With the prosecution having rested, it’s time for the defense to offer its side of things. Last week, we spent close to 3,000 words making what was hopefully a rather convincing case as to why the recent investment of Chinese dollars in Hollywood is a good thing. Now comes the opposing side, in which it’s our responsibility to tell you why, in fact, this isn’t a good thing at all.
On the contrary, this is something about which we should be genuinely concerned, no two ways about it. As we mentioned previously, any time you have a foreign entity invest heavily in your industry, there are going to be pros and cons. While many companies on these shores have made the decision that the former far outweighs the latter, the reality is far more complex and it’s fairly clear that these decisions were shortsighted ones, with the focus purely on money and less on the bigger picture.
Let’s get the big stuff out of the way, first. It’s important to establish that, when it comes to China, there is really no difference between the corporate and the governmental. The larger companies became so at least partly because of government connections and policies. Whether it’s an actual structural connection to the government, or if the access that makes them so big is paid back in policy and business decisions that it’s basically part of the government. Therefore, the Chinese government has a vested interest in whether or not the investments said companies make actually pay off.
That would be enough to give some pause, and for many, it does. There is deep concern in certain circles about a foreign government having such involved ties with an industry like Hollywood. It’s one thing to have foreign investment, another entirely that it comes — directly or otherwise — from the seat of power itself. That’s enough to raise a lot of red flags.
Luka Ladan is the director of communications for the Washington, D.C.-based conservative think tank the Center for American Security, and he and his organization have been very vocal opponents of Chinese investment for some time now.
“I think it’s safe to say that the Chinese market is as influential as the investment,” Ladan says. “But we cannot ignore the investment side of it. It involves the idea of censorship, of Chinese-owned theaters perhaps not showing certain films, of Chinese-owned studios not making films that might be critical of China, about creating an atmosphere where the Chinese government has some real and genuine influence here in the U.S.”
Things like cultural subjugation, societal infiltration, undercutting American content, altering of storytelling styles and tropes, the very specific — read: heroic — portrayal of Chinese characters and the limitations that then result, and so on. It’s easy to think of these concerns as hyperbolic and panicked, and while Ladan admits that some of these possibilities are “farther down the field,” they do provide some food for thought.
Think of it this way: a country that just put the current president-elect in office would not seem terribly susceptible to a cultural push from a foreign power like China, but if the election showed anything, it’s that the American public is particularly susceptible to manipulation. Who’s to say that a subtle undermining of American thinking, using pop culture, couldn’t set the tone for a true Manchurian Candidate in 20 years? Or 10? Or five?
You could read this and think of Chicken Little, screaming that the sky is falling, but this is a legitimate concern for many, the idea of converting people’s thinking through the use of soft power. One commenter on Part One of this series, in fact, wrote this: “In five years, we might start hearing dialogue like, ‘Y’know, looking back, Mao was really just misunderstood.’”
Of course, there are just as many, probably more, with the opposing view, that the deals being made don’t involve any editorial control and, in fact, there’s nothing political about any of it. It’s purely about finance and, more to the point, getting money out of China by investing in companies on foreign shores. That part may be true as well, to an extent, but the head of a multi-media company with Chinese money invested is skeptical. He has seen first hand some of the complications that arise when making a deal with the Chinese.
“A lot of people are looking at Chinese investors and saying, These guys are great! They have a ton of money, they don’t really want any influence, they’re not that clever, we’ll take it!” the Company Head explains. “Hollywood has a long history of taking people’s money. Meet some starlets, hang out with Leonardo DiCaprio, come to a premiere, that’s what you’re getting for your money. The Chinese government took a look at this, understood it, and built a plan to get around it. We found out only after the fact that there were very strict mandates, and that they were so large in scope that they were difficult to fight. It wasn’t a case of approvals with investors, it was a case of there being countrywide government controls that our investors were mouthpieces for.”
Which leads to another facet of this whole thing, the economics. Not just the investment aspect, but also the competition for coveted slots on the Chinese release calendar, and with that the passive influence of investors and, by extension, the government itself. The government, remember, decides what does and doesn’t come into the country. You will often read about guidelines, or story aspects that might not be considered suitable for Chinese audiences. Things like the supernatural, which kept last year’s Suicide Squad and the Ghostbusters reboot off Chinese screens, but, again, it’s not quite that simple.
“The Chinese censorship board,” the Company Head posits, “would you couch that as a government influence or a corporate one? Because I would say it’s both. I have seen it influenced by the government, but also by corporate to aid a company there. If a film is wanted in China, it doesn’t matter if it has certain things in it. If it’s not, suddenly those things are an issue. Suddenly ghosts are not part of the Chinese mandate. Or you can’t do anything set in the past. Or the future. But really it’s just what they need at any given time.”
