Hollywood’s China troubles go beyond virus, author says

China has been a great growth market for Hollywood studios for 20 years, but the picture is getting fuzzy, complicated by the coronavirus crisis and trade tensions with the U.S.

The “trillion-dollar dilemma” for American companies is how to thrive in China without undermining their values at home, according to Chris Fenton, former president of film producer DMG Entertainment, which worked on “Looper” and “Iron Man 3.” Fenton explores this challenge in a new book, “Feeding the Dragon: Inside the Trillion Dollar Dilemma Facing Hollywood, the NBA, and American Business,” that’s due out July 28.

Fenton worked to bring U.S. films to China over almost two decades at DMG, while the number of screens in the country exploded from around 5,000 to 70,000 now, he said.

Fenton, a trustee at the U.S.-Asia Institute, a nongovernmental group that leads congressional delegations, seminars and other programs, Fenton spoke with Bloomberg News this week. Comments have been edited and condensed.

On coronavirus shutting down Chinese movie theaters

There will be some sort of government bailout program, particularly for the most important locations and the most politically influential theater owners. With the government choosing who gets the lifelines, we will see the chosen ones buying up the less fortunate, consolidating the players. Those newly merged, larger entities will have even greater government support. A similar market adjustment will occur with the local film producers.

On the Chinese appetite for American films

Chinese excitement for anything American has dulled in lockstep with the propaganda ministry’s push of a more nationalistic and self-reliant narrative. I first noticed such anti-American sentiment on a U.S. Congressional delegation trip to several Chinese cities last fall—during the peak of the U.S.-China trade war. Feelings toward the U.S. had declined greatly by that point. They then got worse after the NBA controversy (when Houston Rockets executive Daryl Morey tweeted his support for Hong Kong protesters). And today, they’ve deteriorated even further.

On China’s importance to Hollywood

Hollywood needs China since it will be the largest film market in the world. Continuing to monetize films there is crucial to the health of U.S. studios. On the flip side, hawkish members of the Chinese government view Hollywood as an American institution using China as a money grab and propagandizing their populace with a democratic narrative. Those same officials believe that for every Hollywood movie that works in their market, it takes money and opportunity away from China’s own film industry. Therefore, moving forward, Hollywood needs to get more innovative to combat that point of view. Making a movie with substantial Chinese collaboration will be one way to do that. “Mulan” (an upcoming Disney film) is a good example.

On lessons from the NBA’s clash with China

I was watching my son’s soccer game when I first saw Daryl Morey’s tweet. I immediately said to another father, “Oh boy, that’s going to be a problem for the NBA in China!” And I was right. However, what I didn’t predict was the backlash it created here in the US. It “woke” many Americans, and definitely members of Congress, to the hypocritical China pandering that the NBA had been exercising to gain access to the market.

On Chinese conglomerates pulling back from entertainment

Hollywood presents an extremely effective platform for spreading soft power globally. That said, the Chinese government discovered abuse with this type of investment when companies routinely exploited the high multiples of foreign entertainment assets on China’s public stock exchanges. Many of those guilty parties weren’t associated with anything even close to the media business. That’s when regulators stepped in and stopped it. Now that the bad actors have been flushed out, we’ll eventually see American entertainment assets become a target again. Only difference this time around will be obstruction from the American side. Extremely restrictive CFIUS (Committee on Foreign Investment in the U.S) legislation now makes such acquisitions almost impossible for the Chinese to pull off.

On the success of China-backed movies

Major China players like Alibaba, which is currently enjoying success from the critical and financial success of the film “1917,” will want to continue to invest in single or multipicture deals. They will be much smarter about which ones they invest in, though. And they will also want to participate in the global receipts of those films, rather than just revenue from China since the local market is such a wild card.

On Fenton bringing U.S. films to China

As a businessman, I deeply believe in the market’s massive potential. But, more importantly as a father who wants to leave a safe world for his children, I see the greater significance of continuing what I call “film diplomacy.” The U.S. and China will either continue to coexist through the bond formed by the exchange of culture and commerce—films being a huge part of that effort. If we choose to end that exchange, we will consciously start a cold war between the world’s two superpowers.