February 21, 2019 | By Brian Hanson, Lynda Obst, Orville Schell

Deep Dish: China's Blockbuster Influence in Hollywood

The 91st Academy Awards take place on Sunday in Los Angeles, but international markets, led by China, have eclipsed the domestic market in importance for the US movie industry, rewriting the rules about what kinds of films get made. On this week’s Deep Dish podcast, Lynda Obst, producer of Sleepless in Seattle, Contact, Interstellar, and How to Lose a Guy in 10 Days, and Orville Schell of the Asia Society join Brian Hanson to discuss how China is changing the US box office.

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Transcript

Brian Hanson: This is Deep Dish On Global Affairs, going beyond the headlines on critical global issues. I'm Brian Hanson, and today we're going to talk about Hollywood movies and the geopolitics of movies. Few industries are more iconically American than Hollywood. And as I was preparing for today's show, what I learned was that there are some 40,000 movie screens across the United States. 40,000. But what really surprised me was that in China, I understand there are more than 60,000 movie screens today with around 25 new ones being added each and every day. So for Hollywood, the international market has become an increasingly important market and really has eclipsed the domestic market, rewriting the rules about what kinds of films are made and also the geopolitics around what countries are trying to achieve through their cultural production. I've got two of the best people to help us understand what's going on in the world in this realm. The first up is Lynda Obst, who is a prolific Hollywood producer. She has many films that she's produced that you will recognize: How to Lose a Guy in 10 Days, Contact, Hope Floats, Sleepless in Seattle, Interstellar, and many others. She's also written a terrific book on her time in the movie industry and many of the changes we'll talk about today called Sleepless in Hollywood. Welcome, Lynda. It's great to have you on Deep Dish.

Lynda Obst: Thank, Brian. Great to be here.

Brian Hanson: Also here today is Orville Schell who is the Arthur Ross Director of the Center on US-China Relations at the Asia Society of New York. His most recent book is Wealth and Power: China's Long March to the Twenty-First Century. Welcome, Orville. It's great to have you here as well.

Orville Schell: My pleasure.

Brian Hanson: I want to start with you Lynda and really set up how the movie industry has changed so we've got that as a basis as we move into the role of China. You have this great phrase in your book where you talk about the "new abnormal" in the movie business. Can you talk about what the old abnormal was, what the new abnormal was, and what has driven some of the changes in the industry?

Lynda Obst: Well, the movie businesses was never normal because the people in it are not normal and the rules are constantly changing. So half the people spend their time cloning other people's hits, and the other half of the people are trying to con the buyers into just making whatever they want. And so it's never really been normal because there's no rules and there are no algorithms at work. But the new abnormal came about when the profit margin of the movie business, which had always been provided by DVDs suddenly collapsed and in 2009 in the wake of piracy. And suddenly the movie business had no profit margin whatsoever, and it sort of came to a screeching halt. This was at the same time as the writers strike. It created the tremendous catastrophe. And at that time, the international market was about 20 to 30% of the entire market of the movie business. When we emerged from the DVD crisis, which had provided about a 20% profit margin for the entire business and was the basis of all of the algorithms with which movies had been green lit, suddenly movie studios realized that the only profit margin they had was coming from the emerging markets around the world. And international was now creeping up to 50% and then 60% of the total profit margin of the business. And by the time we emerged from this a catastrophe, the profit margin was in fact starting to look like it was becoming 60/40 to 70/30 of international profits over domestic profits.

Brian Hanson: Yeah, that's an amazing shift.

Lynda Obst: It was amazing. And the reason that that happened was because in China and Russia in particular and also in South America, the building of multiplexes, the building of infrastructure was creating the proliferation of movie theaters, and suddenly ... And the internet also was connecting audiences, and word-of-mouth, and it made it easier to market movies without advertising. And suddenly brand new markets we're showing up in movie theaters.

Brian Hanson: That's fascinating. And how has that changed, then, the kind of movie that gets made? I mean, off the top of my head I can think of just that what the tastes of people might vary. But with this shift in really being more responsive to these international markets, how has that affected movies?

Lynda Obst: In two primary ways. For one thing, they couldn't be too dialogue-reliant. So dramas and comedies, which are all dialogue, became drowned out by movies that were all action and loud sound and visuals. Because they couldn't be looped, they didn't require as much looping. And the second reason, and because you couldn't be as dialogue-dependent was the first reason, was marketing. You couldn't advertise a movie all over the world; it would be much too expensive. So you started being reliant on titles, things that were internationally famous. We call them IPs. They used to be called books, remakes of movies. Kleenex would be a good property because everyone knew what it meant. Jello could be a property.

