the first true Chinese movie studios in Hollywood,” Goodman said of his new venture, once his partner Zhang Zhou, the vice chairman of the Chinese company LeEco, finished his cigarette. “It’s a creative partnership taking the best of where we came from and where they’re going.”

  LeEco is a Chinese electronics giant involved in smartphones, Internet-connected televisions, and electric cars; it also operates an online video service akin to Netflix. The ultra-confident, English-fluent Zhang, whom Goodman called “ZZ,” wanted to pair information about consumer behavior around the world, which his firm could gather, with a filmmaking operation that could base its decisions in part on that data and also use the company’s platforms to release its productions.

  That idea matched perfectly with Goodman’s desire to move faster than the old studio infrastructure allowed. His Dichotomy was folded into LeEco’s entertainment division, called Le Vision Pictures, which he ran out of Los Angeles. Now he could try to make movies with information based on what people watched online yesterday, rather than what they saw in the theater or bought on DVD last year. And if some of his micro-budget movies didn’t turn out well enough to release in theaters, he had an in-house platform that could release them online.

  Most important, he had a deep-pocketed backer and was free, for a while at least, from the pressure to hit box-office projections for every film and from the endless hunt for the next Avengers concept—the only things that really mattered to a major studio anymore.

  Zhang wanted to make money, of course, but what he wanted most was to run the first Chinese company to prove that his country could make films popular around the globe. An American might run production, but Le Vision would become the Chinese studio that rivaled Paramount and 20th Century Fox.

  And in a few years, Zhang might not need the American anymore.

  14

  Field of Dreams

  Studio Defectors and the Future of Nonfranchise Films

  Adam Goodman’s partnership with Le Vision wasn’t just an example of the Chinese money flooding the American movie business. It was also a new way for a guy who started workin
g in Hollywood because he wanted to make all types of movies to actually do that, at a time when studios no longer wanted to.

  Running production at a studio, as Goodman did at Paramount, used to be the dream job for film lovers because they got to use their taste to decide which movies got made. Think that script is great? Love that director? Studio heads of production can spend millions to turn what they like into an actual movie playing in multiplexes around the world, so long as they stay on budget and don’t make so many flops that they get fired. The best-known model for this type of executive is Robert Evans, the colorful head of Paramount in the 1970s who made Rosemary’s Baby, Harold and Maude, and The Godfather. His autobiography The Kid Stays in the Picture and its companion documentary are must-sees for anyone fascinated by the halcyon days of Hollywood.

  But life atop a studio no longer resembles what it was like for Bob Evans. Now and for the foreseeable future, the heads of production at studios aren’t larger-than-life moguls whose relationships and tastes define what we all see. Instead, their job is to identify, cultivate, and grow franchises. Like a senior executive at Procter & Gamble, they have a collection of brands for which they need to maintain consumer interest. But instead of updates to the packaging and ingredients, studio production chiefs come up with sequels, spinoffs, and expansions of their cinematic universes.

  Only when that job is done, if they’re lucky, might they be able to make a handful of inexpensive comedies, dramas, or thrillers that they personally like and think will succeed—like the kid who gets to watch TV after homework is finished.

  Goodman was fired because his bosses blamed him for Paramount’s lackluster slate during his last couple of years, and in particular for a shortage of successful franchises. But for him, as for so many other longtime studio executives, the job had become a lot less fun because there was a lot less freedom.