Which means that some companies are buying the expertise of their investors without getting the benefits, which borders on the insidious. It also affects the thinking of those who work inside of the industry, as well as those who observe it. Recall, if you will, a story that made the rounds last fall, about Warner Bros. executives discussing the upcoming Batman movie to be directed by Ben Affleck. As the story went, the executives working on the film were given notes as to how to improve the project, but those notes were dismissed because, “70 percent of the audience won’t even be speaking English, anyway.”
This story is almost certainly apocryphal, especially given the recent news that Affleck is still working on the script, but the story had a whiff of believability simply because it wasn’t hard to imagine studio executives saying that, and the influence of the Chinese market playing a sizable role in the thinking.
Here’s something that is not apocryphal: just yesterday, Thomas Tull was ousted from the company he created, Legendary Entertainment, which he sold to Wanda a year ago. It’s a dramatic shift for the Chinese company, which previously had not appeared interested in interfering with the leadership of the companies it acquired. Now, all of a sudden, it is making its presence felt in a very meaningful way. With Tull out, Jack Gao, Wanda’s CEO and senior VP of international investments and operations, will take over until a new, full-time replacement for Tull is found. It could also be a precursor to what we have in store.
More reality comes from a producer who has made several films with Chinese investors, plans to make more of them, and who is very upfront about the tradeoff the producer’s company makes in exchange for the dollars that allow it to finance his projects. “Soft power” is not something with which to be trifled.
“I know there are people who say that their investors have no influence over their creative decisions, and to a point, that’s right. The same goes for us and our deal with our investors,” the Producer explains. “But it’s a wee bit more complicated than that. The thing is, we want into the Chinese market, and the best way to do that is to be in business with these guys. While they have no overt say regarding the projects we make or don’t make, they definitely nudge us in one direction or another when it comes to films we think might get play over there. I know some people worry that there’s something underhanded going on that will undermine the main tenets of American society and cost us all our freedom, but that doesn’t wash so well with me. I think it’s more about pushing us to make content that will play to their audiences. The thing is, that’s fine with me, as long as it’s playing to ours, as well.
“Now, having said all that,” the Producer continues, “there are some business practices I’ve seen and heard about that leave a bad taste in my mouth, but I’m not sure what to do about that. Honestly, I kind of think that’s the sort of trade off you make. After all, they’re paying us a hell of a lot of money for the privilege of being involved in what we’re doing.”
Business practices that leave a bad taste is a good way to put it. Also bordering on the insidious is a trend that appears to be happening with increasing regularity, the negotiation of deals for reasons other than actually making them.
Exhibit A: An entertainment lawyer who has been working in Hollywood for over 20 years told this story of his experience negotiating a deal with a Chinese company. “This thing began simply enough but soon became complicated, with various concerns being mentioned by both sides here and there and further negotiations occurring,” the lawyer explains. “It became clear to me as we dived deeper and deeper into it that my counterparts were in virgin territory. I found myself explaining things to them that, in my experience, a lawyer working in entertainment should know. So I walked them through one item after another, as the deal became wider and broader in scope. After a couple months, the deal was ready to be finalized and I thought everything was going to be signed and that would be it. But at the last minute, things hit a snag, and it all fell apart. I didn’t think much of it, initially, because this kind of thing happens all the time. Deals work or don’t, they come to fruition or die, it’s the way of the business.
“But then, a few months later,” the lawyer continues, “another deal came across my desk from the same Chinese company, and all the things they hadn’t known before, they knew very well now, and I realized that the first deal, the one I’d spent months negotiating and so much of my time teaching, was simply an exercise so that they could learn how to do it. That deal, I understood with crystal clarity, was never meant to happen. It was a ploy so they could strip-mine the knowledge of others and take it for their own. I was, to put it mildly, annoyed, simply because I don’t appreciate my time being wasted, but part of me admired the sheer, unapologetic boldness of it.”
This, in fact, is one of the things that comes up over and over again from the people consulted for this series. It’s the idea that it’s certainly within the realm of possibility that there is something underhanded at play here. Even the most bullish will concede this.
“If there is another agenda beyond the financial,” admits a dealmaker for one of the Chinese investment companies, who is staunchly in favor of the trend and has been quoted extensively here in that vein, “then it might be to gain knowledge of how to do it. How to make the deals and create the content and do all the things that, prior to this, they didn’t necessarily know how to do.”