Brian Hanson: And one of the things that struck me in the book when you were talking about the Kleenexes and the Jellos of the movie world, they become things like the Transformers, like Fast and Furious one, two, three, four, five.

Lynda Obst: And the more you make them, the less they make in the domestic market and the more they make in the international market because they become familiar, comfortable titles with characters that you know, and you can start changing out the stars. They become less important than the titles.

Brian Hanson: That's really fascinating. So you've suggested that the kinds of movies that get made are different, really looking for these kind of franchises that can have that extended life movie after movie. What kinds of things drop out? What kind of movies aren't being made? Are there some of yours, for example, that you made that in today's world wouldn't be possible?

Lynda Obst: Well, for a period of time romcoms were the first casualties, and there was a big moment where dramas had a gigantic strike through them. But something very interesting has happened recently with the proliferation of streaming venues. So we have what sort of happened in 2015 and 2014 before Netflix and Amazon became such potent forces as they are right now, which was romcoms were dead as a door knob, and I had to redirect all my movie interest into big spectacles and sci-fi pieces, which I could get made, grounded sci-fi, and I couldn't get a romcom made to save my life.

Brian Hanson: Yeah. And for foreign affairs oriented people who might not be familiar with romcom, I'm assuming that's romantic comedy.

Lynda Obst: That's romantic comedy.

Brian Hanson: Yeah. Okay.

Lynda Obst: And I had made Sleepless in Seattle and Hope Floats and One Fine Day and How to Lose a Guy, so it had been my meat and potatoes for years. So the $30-million movie, the two-quadrant movie, which meant that two groups of demographics would go — younger and older females. Also, the political movie was killed. Those were driven by older men and older women. They were killed. Any group of demographics that didn't involve four quadrants or three quadrants were killed. So that meant dramas, comedies, and romantic comedies were dead for about four years, five years.

Brian Hanson: That's interesting. It's helping me understand why my teenage kids have more movies they're interested in than I might have that I'm interested in.

Lynda Obst: They were our target audience.

Brian Hanson: Yeah. Terrific. Orville, I want to bring you in now. We've got this background, really helpful background to understand kind of the pressures on movies, and I want to draw our attention to China. One of the things that you've written about is that China actually actively limits the number and kind of movies that can come into China. What are they doing there, what are they trying to achieve, and how is that feeding into the story that Lynda just told us?

Orville Schell: Well, no matter what realm you look at today, there is this kind of a parallel phenomenon of what we see in the Hollywood sort of film industry in regard to China. Mainly that as China heaves to on the horizon, both as a more wealthy, powerful and ambitious nation, it's like some enormous planet with this huge field of gravity passing by and sort of pulling everything in its direction. And there are two sort of most interesting ways in which China has pulled Hollywood. One is, as Lynda properly describes, it is the most important market in the world today for many industries because it's expanding and it's a huge population with a growing middle class. So that means its taste, its market demands are having a global consequence all around. And it has, at least to date, we don't know what's going to happen going forward. There's a bit of a wobble on the axis now of China's sort of high growth rates, but it's meant that with huge amounts of money also pouring out of China, and this is not just exclusively in the film world, but it's had a huge effect in the film world because it means they're looking at studios, they're buying theater chains, they're investing. They're looking for brand name companies, brand name films, just as they're looking for brand names in fashion, in real estate and travel, you name it. And the second thing that I think that sort of China's rise has brought to the Hollywood equation is, of course, politics. When you look back in the '90s when Hollywood made, for example, a whole plethora of films about Tibet. That really angered China, but there wasn't much they could do about it. You had Seven Years in Tibet, you had Kundun, and there were several others. Now, not only has its politics gotten much more authoritarian, but China's ambition to control the dialogue, control the narrative outside of China is also advancing. So this means that with that money, with those theater seats, with that market share come a whole host of political circumscriptions.

Lynda Obst: I'll just elaborate on what Orville said. I've seen two stages of this. In the earliest stages of submitting movies to China, there was work in post to edit out anything that was not approved by the censors to improve the look of the peasants, to never have anything negative that reflected negatively on the Chinese people. Now scripts are written in advance to be able to get approval in China so that there's nothing negative about anything about China, so that they don't even have to be worked on in post and no money is spent to do that, to get preapproval. So we will never see anything about Tibet that wants to get into China.

Orville Schell: And it's getting-

Lynda Obst: You don't see Chinese bad guys anymore. There's only Russian bad guys.

Orville Schell: And it's getting tighter and tighter, isn't it?

Lynda Obst: Tighter and tighter.

