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Chinese Want 3-D Movies, and They’ll Make Their Own

August 15, 2012 By
James Cameron speaking at 2010 TED Conference.

James Cameron speaking at 2010 TED Conference. (Photo credit: Wikipedia)

“U.S. Filmmakers Eager to Feed China’s Appetite for 3-D”
Jonathan Landreth
The New York Times
August 12, 2012

China has made few concessions to the U.S. in the effort to gain more access to Chinese audiences for Hollywood films of late, and no significant concessions since China’s accession to the WTO. Then, on a U.S. visit in February, Chinese Vice-President Xi Jinping told U.S. Vice-President Joe Biden that 14 additional films would be allowed into China each year. The catch: they had to be either 3-D or IMAX pictures.

The reasoning behind this concession is not hard to surmise: the number of Chinese cinema screens has leapt to 11,000 screens after languishing for over a decade at around 3,000 screens. Why the boom? Simple: China’s hyperactive real estate developers have begun including cinemas in their commercial, retail, and mixed-use complexes throughout China’s 600 cities. Cinemas, apparently, attract the kind of foot traffic that supports retail business. Those developers wield considerable political influence, and they want more foreign films because in order to fill the seats.

Across the proverbial table are the party ideologues and China’s own film production industry whom, after decades of effort, are just starting to see Chinese going to the cinema in droves, and increasingly to see Chinese films. They don’t want to give it all away just as they’re capturing the market.

Enter 3-D.

There are over 7,000 screens in China that are 3-D capable, yet only a tiny number of Chinese films produced each year can take advantage of that additional investment. For the government to allow access to 3-D films was almost cost-free: it made the developers happy without upsetting the film industry.

This is going to be a good thing for Hollywood as well, but we must hope that the MPAA was not expecting any further 3-D slots beyond what has already been granted. Any hope of that was dashed last week by none other than James Cameron.

Mr. Cameron, the mercurial director of “Terminator,” “Titanic,” and “Avatar,” announced on August 8th that it would set up a joint venture with the Tianjin government to produce 3-D films and television content. In short, Mr. Cameron proposes to teach Chinese filmmakers how to make 3-D content of their own.

As I’ve noted before, China’s goal is neither to partner with the U.S. in the movie business, nor focus exclusively on its large and growing home market. China – and by that I mean not only China’s film industry but also the central government and the Communist Party – has every intention of competing with the U.S. and European film industries globally and, if possible, beating them. It is only realistic to see any partnerships with and concessions to Hollywood in the light of that effort.

One hopes Mr. Cameron understands his role in The Big Picture: China will happily use the Cameron Pace Group as a means to learn how to make fantastic 3-D content. Once that is done, Chinese 3-D filmmakers will not only be able to fill the growing number of 3-D cinemas at home, they’ll come gunning for Hollywood in its own increasingly-essential overseas markets. Cameron Pace may make a lot of money, or it may not. It will certainly make a competitor for Hollywood in 3-D.

Mr. Cameron may not mind: he’s near enough to the end of his storied career not to care. At the same time, you have to wonder how the students at NYU, USC, and the Directors Guild might feel about it.

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Filed Under: Film, Media Hutong

The Return of News Corporation

May 22, 2012 By

The Speaker Lounge, Digital Matters 2012
Charging the Devices
1025 hrs.

In an excellent post in the Company Town blog over at The Los Angeles Times, Jonathan Landreth describes News Corporation’s announcement that it is purchasing just under 20% of Beijing-based Bona Film Group. (“News Corp. buys stake in Chinese film studio”)

The deal is interesting for several reasons. First, it marks a strategic departure for News Corp., which has in the past preferred to own larger stakes in its China ventures. It is also the first major investment News Corp. has made in traditional media since 2006, when CEO Rupert Murdoch told a meeting of industry executives in New York that he’d hit “a brick wall” in China.

Second, it is interesting because News Corp. is now leading from behind in China, preferring to play a fast second rather than trying to beat the rest of the industry. Similar linkages between Legendary Pictures and Orange Sky Golden Harvest, DreamWorks Animation and Shanghai Media Group, and Walt Disney and the Ministry of Culture/Tencent have been announced over the last year.

Despite some secrecy around specifics of the deal and Murdoch’s real intentions behind it, the move represents a wiser China strategy than News Corp.’s previous, dingo-in-the-butcher-shop approach. The history of foreign business in China has been dominated by a preference for speed over calculation: if we don’t get in early/first/biggest, the thinking went, we have no chance of success. It now seems that Murdoch has learned from costly experience the fallacy of such thinking, and now that Legendary, DreamWorks, and Disney have paved the way, he has followed.

Neither News Corp. nor its CEO have been idle these past six years, either. A quiet charm offensive has apparently been underway for at least the past two years, a period during which I think News Corp. has done a lot of listening and learning, understanding what is possible and permissible for a foreign media company here, and calibrating its ambitions accordingly. Many whom have dealt with the News kraken or one of its tentacles can attest that this is an uncharacteristic approach: normally it is News that defines what is possible in a given market.

