American film studios are desperate to win approval for releases in China because its film market is rocketing. From 2003 to 2010 box-office receipts on the mainland grew by an annual rate of more than 40% on average. In 2012 Chinese film revenues passed those of Japan, then the second-biggest market. Chinese box-office receipts are forecast to top $10 billion a year by 2017, when China will be closing in on America as the world’s biggest market.

No wonder, then, that Western entertainment firms have been investing money into China. IMAX, which specializes in large-screen theatres, floated shares in its China division earlier this month to finance a big expansion there. In September Warner Brothers announced a joint venture with China Media Capital, a local investment firm, to produce movies palatable to China tastes. CMC is also an investor in Oriental DreamWorks, a local entity collaborating with DreamWorks, an American studio, to make the next “Kung Fu Panda” series.

Hollywood should beware it might be more complicated…There are only two ways for films made abroad to enter the Chinese market: 34 big foreign productions a year are let in via a quota system; Chinese firms are also allowed to acquire the rights to 30 to 40 smaller foreign films a year for a fixed fee.
Because distribution of foreign films is controlled by state-owned entities, even an easing of these quotas—expected to happen after Beijing circulated a few weeks ago a new draft of Film Law—will allow only a very slow transition. Like in every country the film-opening schedule is the most powerful tool to control the market.

This past July a big month for movies, no new Hollywood blockbusters were permitted on Chinese screens only Chinese movies made by local firms. Disney is lobbying very hard and making a big push for “Star Wars”. There is not yet an official release date but there has been some chatter it could open Jan. 29, the beginning of the Chinese New Year, as reported by Aynne Kokas Prof. at University of Virginia – which would be quite a coup for Disney, she said. “The Chinese New Year period is a highly protected period for film distribution, so if ‘Star Wars’ is able to get a Chinese New Year distribution date, it would be a “coup” and could open new avenues for other big Hollywood powerhouses.

To avoid these challenges foreign firms are either investing money into “co-productions” with local partners or introducing new format Films such as 3D or IMAX. “Having IMAX or 3-D releases of the ‘Star Wars’ film will be really strategically important, particularly if it is released during the holiday season,” – Said Kokas in an interview published in UVA Today.

Meanwhile, Chinese competitors long dismissed by Hollywood moguls as unsophisticated, are learning fast, very fast. Chinese film companies are investing in new technologies, improving creative capabilities and attracting more financial backing. The Huayi Brothers Media and Beijing Enlight Media are now producing blockbusters of their own. “Lost in Thailand”, released by Enlight in 2012, became the first Chinese film to earn $200m at the box office. “Lost in Hong Kong”, a sequel released at the end of September earned over $100m on its opening weekend.

Wang Jianlin, one of China ’s richest men, wants to rival Hollywood and is building “ ShangyWood”, 350 miles north of Shanghai, in an atmosphere that recalls Southern California, on the coastline southwest of Qingdao where the Sailing Olympics took place in 2008.
1,200-acre site at the foot of that hill, a gaggle of construction cranes is noisily building Qingdao Oriental Movie Metropolis, a vast development that includes a movie studio, a theme park and entertainment center, a 4,000-room resort-hotel complex, a shopping mall, a 300-berth yacht club, a celebrity wax museum, and a hospital. The Dalian Wanda Group, China’s biggest commercial real-estate developer and the world’s largest owner of movie theaters, has committed $8.2 billion to the project.
Wanda Studios Qingdao is the center of the new development, and is planning to opens its doors in April 2017, it will be one of the largest and most technologically advanced feature-film-production facilities in the world, with 30 soundstages; an enormous temperature-controlled underwater stage; a green-screen-equipped outdoor stage that’s still larger, at 56,000 square feet; a permanent facsimile of a New York City street; and much more.

So Hollywood needs to be ready: either very close collaboration or harsh competition and some of the most talented Directors have understood like Brian de Palma who will direct “lights Out” a coproduction Arclights Films & Huace Media.

The long domination of movie making history may not bend inevitably toward China, but it does lead away from Hollywood, whose rise and long dominance of the film industry was predicated on a series of conditions that no longer exist.
Like the manufacturing of many products, the making of motion pictures started out as a craft industry.

However we need to be prepared for strong new comers after Hollywood then Bollywood now is Shangywood.

It should rejoice moviegoers but make Hollywood think twice….

Libra6 Management is present in Shanghai and invests in Cleantech, Media, Healthcare and Real Estate.

Libra6 operates several subsidiaries or affiliates in the media industry.