Orville Schell: I mean, this is ... I'll tell you one little curious anecdote. This was back in 2012 I think, but I was part of a cultural exchange with Meryl Streep, and at that time Iron Lady was coming out, and we had arranged for the world premier to be in China with Meryl Streep there. Now, you would've thought this would've been occasion for red carpets, for searchlights, the whole nine yards. But the first thing the Chinese did was to say, "We need to see the film two months in advance," and the film wasn't done, and Meryl was doing special kind of dispensation for them. And the film would be done like a week before it was to be shown. And I said, "Well, what would you do if you saw the film and how would that affect things?" And they said, "Well, of course if we didn't like it, it would have to be changed." What? It's sort of preposterous, right?

Lynda Obst: 100%.

Orville Schell: But there it is. And so finally we got the film to China, and Meryl Streep got to China. And instead of putting it in a big theater and inviting the world to come and see it, they stuck it in a theater inside a museum that sat 250 people, allowed us to screen it with an invitation-only, and all invitations vetted by the Party, audience. And we didn't even fill the theater. And we had Meryl Streep and Jonathan Spence, the sort of foremost historian from Yale, there doing a little pre-film discussion. Well, there you had the perfect storm, but the circumscription of Chinese politics just emasculated it and turned it into a non-event.

Brian Hanson: Yeah, it's fascinating.

Lynda Obst: I'll give you an anecdote that is sort of the opposite version of that that shows you the intermediate stage of Chinese efforts to expand to become a film market or a film production center using American talent and not using American talent at the same time. Because there was this first wave, as Orville says, of the Chinese buying everything here. Just buying up talent and buying up executives, and everybody flying over there. That ceased. Xi seemed to have put an end to that. And suddenly the Chinese money dried up, and everybody who had Chinese financing suddenly couldn't pay for anything. Then I was part of a delegation that was invited over to China to visit some movie studios where they wanted us to shoot. And it turned out, Orville, to be part of the Belt and Road program, that they had built a very big studio that was the center of an apartment complex, a more than an apartment complex. Eventually, it was going to be a place where they wanted all the peasants to move and where there was going to be an amusement park and a movie studio and a whole community based around this movie studio. But there were hundreds of apartment buildings, but no one was living in them. I know that you know that there are a lot of these empty concept communities that were built.

Orville Schell: Ghost towns.

Lynda Obst: Yes, exactly. So it was completely empty, and there was this gigantic movie studio and a rollout with the red carpet, with gorgeous Chinese models, with searchlights to welcome us, this tiny delegation. They'd created the infrastructure without thinking of any of the production issues. There was nothing around where you could shoot exteriors. There were no wild walls in the infrastructure. They had built the entire concept without knowing anything about production. And I could see why, as I was going from production company to production company, which were all funded by princelings, that they were all going to fail because it seemed like they could just copy what we were doing, which we had been doing since the '30s, just by looking at the blueprints and doing it the same without understanding script. And I thought, This is all going to be a gigantic disaster, kind of like all these huge communities that no one had moved into.

Brian Hanson: In that context, then, help me understand how China is thinking about its relationship with Hollywood. You've mentioned that there's a restricted number of movies that can come in. So one of the things that they're doing is controlling the quantity that comes in. I have no idea how big in terms of the overall box office, the Chinese box office are dominated.

Lynda Obst: 62% is Chinese.

Brian Hanson: Is Chinese, and the rest is ...

Lynda Obst: Is foreign. Not just American, though. They have some Japanese movies have done well and some Indian movies.

Brian Hanson: And is their controlling what comes in ... What are they looking for to bring in? Clearly, there are certain political messages they don't want in, but are there messages that they're actively promoting and diffusing throughout China based on the movies they are allowing in from Hollywood?

Orville Schell: Their sort of urgent sense that they are not well understood, they're not well respected, they're not well appreciated means that they very much want to sort of have films and every kind of art form that emphasize China as glorious, as strong, as a leader, sort of overlooking the reality of the kind of government they have that doesn't really lend itself to soft power. It isn't a very sort of compelling message. It isn't a compelling form of sort of a political governance. But China has this notion that if they can marry, and they've done it quite effectively in some cases, propaganda to public relations, they can kind of cure the deficit of Chinese respect abroad. And they look at Hollywood with immense kind of hunger because they see how successful Hollywood has been as a purveyor of American soft power. Of course, not government-sponsored at all. So they want to both buy into Hollywood, they want to imitate Hollywood, and therefore, you do get these kind of weird confections where they will build a studio or they'll try to make a film or ... It's imitation. But what they really want is they want the affectation of Hollywood, but they don't want its kind of uncontrollable, actually quite subversive element to enter into their society. So it's a terrible contradiction, this quest and yearning to be of consequence and to be respected abroad and to have soft power, but not actually wanting to let the creative process run wild.