I suspect, therefore, that this is a first step for News with Bona, and that we can expect the relationship to mature and expand based on the signals that come from the Party and the market in the next several years.

This is without doubt a deal to watch.

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Filed Under: China Rules, Film Tagged With: , , , , , ,

Television Regulations: New Bottle, Same Wine (With Corrections)

February 15, 2012 By
State Administration of Radio, Film & Televisi...

State Administration of Radio, Film & Television offices in Beijing (Photo credit: Toby Simkin)

In the Hutong
Black Lung Control
1047 hrs.

In the Valentine’s Day edition of The New York Times, Andrew Jacobs describes the new regulations issued yesterday by the State Administration of Radio, Film, and Television (SARFT), most specifically including two key restrictions: the prohibition of foreign programming during prime time, and the limitation of foreign programming to no more than 25% of the total air time on a channel.

There is some new content in the regulations issued yesterday, but contrary to the NYT headline, the major issues addressed vis-a-vis foreign content are not new: indeed, they harken back to regulations that have been in force since 1995. From the unpublished manuscript of a guidebook on Chinese television that I co-authored with William Soileau and Jeane-Marie Gescher in 1998, according to regulations then in force:

Foreign programming must not be distributed between 6:00 p.m. and 10:00 p.m., although actual enforcement varies according to the broadcaster.

and

Foreign programming must not take up more than 25% of total broadcasting time on a station basis.  In reality, while the rule is nominally honoured, many networks apply the quota on a channel by channel basis. Unofficial figures indicate that foreign programming may account for as much as 50% of programming.

The rules governing television are not increasing, as the Times suggests. What seems to be increasing is the degree to which they are openly flaunted by broadcasters. Let me explain.

China has had a wide range of laws and regulations restricting media (and many other industries) in place for a long time. What varies is not the regulations, but the degree to which they are enforced. Laws and regulations, as such, are not de facto restrictions of behavior so much as they are tools for the government to use when political conditions demand it. For that reason, what SARFT does on a fairly regular basis is issue notices designed to remind broadcasters that the regulations exist, and signal to them that enforcement looms. Usually, such initiatives come either when things get too far out of hand (i.e., 25% becoming 50%, as suggested above), or when something happens to make it an issue (Chinese producers complaining about access to TV time, or, say, a  leadership change.)

This is not dissimilar to the way I get my ten-year old to clean his room: I let him know an inspection is coming, and by the time I get there, behold! A clean room! The requirement to keep his room clean always existed. What was lax was the enforcement. What caused me to issue the edict to my son was either the room was getting too messy, or guests are coming over.

Jacobs quoted one Chinese citizen posting his disgust with the regulations on Weibo:  “They should really put Sarft in charge of food safety and have the State Food and Drug Administration regulate TV shows — that way we’ll have safe food and good entertainment.”

I would wager the person posting this was either very young or unborn when the regulations were actually issued. The issue that has provoked SARFT (an underfunded, undermanned, out-gunned agency if there ever was one) is the same that caused the food problem: China is ruled less by policy than law, and political expedience trumps enforcement – until the political expedients change.

UPDATE: Please read the comments conversation between Li Yuanyuan and myself. He raises some excellent points to rebut my point of view. He disagrees that enforcement was ever lax, suggests that it was always tight, and he explains why. We do not share the same memory of events, but he does point out that the prime time ban on foreign programming and the restriction of quantity of content was not in the 1995 Regulation #549.

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Filed Under: FITG, Media Hutong, Policy & Governance

Will China Actually Import “The Hunger Games”?

February 14, 2012 By

‘The Hunger Games’ In China | ThinkProgress.

“The Hunger Games” is apparently scheduled to show in China, according to this piece (h/t to Jacqueline in HK, aka @lantaumama for this.)

This movie, based on the first book of a trilogy telling the tale of a hardy young woman who inspires a rural uprising against a brutal repressive urban dictatorship, will either be pulled at the last minute when the censors actually WATCH the darn thing, or it will be the most subversive piece of democratic propaganda ever to sneak onto Chinese screens.

Or, as occasionally happens, the Chinese audience will take something entirely different from the experience than we would.

The Hunger Games (film)

Image via Wikipedia

Either way, it will be fun to watch what happens.

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Filed Under: Film

Chinese TV: App to the Future

November 4, 2011 By

In the Hutong
Back from CASBAA
1307 hrs. 

“China: The New Mobile App Dragon,” by Peter Farago, Flurry Analytics

If one conclusion stands out after all of the panels at the Cable and Satellite Broadcasters’ Association of Asia (CASBAA) conference this week, it is that all of the broadcasters in the region see the challenge posed by New Media (even China Central Television [CCTV]), and none of them are quite sure what to do about it. As one CCTV executive told me, “we all acknowledge now that new media, the Internet, and mobile are the future, and that we want to be a part of that. But the question is ‘how’?

Steve Garton of Synovate suggested in a well-attended breakfast meeting that part of the answer lies with apps. In his presentation, Steve made the case to the region’s broadcasters that they needed to get better at using mobile apps to distribute their content on smartphones and tablets. Specifically, Steve noted that his company’s research around the world had proven that the best way to get in front of users would be for a broadcaster to have its app pre-installed on phones when sold.