Exhibit B covers a different aspect of it: “There are a large number of deals that were announced to the public that never closed, and they were used purely to burnish the reputations and the profiles of the Chinese companies to make them look even more impressive,” the Company Head explains. “You’ll often get these big, boastful articles here that are really for the investors, partners and government at home, and they see tremendous gains from that. The cycle becomes self-fulfilling in a bad way, because the headlines are read by those here in Hollywood who maybe aren’t involved in the Chinese market yet, and they rush into bad deals to get there. And some of those don’t close, and were never meant to close. It just happened to us. We had a deal on the table that we had sourced, we brought in these partners, gave them the information, but we weren’t ready to announce it. The studio wasn’t either, and we were going to wait and do it down the road. Less than 24 hours later, it was front page news of a major trade that the deal happened, and as a result, it died. The studio thought it was us, we thought it was the studio, it was very antagonistic, and once we figured out what happened, the momentum was lost and the deal was gone. The benefit for that Chinese partner, however, was still there, because as far as everyone else knew, we had made the deal and they looked great in it.
“It’s an arms race,” the Company Head continues. “All these companies, Wanda, Alibaba, all of them are in a race to become the Chinese Sony, or Paramount, or whatever, so the more they can tie themselves into the major creative forces in Hollywood, the more they can build that mind share of the Chinese market, and that’s the most important thing to them. That’s why it’s a dangerous thing, and why I think it’s a dangerous time.”
Dangerous is right. Last summer, the success of Warcraft at the Chinese box office was a global story that left many on these shores scratching their heads. The film bombed spectacularly here, but did over $220 million in China. Except not really.
In fact, when moviegoers went to the box office that opening weekend, no matter what film they wanted to see, they were sold a ticket to Warcraft. With Wanda’s enormous investment in Legendary — the company that made the film — it would have been seen as a terrible blow for a project that huge to be such a monumental failure. But since Wanda has such deep and abiding ties with the Chinese government, the fix was put in. Moviegoers were told they could see whatever movie they wanted, but the ticket they actually purchased was for a screening of the video game adaptation.
What’s the thinking behind something like this? It’s pretty simple: it continues the narrative of Chinese box office power and, by extension, its influence. It also calls into question the idea that more Chinese investment will help to fight piracy. As mentioned last week, many believe that, with more skin in the game, the Chinese government will crack down on it, but there’s a pretty straightforward argument against that.
See, the whole point of piracy is to make money illicitly, by taking something from others and using it to one’s own end. If there is more money to be made by pirating movies than by releasing them through normal, legal channels, even if the pirates own the movies in question, then the practice is going to continue. Even more so, in fact, because whatever money being lost to the piracy is made back in spades from the same practice. You’re essentially taking money from one hand and putting more of it in the other.
All of this lines up in the direction of setting up Hollywood for a fall. To spend billions of dollars targeting a market that might not be all it’s cracked up to be, and appealing to an audience that may or may not be accessible, depending entirely on the whims of those in charge. This, all while getting the industry to become dependent on an influx of money that could — and assuredly will — end at any time, causing economic catastrophe.
When faith-based films became a popular thing, just about every studio in town created a division to develop them. Going back a ways, as the indie film movement became a true revolution, the studios got into that business, too. With that in mind, there’s a question that begs asking: if the Chinese market is so pivotal to the continued success of the industry, why does every studio not have a Chinese film division, too?
Perhaps it’s because there are two sets of numbers: those for public consumption, and the actual numbers that the studios see. Numbers that reveal, for instance, examples like Warcraft, in which the $220 million in ticket sales did not accurately reflect the real number of viewers who in fact saw the movie. Numbers that reveal the reporting coming out of China is not 100 percent accurate and that, in fact, grosses are often inflated, so as to give the impression that the market is still the fastest growing one on the planet.
But what about the recent market stall, you ask? Ah, that’s a natural occurrence built in so as to not raise suspicion. It’s a pause in an otherwise meteoric rise, and not too much should be read into it. If this sounds paranoid, or like part of a conspiracy theory, that’s understandable, but it’s also dismissive. Just because it sounds farfetched doesn’t mean it isn’t true, and in this case, it is. The problem is that no one wants to talk about it because doing so would reveal internal numbers that the studios would rather you not see.
This is not to say that the Chinese market isn’t powerful, and isn’t genuinely poised to become the top one in the world, or that the studios aren’t keenly interested in exploiting it, it means that there is, as usual, more to this than meets the eye. People are wary of betting too heavily on a market that, in the end, might not hold up. Therefore, increased reticence to dedicate too many resources and spend too much money, because the image and the reality do not, in fact, line up. When you combine that with all the other warning signs, it paints a picture that is not terribly attractive.
So, there you have it. An unassailable series of points that confirm, without question, that Chinese investment in Hollywood is the worst thing that has ever happened to the industry. No ifs, ands, or buts about it.
Except we all know that’s not true, because an equally convincing case in favor of such investment was made just seven days ago in this very space. Which means that there is some serious discussion to be had and a definitive conclusion to be made.
Come back next week, and we’ll do that.