Lynda Obst: If you look at what movies they let in and that do really well there, it gives a lot of clues, right? They let in Avengers, and it's huge. They let in Jurassic World. They let in Aquaman. So they like the big, big international blockbusters that are completely apolitical and designed to be international, that have no political message, that are fun, fun, fun popcorn movies, and that bring a lot of income to the theaters. It's good for their economy.

Brian Hanson: Yeah, that's interesting. And I can imagine even if they only let 40 in, the prospect of having access to that market causes more than 40 movies to be aimed at, hoping to get into that market and make a splash like that, which I would imagine exacerbate even more the concentration of effort on movies like that.

Lynda Obst: Yeah, it's critical to their bottom line.

Orville Schell: It's also, if, let's say, Studio X makes a movie that is not favored or disfavored in China. That also, as we saw in the case of North Korea, can have a very harmful effect on the studio as a whole. So it's not just a question of making movies that will sell in China. It's also frequently a question of not making movies that will offend China, less the studio as a whole be put in the doghouse and suffer.

Lynda Obst: 100%, that's right.

Brian Hanson: That sets up where I want to kind of close our conversation with, which is with these trends that we've just been talking about, if we were to look out 10 years from now and see how this set of phenomenon has affected Hollywood and US movie making, is it going to be that we've got the 17th Avengers movie and the 32nd Transformer movie and that we'll just keep going deeper and deeper in this direction? Or do you see something that might break this pattern and open things to a different kind of future?

Lynda Obst: I actually do see some progress. Because it is so hard to break into the market, the Chinese market, and because the market is being so fractured by the streamers, I see the studios making smaller movies again. And because the studios are sort of being brought to their knees by the scale of these movies. So there's some consolidation going on as you see with the studios. Fox was eaten by Disney. Disney will keep making its Avengers, the big tent-poles will thrive, but I don't know how many new tent-poles will be created at the scale of $200 million to be tried.

Brian Hanson: And Orville, what do you see?

Orville Schell: Well, China this notion when it comes to, for instance, the internet, of internet sovereignty. In other words, what China most aspires to is to having an intranet that they can control, that's connected in peripheral ways but basically controlled by the Party and doesn't intersect in a completely open and free way with the worldwide web. And I think there's a version of that developing in the film world as well. They want film sovereignty, and they have pretty much obtained that. So to the degree to which you will depend on that market, you will have to be mindful and come to heel around the things that sovereign market demands. But on the other hand, I think Lynda's point is an interesting one that, and this is always the way things work, that around the margin you get all these sort of smaller films that costs less, that don't need as big a market to survive. And I think that is what is going to continue to proliferate outside of China. And sadly, those people, and they are legion, incredibly smart and able within China that would like to engage in that kind of filmmaking, they're going to have to leave. And China, of course, under Xi Jinping in the last few years has become much, much more controlling rather than less. And culture, which used to be relatively free of sort of political influence, has now fallen irrevocably under the thumb of the Party. So this will force in many ways some of the most innovative, creative, and best people out of China if they want to make films that they're proud of and happy about, even though they may not make a lot of money. The really interesting question, of course, is the innovation question in general, which will also be true in other realms, and that's an interesting discussion for which there is not yet an answer.

Brian Hanson: Hollywood producer Lynda Obst and Orville Schell from the Asia Society, thanks so much for coming onto Deep Dish and help us understand this. I certainly have a much better appreciation for the patterns that are happening in the US movie theater and the relationship with what China's trying to accomplish, which is something that I had really not understood at all. So thank you both for being on Deep Dish.

Lynda Obst: My pleasure. Thank you.

Orville Schell: Thank you.

Brian Hanson: And thank you for tuning into this episode of Deep Dish. If you liked the show, do me a favor and tap on the subscribe button so that you can get each and every new episode as it comes out. You can find our show under Deep Dish on Global Affairs wherever you listen to podcasts. And if you think you know someone who would enjoy today's episode, please take a moment and tap the share button and send it to them as well. As a reminder, the opinions you heard belonged to the people who expressed them and not the Chicago Council on Global Affairs. This episode of Deep Dish was produced by Evan Fazio. Our audio engineer is Andy Zarnecki. I'm Brian Hanson, and we'll be back soon with another slice of Deep Dish.

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The Chicago Council on Global Affairs is an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. We convene leading global voices and conduct independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

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