It is not hard to foresee an edict from the Central Government requiring all carriers selling smart phones to include a CCTV app on those devices, and the numbers suggest that the Party needs to start looking at mobile as a means to ensure that it is still reaching China’s post-90s generations. According to Flurry Analytics, China began 2011 ranked 10th in the world in the number of global app “sessions” on smartphones and tablets. Growing 870% in the first 10 months of this year, China has passed every country but the US and now ranks second worldwide in app use. And one of the top 10 must used apps? Youku, which, by the way, comes pre-installed on many of China’s handsets and tablets.

I’d wager CCTV and the other broadcasters will not long permit Youku exclusive rights to that space, but all of the terrestrial and cable broadcasters face the same problem: how to attract the user to their apps when those users do not watch the stations? And if they collaborate with Youku and Tudou to distribute their content, what value do the broadcasters add? And what happens to their brands?

We cannot yet rule out the possibility that the broadcasters will move to create a Hulu-type service and pull their content off of the other sites. But that still leaves them with a large back of programming all in one place, and the brutal challenge of getting people to actually use the service. And for all of their production and engineering prowess, Chinese broadcasters are not the bastions of marketing that their U.S. counterparts have been.

For these reasons, the question of how broadcasters will deal with apps and mobile seems to point toward the same eventual solution as do the tricky politics and economics of the broader online video sector: eventual mergers between the broadcasters and the major online video sites.

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Filed Under: China Rules, Media Hutong

Stop Shunning Beijing’s Foreign Correspondents

October 13, 2011 By
Me Reading the Financial Times

Image via Wikipedia

In the Hutong
Good grief, Thursday already?
1317 hrs.

In a recent profile of Michael Lewis, arguably the leading long-form journalist of our age, New York magazine’s Jessica Pressler quotes her subject on the gulf between journalists and the people and organizations they cover:

It is amazing how much contempt there is for the professional media that surrounds any given enterprise,” he says. “I find it all the time. Silicon Valley entrepreneurs think the tech journalists are all stupid. The sports people think that about the sports journalists. They don’t say that to the sports journalists, because they want the sports journalists to be nice to them. But the level of contempt is very high.

As someone who is called upon to bridge the gap between companies and the media who cover them, I can attest that this contempt, mixed with more than a little fear, is a problem here in China as well. In defense of the companies, part of that contempt is self-inflicted: any journalist who cheapens himself and his trade by taking payment or expensive gifts from a company he covers earns his full measure of scorn and contempt, and splatters his fellow journalists in the process.

But it is not always justified, in particular in the case of the global media. There are hacks in every crowd, to be sure, but China has been blessed with a crop of some of the most astute, erudite, and talented people ever to face a daily deadline. I challenge anyone to impugn the intelligence or abilities of people like Andrew Browne at The Wall Street Journal; Tania Branigan of The Guardian, Louisa Lim of NPR, James Kynge (formerly of the Financial Times), Charles Hutzler of the Associated Press, Barbara Demick of The Los Angeles Times, or anyone working behind the veil of anonymity at The Economist, including their most recent addition, Gady Epstein. And for every one I mention, I am skipping a half dozen of equal or greater talent, as well as those who have been here and left, like the brilliant James Fallows.

Granted, engaging with foreign correspondents can be painful at first: there is much to explain about one’s business and industry, because most of these reporters are by necessity generalists. One executive complained to me that it was a lot of trouble to explain the basics of their business to someone who had not bothered to do the research ahead of time. My response to him was that as bright as these folks are, they are also under the constant gun of a deadline and cannot always afford to do the research ahead. But a stupid question is a golden opportunity: when a foreign correspondent asks you to explain your business in your terms, it doesn’t get any better than that. And nowhere do those opportunities crop up more often than here in China, especially Beijing.

A generation ago, the “best and the brightest” young stars of international journalism made their careers covering the Vietnam War. Today, many are making or sustaining their careers by covering the rise of China. If your company is not taking advantage of that opportunity, (and plenty of both Chinese and foreign companies are blowing that one terribly,) what excuse do you have?

Filed Under: Communicating Innovation, Media Hutong, PR and Communications

Understanding Xinhua

July 28, 2011 By
Xinhua News Agency

Image by xiaming via Flickr

Hutong West
Planning August
1943 hrs.

In an superb article on veteran New York Times media reporter David Carr, Tom McGeveran quoted legendary media watcher Gay Talese:

“I consider The New York Times news,” he said. “Fascinating news. It has been sitting in judgment of America for more than a century and it, too, should be looked at in detail with the same objectivity.”

As the New China News Agency, Xinhua, takes over a 60 foot by 40 foot billboard in Times Square in New York, the same could be said for that media outlet. Xinhua is news. It has been the media mouthpiece of the world’s largest nation for over six decades, and it should be looked at in objective detail.

Why Xinhua is Important

This is more than just China-watcher or media maven esoterica. As we move into the fifth generation of Party leadership in the coming 24 months, we will be taking a further step away from the rule-by-individual that characterized the first four post-revolutionary decades. We are well into an era where China’s single-party state is run by the construction of a consensus on an issue-by-issue basis. Where once sat rubber-stamp toadies now sit leaders whose support is required for every significant initiative and action taken by the central government.

The consensus-building usually takes place behind closed doors, but when a particularly contentious issue arises, or when a relatively small group is trying to champion an initiative and is having a hard time building support, the process bursts out of those rooms and into certain government media in the form of an isolated quote in an innocuous article, in an editorial, or in an analysis piece.

The challenge for those of us trying to navigate our way through China’s political fog is deciding whether one of these journalistic tidbits means we should sit up and take notice, or whether it is so much positioning. To understand this, we have to understand how Xinhua’s role is changing.

Not Just Aparatchik Heralds Anymore

Is Xinhua a government mouthpiece to the extent that its positions reflect those of the Party? Is it more independent, and thus free to post articles like this without regard to policy? Or is it somewhere in the middle: that Xinhua is a tool used at will by various Party leaders to incite or test wider support for a possible policy change?

While it was once the former, I suspect that it is becoming a combination of both the former and the latter. And for that reason Xinhua demands study. We have to understand when Xinhua is floating a trial balloon on behalf of, say, a vice-minister of Finance, or when it is presaging a critical policy change. Regardless of your vocation, if China touches you or your work, that is an essential distinction.

So rather than continue to dismiss Xinhua as a hand-in-glove extension of the Party (which I have to confess I have long done myself), we need to recognize that it is becoming one of the most important media companies on the planet, offering more than just prepackaged propaganda for the Chinese masses, but actionable insight into the Chinese polity and society. The microscope that media watchers once turned to The New York Times, The Washington Post, Time-Warner, Disney and News Corporation must now be focused on the most enigmatic specimen of all.

Any takers?

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Filed Under: Media Hutong, Policy & Governance

What China’s Online Companies Can Learn from the MySpace Implosion

July 26, 2011 By
This is icon for social networking website. Th...

Image via Wikipedia

The Patio, Hutong West
Hawks screeching overhead
1215 hrs.

In what has to be one of the best almost-postmortems of an Internet company I have ever read, Bloomberg BusinessWeek’s Felix Gillette’s June article on “The Rise and Inglorious Fall of MySpace” offers a set of insights that apply far beyond the doors of the benighted (and recently sold at a 94% write-off) social network pioneer. I have extracted three lessons that I think are particularly germane for online companies in China.

Perception is Reality

Social networks are sufficiently new that they are still a little scary to your average consumer, less so than space tourism, perhaps, but more so than a trip to the grocery store. Fears about privacy, identity theft, stalkers, pedophiles, and a host of unseen and unimagined dangers lurks in the subconscious of even the most adventurous user. As willing as we are to flock to something new, we will take flight like spooked ducks if our sense of security is credibly threatened, leaving a once-hot network foundering. As Gillette notes:

One of the reasons social networks are so combustible is that they have proven to be particularly sensitive to public perception. In February 2006, Connecticut Attorney General Richard Blumenthal announced that he was launching an investigation into minors’ exposure to pornography on Myspace. The subsequent media frenzy helped establish the site’s reputation as a vortex of perversion. “If you have a teenager at home, odds are they’ve visited the blog site myspace.com,” Hannah Storm warned CBS News viewers in 2006. “And there are fears that this popular social networking website, and others like it, have become places where sexual predators easily prey on children.”

Researcher [Danah] Boyd of Microsoft believes that alarmist press ended up crippling the company. “The news coverage of teenage engagement on Myspace quickly turned to, ‘Oh my gosh, there are all these bad teenagers doing bad things and this is crazy!’ ” says Boyd. “Quickly, it turned into a big narrative about how this was a dangerous, dangerous place.”

This situation brings to mind an editorial that serial entrepreneur and Mahalo.com CEO Jason Calacanis wrote in 2008, suggesting that Internet startups didn’t need PR people, and that the CEO can and should be the PR guy for a company. I am inclined to agree with Calacanis to the point where the CEO is the chief spokesman for a company with media, bloggers, analysts and the general public, presuming of course that the CEO is not a reclusive nebbish who gets flop-sweat in front of reporters (and there are plenty of those.)

What the MySpace case suggests, however, is that somebody on staff or on retainer needs to be spending his or her days anticipating and addressing potential scares and other reputation busters, because waiting for such things to happen and then responding is already too late. As quickly as MySpace reacted, reaction was not enough, and in a world with five-minute news cycles it never will be. Besides, a CEO has far more things to worry about. And how IS Mahalo doing these days, Jason?

If It Does Not Look Broken, You Aren’t Looking Hard Enough

The old expression that “a rising tide raises all boats” has an unwritten corollary that applies to fast-growing businesses: “a rising tide covers all rocks.” High growth can mask a huge range of fundamental problems, and smart companies like Amazon go and dig them out even when they aren’t real problems. They understand that failure to do so will only mean problems later, when the growth slows, the tide goes out, and the rocks start sticking holes in the boat.

MySpace did not. As Shawn Gold, former head of the company’s marketing and content efforts, told Gillette, “when you’re growing at 300,000 users a day it’s hard to imagine that you’re doing anything wrong.”

In retrospect, that sounds almost delusional, but you have to be in one of these organizations to realize how dead easy it is to overlook or ignore critical problems. Hubris is as easy to catch as a cold when things are really good and you are being lionized by media and users alike, and even those immune to the hauteur virus are likely to be so wrapped up in just keeping the wheels on such a fast growing organization that they set “important but non-urgent” problems aside.

Companies have to build such organizational debugging into their culture and allow time and resources to address those issues. MySpace, by the admission of both Gold and its founders, were more seat-of-the-pants, and they paid for it.

Leaders Must Be Users

MySpace co-founder Chris DeWolfe made a point he felt was critical to the company’s long, slow slide to the middle of the social network pack:

“After we left, the guys that took over were never Myspace users,” says DeWolfe, who now runs a startup called MindJolt. “They didn’t have it in their DNA.” According to a source familiar with the sale, DeWolfe is also a finalist to buy the company. DeWolfe declined to comment.

This might be so much positioning, or even a bowl of sour grapes given the rough handling News Corporation dealt to the MySpace founders when they were shown the door. Let’s resist the temptation to get all ad-homenim for a moment and look at his point.

The owner or executive of a media company has to be in the audience, and for social media he or she has to be a participant. There is simply no other way to understand or manage the business. The idea of a newspaper executive who cannot read or a movie mogul who won’t watch films is ludicrous. It is the same for online companies, and especially social media.

This is particularly relevant for foreign companies setting up online businesses in China. You do not want to put someone in charge who is not a user, or, worse, who because of a language or cultural barrier is unable to be a user. The experience for these companies, not the content, is everything, and if you cannot evaluate the experience you have no business being in charge.

Don’t Go There

The history of social media and the Internet is sufficiently short that we should be squeezing as many lessons as we can out of every case. We will be analyzing the MySpace story for years, but Gillette gives us an excellent starting point. This is a superb article that should be mandatory reading for anyone putting their money into an online company, particularly in China, where we enjoy a surfeit of engineering talent and suffer from a dearth of capable managers.

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Filed Under: Internet Business, Marketing, Media Hutong, PR and Communications

Getting Real about the News Corporation Scandal

July 19, 2011 By
Rupert Murdoch

Image via Wikipedia

Hutong West
Back in the saddle
2137 hrs

As the world is treated to daily revelations centered around the defunct British tabloid News of the World, I am slowly crawling out of blog hibernation here at Hutong West, so to get things going a few comments on the News of the World scandal are in order. While analyzing this unfolding train wreck would be premature, there are several points that need to be made right now.

Before I begin, however, for the sake of full disclosure I must say that I am not in the pay of any organization with ties to News Corporation, nor am I a fan of either News Corporation or any of the Murdoch family. My writings should give ample support to that contention. As such, what is written below is meant as neither defense nor condemnation of either the company or its controlling family.

To The Grave Dancers of Fleet Street

Yesterday, the editors of The Wall Street Journal, in a sanctimonious, blame-shifting editorial defense of News Corporation that ill-serves the paper and its outstanding journalists, manage to make one point that strikes home. The media establishment is doing neither itself nor the public a service when it allows schadenfreude to seep into coverage of News Corp’s troubles.

One need only read headlines to imagine the gleeful editors and publishers who composed them: “The Tables are turned on Murdoch” crows Joe Nocera at The New York Times; “Just deserts for Murdoch” shouts Richard Cohen from the pages of The Washington Post. The blog and online coverage is downhill from there. As for the Times, once the standard-bearer of American journalism, Nocera goes so far as to try to make a virtue of a vice, explaining:

Well, yes, the schadenfreude is pretty darn thick. Who would deny it? The whole thing reminds me a little of the ending of Ian McEwan’s wonderful novel “Solar,” in which the many awful things the central character has done in his long life suddenly come together to bury him in an avalanche of comeuppance. I’m O.K. with that.

Joe is okay with that. And that is a worrisome problem.

Rupert Murdoch has made his share of enemies in the process of building News Corporation, many of them in the media industry, and some of these among the ranks of those with the power of the printing press. There is no shortage of people who have waited for a very long time for Rupert and his empire to get their requital. Further, I’m all in favor of companies sowing truth-based fear, uncertainty and doubt about competitors.

These are, however, extraordinary circumstances. If this scandal is as serious as it appears, the media have an especial duty not only to get the story right, but to maintain both the reality and appearance of balance in its coverage given that the target is a successful rival. The appearance of balance is eroded when you are reporting the story on page 1 while sticking it to Ol’ Rupert on the opinion page. Once that happens, it starts to smell like someone is settling scores, and the credibility of an important media outlet is undermined. That’s not serving the public or the media.

There will be plenty of time for schadenfreude when this is all over, and once more when the better reporters on this story line up to collect their Pulitzers. For right now, stick to the facts, folks, and take a little less public joy in the trials of rival: you’re starting to look exactly like the thing you hate the most: a pack of bloggers.

Rupert Is Not Going Anywhere

While there have been early reports that News Corp is considering replacing Rupert Murdoch as CEO, I would not give them much credence. Corporate watchdog Nell Minnow doubts the ability of the News Corporation board to do anything without the express, prior approval of Mr. Murdoch, so there are probably only two ways that Rupert will surrender leadership of NewsCorp: either at his own choice, or if they carry him out feet first under a sheet.

In a fawning editorial that compares Mr. Murdoch to Alexander the Great, Forbes publisher Steve Forbes promises us that Murdoch will survive and fight another day. In a rather less complimentary column in The New York Times, David Carr concedes that the News Corp. CEO still has his teflon armor:

Even as the flames of the scandal begin to edge closer to Mr. Murdoch’s door, anybody betting against his business survival will most likely come away disappointed. He has been in deep trouble before and not only survived, but prospered. The News Corporation’s reputation may be under water, but the company itself is very liquid, with $11.8 billion in cash on hand and more than $2.5 billion of annual free cash flow.

For better or worse, K. Rupert Murdoch is News Corporation. As long as there is a company, he will be calling the shots.

Aid and Comfort

What is most disturbing about this scandal is the impression it leaves in the minds of the people and government of China. In the west, we are fond of portraying a free and independent media as watchdog against lawlessness, corruption, and the abuse of power. As a whole, the media serves that function brilliantly around the world.

But if the allegations about News of the World are proven true, and worse, if the illegal and anti-democratic behavior extended beyond that single paper to elsewhere in the News Corporation empire, then the people and leaders of China can make the point that an overly independent media can actually become a vector of lawlessness, corruption, and the abuse of power. Under such circumstances, could China’s leaders not make a rational case that rather than have a media industry so powerful that government is in its thrall that it would be better for government to control the media?

You can bet China’s leaders will make that point, if they have not already. That can only be counted as a blow against progress in the world’s largest nation, a blow that must count against whatever good News Corporation did for media in China.

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Filed Under: Media Hutong

Is Film Finance in China About to Change?

May 9, 2011 By

In the Hutong
Break time
1120 hrs.

Since China began the reforming and opening process in the late 1970s, a small number of industries have been held outside the reforms that most other sectors have enjoyed. One of those industries has been the national defense complex, and the other has been media.

The media and entertainment sector in the world’s largest and most entertainment-hungry market has been kept in the hands of government at the insistence of the Party. This has meant that the government has rebuffed not only attempts by foreign investors to buy into domestic traditional media properties, but similar attempts by powerful local companies as well.

The result has been the anemic development of the domestic media industry, forced as it is to rely on its revenues, the government, and ingenuity to support its efforts. This has been particularly challenging for the film and music businesses in China, making it difficult for those businesses not only to finance new projects, but to make long-term capital investments and to attract and retain talent.

Not so constrained have been new media companies, in particular the online video websites, the largest of which are taking foreign venture capital investments, conducting offshore IPOs, and starting to produce their own television/video programming. This contradiction is a latent problem in Chinese policy, one that is frustrating to the leaders of China’s state-owned traditional media, and it becomes more severe as the online video sites grow in revenue and production capacity.

The government will have to level he playing field at some point. They can do so either by forcing the online video sites to buy out their foreign investors (not so easy after an IPO,) or by allowing traditional media companies to seek outside investment. The latter would mark a radical shift for Chinese policy makers, and one fraught with risk. The implicit belief in Beijing is that once private interests control media, the Party loses control. In China’s system, this risk is nigh unacceptable.

But there are some signs that the party is willing to experiment with a degree of private ownership in traditional media. South Africa’s NASPERS has long held an interest in Beijing Media Corporation, a marketing and advertising vehicle for print media in Beijing, and a joint venture with Anhui Daily Newspaper Group. These deals took place with the implicit approval of the Party, and it appears they are being watched with great care.

That degree of experimentation appears to have now extended to film. Last week, Beijing Xiangqiao International Media, a film and animation production company and subsidiary of state-owned Hunan Broadcasting, went private in a management buy-out, and there are apparent plans for a domestic IPO at some point in the future.

This will be an important development to watch. If this is allowed to go forward, this marks a limited but key precedent for wider privatization – and private finance – in China’s growing film industry.

This could also be a watershed moment for online video providers like Youku (YOKU) and Ku6 (KUTV). If regulators are prepared to allow domestic production houses outside investment, it could mean that they are also prepared to allow Youku, Tudou, Ku6 and others to continue their evolution toward becoming integrated media companies.

Filed Under: Media Hutong, Policy & Governance

The Best of the Peking Review, January 2011

February 7, 2011 By

From our free-book-fixated sister blog The Peking Review, here is a list from among the January reviews that Silicon Hutong readers might find interesting:

Affairs of State: The Interagency and National Security

Communist China’s Policy Toward Laos: A Case Study 1954-1967

Contemporary Chinese Views of Europe

Current Studies in Japanese Law

Film Piracy, Organized Crime, and Terrorism

India as a New Global Leader

Managing a Changing Relationship (China and Japan)

Pacific Currents

Whither Strategic Communications?

Why Russian Policy is Failing in Asia

Filed Under: Craft, Fill Your Mind, Media Hutong, Peking Review, Plowshares and Pruning Hooks

Pulling the Wings off of News Corp

December 5, 2010 By

In the Hutong
Almost Sundown…I think
1638 hrs.

In early February New York magazine ran a superb bit about News Corporation’s aging Chairman Rupert Murdoch and the looming prospect of a succession at the media giant. As Gabriel Sherman notes:

King Lear in the Storm, oil on canvas, painted...

Image via Wikipedia

“Those of us who care for Rupert, and I do very much, hope we don’t get the fifth act of King Lear,” says David Yelland, former editor of Murdoch’s London tabloid the Sun, now a partner with the Brunswick Gro

up. “You won’t find anyone to say anything critical about James Murdoch on or off the record. But the moment Rupert goes, that changes. Once he does pass, it will be very difficult to keep the company together. I almost wonder if he senses that and, toward the end of his life, we’ll suddenly wake up one morning and we’ll see an announcement he’s taking it private, or merge it with Google, or Microsoft, or [Liberty Media’s chairman] John Malone.”

Yelland offers some interesting scenarios. The alternative is to dismember the group into its component parts, selling them off one-by-one. The only bits worth keeping are the subscriber-driven businesses. If I were Mr. Murdoch, I’d be getting out of the ad-supported business right quick.

But, of course, that business is what he know. So it is unlikely.

I hope, for the sake of all involved that Yelland is right. If Murdoch clutches the lot to his chest until he takes his last breath, Wall Street’s carrion birds will be circling News Corp, not even waiting for it to fall over before picking it apart.

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Filed Under: Media Hutong

China Tiptoes into Hollywood

September 27, 2010 By
Entrance to Grand Ocean Cinema at Harbour City

Image via Wikipedia

In the Hutong
Windows open
1454 hrs.

It was one of those temporal ironies that remind me that the Almighty (or Chance, for you secular humanists out there) has a sense of humor. Not long after I wrote a post warning Hollywood to use care in its dealings with China, Legendary Pictures announced that it had accepted a strategic investment for 3.3% of the company from a subsidiary of Orange Sky Golden Harvest Entertainment.

What makes the deal even more fun here in the Hutong is that my brother-in-law is on the executive team at Legendary. But let’s set that aside for a moment.

Nikki Finke over at Deadline.com does a writeup of the details, so I won’t dive too deeply into the nuts and bolts, nor will I wax poetic about Legendary’s successes. It is worth noting, however, that Legendary’s fare has a Chinese audience: their most recent hit, Inception, recently took in over RMB200 million at the Chinese box office.

Relationships aside, I expect the deal will avoid the tripwires I outlined, for several reasons.

  1. Legendary is a production company rather than one of the big studios. Washington is unlikely to raise an eyebrow.
  2. While the amounts involved were not disclosed, logic and experience suggest that we are not talking billions of dollars in paid-in capital. This is a “toe in the water” for all involved, an opportunity to get to know your partners while the stakes are low.
  3. The investment is for a very small stake – this is more about strategic opportunity than control over content.

In fact, I expect this deal to be widely imitated: production houses that are not already looking for Chinese partners will start hunting, and Chinese film entities will now follow their cultural instinct to Keep Up with the Zhous by looking for similar tie-ups.

Therein lies the caveat: it is in the predictable imitative that reason lies for concern. If further deals match the modesty of the Legendary OSGH tie-up, and the partners remain as overtly commercial as Golden Harvest, the China-Hollywood link will build without outside interference.

But if the pace of deals grows too quickly in frequency and/or size, it will elicit a response that will serve neither the industry nor the companies well. In any case, firms on both sides of any deal need to be transparent about the rights and powers granted to each partner in the tie-ups. More important than confidentiality in these cases is the comfort of the governments and movie-going publics in the U.S. and China with the closer relationship between the two industries.

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Filed Under: Film

Hollywood and China’s Three Goals for Film

September 15, 2010 By
Cathay Cinema for the Shanghai International F...

Image by Toby Simkin via Flickr

Michael’s Ristorante, Shunyi
Bruschetta and Iced Lemon Tea
1245 hrs.

Jonathan Watts in The Guardian offers an intriguing contrast to The Washington Post article about China investing in Hollywood when he posits that the PRC is much more interested in defeating it on the global stage. He quotes Xiang Yong of the Institute for Cultural Industries at Peking University:

“There’s a saying that Hollywood is the real foreign ministry of the US, which shows the importance of the movie industry.

From a cultural perspective, the promotion of the movie industry is an important way to strengthen the soft power of our country.”

We have made this point before, but it bears repeating. The Party and the government have three identical goals for each of the media and cultural sectors. In the case of film, they are:

  1. To construct a commercial cinema industry that dominates the domestic market for filmed entertainment, regardless of means of distribution.
  2. To then build China’s local film industry into a major generator of export dollars by creating motion pictures with international appeal and wide distribution.
  3. To generate soft power by using motion pictures to convey positive and appealing messages, images, and impressions about China, the Chinese people, and Chinese culture to international audiences.

Against this, the seemingly contradictory articles in the WaPo and the Guardian both make sense. Chinese filmmakers seek to build ties with Hollywood that can help make use of major U.S. motion pictures to convey positive images and impressions about China, to better learn the “mojo” that makes Hollywood America’s shadow foreign ministry, and then (hopefully) to duplicate that success as a global competitor to Hollywood.

Hollywood – and in this I mean the major studios – walks a fine line in dealing with China, not only in that it is potentially forging a competitor in Hollywood’s increasingly critical international markets, but also in that such chumminess could undermine the industry’s “American-ness” in the eyes of legislators in Washington and audiences across mainstream America.

If the hysteria after 9/11 demonstrated anything, it is that the spirit that birthed McCarthyism lies dormant in the American polity, awaiting only a crisis or catastrophe to wake it again. In an era of Tea Parties, Hollywood needs to move with care and caution as it engages filmmakers who operate at the whim of Zhongnanhai.

And if the past three decades in China have demonstrated anything, it is that western companies who have invested in China have been most successful at manufacturing their own competition. The Chinese government and its interlocutors like Xiang Yong have put Hollywood on notice that they are next.

Now, is anyone between Santa Monica and Burbank listening?

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Filed Under: Film

Rebuilding Hollywood with BRICs

September 14, 2010 By
Hollywood is a well-known area of Los Angeles ...

Image via Wikipedia

In the Hutong
Running a sand-table exercise
1930 hrs.

Keith Richburg and Zhang Jie wrote an enjoyable piece in The Washington Post about the different ways in which the U.S. film industry is seeking to tap Hollywood. The article is encouraging in that it suggests that Hollywood is getting over its blinkered view of China as a really big version of France (big market, different language, resists our product, resistance is futile, will eventually be assimilated.)

The article notes that product placement, scripts (read “story ideas”) and locales have made China more interesting to Hollywood. There is even a bit about the importance of “co-productions.”

It’s Spelled O-P-M

The biggest attraction, however, is cash.

For Hollywood, the reason for the sudden interest in China might be described as more mercenary. Hollywood traditionally runs on other people’s money – and China has a lot of cash to spread around these days.

Our favorite films notwithstanding, Tinseltown’s most remarkable achievement is its consistent ability to get outsiders to fund a business that is as unapologetically opaque as it is inherently risky.

In succession, Hollywood has tapped (and tapped out) Main Street USA (Gulf & Western, Kinney, Coca-Cola, General Electric), Main Street Japan (Matsushita, Sony) Main Street Europe (Vivendi), and Wall Street (take your pick of hedge fund and private equity-funded film partnerships and virtual studios). In the wake of the financial crisis and the drying of the Wall Street wells, the emerging markets were a logical next target.

It took someone with the foresight (or desperation) of Stephen Spielberg to lead the way. Spielberg, a producer/director not normally associated with low-budget, high-return films, began the trend when he longtime collaborator Stacey Snider closed a $1.2 billion deal with India’s Reliance ADA Group to produce six films a year.

Barring an abrupt change in the mood on Wall Street, China looks to be next to fall into the celluloid web.

Or is it?

I’m Ready for my Closeup Now, Mr. Lou

Hollywood’s major studios and their affiliated production companies need literally billions of dollars a year to finance slates of films costing upwards of $100 million each to produce and market. There are a very limited number of entities in China capable of investing at that scale: the major state-owned banks, China Investment Corporation, and a handful of large state-owned industrial companies.

And while the leaders of those firms might well be attracted to Hollywood’s glamour, the Industry’s need comes at an inopportune time. CIC’s large paper losses in Blackstone Group caused an uproar, and the financial crisis has placed the stewards of the people’s funds under uncomfortable scrutiny at home. Senior cadres can well imagine the popular backlash that would occur if it were to become known that national wealth was lost investing in Hollywood flicks, and would be anxious to avoid such a scenario.

It is also instructive to remember the popular consternation whipped up in the US when Japanese keiretsu began to invest heavily in Hollywood. That storm would be a squall compared to the typhoon of opposition and angst blowing out of all corners of the US if a Chinese government-owned entity attempted to buy into Hollywood. Hollywood’s leaders need to think carefully about whether they want to fritter their political capital in Washington on such a quest.

None of which is to suggest that China will stay out of Hollywood: the kind of picture-by-picture deals that the WaPo article alludes to will continue and grow, and I think we can expect slow but growing connections between the US and Chinese film industries.

But we would be wrong to forget that the dynamics driving The Biz in the two countries are vastly different, as are the cultures they are spawning, and that it is a sizeable leap from an increase in co-productions to China replacing Wall Street as Hollywood’s Sugar Daddy.

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Filed Under: China Breaks Out, Film
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