Post

Why is Hollywood Fighting so Hard to Enter China?

May 10, 2012

To hear the movie studios describe it, a world without robust (if not draconian) intellectual property protections is a world without a viable movie industry.  This simple idea is at the heart of attempts to push through SOPA, PIPA, and whatever the IP enforcement bill of the month happens to be.

Naturally, this statement conveniently overlooks the fact that there are a number of countries with high levels of copyright infringement – India and Nigeria are but two examples – that also have rich home-grown movie industries.  This incongruity between rhetoric and reality might be explained if we assume that when movie studios say “a viable movie industry” they really mean “a viable Hollywood movie industry.”  However, there is one place where it is even harder to rationalize Hollywood rhetoric with Hollywood reality: China.

Exactly What Hollywood Warns Against . . .

As any resident, visitor, or causal reader of the news knows, there is a lot of intellectual property infringement in China.  Unauthorized copies of the latest Hollywood blockbusters are available from any number of retailers – from street vendors to brick and mortar establishments. 

In fact, in many ways China represents exactly the type of intellectual property dystopia that Hollywood spends a great deal of time, energy, and resources fighting against here in the United States.  One could be forgiven for assuming that, with such a casual attitude towards intellectual property and rampant copyright infringement, China would be precisely the kind of market that would not even be worth entering for a major American movie studio.

. . . And Yet an Irresitable Market

Of course, that assumption would be exactly wrong.  Authorized movie ticket sales increased 30% in China last year.  That was after a 61% increase the year before.  China is now the number three market for movies, trailing the United States and Japan.

And the movie studios are bending over backwards to get even further engaged in China.  Studios are editing films to make sure they do not anger the Chinese censors, or simply scripting them with China in mind from the beginning.  The Studios’ chief complaint is that they are not getting enough movies into China.

Additionally, they are cutting “co-production” deals with Chinese companies in order to make it easier to enter the market.  These deals often involve giving production credits to connected businesspeople in order to ease a film’s entry into the country and past its censors.  Recently, the studios received letters from the SEC expressing concern that “inappropriate payments” related to this process may violate the Foreign Corrupt Practices Act.

Studios have also been fostering relationships with Party leaders in the controversial Linyi district – until recently the home (and prison) of the blind human rights activist Chen Guangcheng.

There Must Be Something Worthwhile

None of this means that movie studios have been bribing Chinese officials or purposefully seeking out relationships with abusers of human rights.  However, it does highlight that working hard to enter the Chinese market comes with some significant costs and may require troubling ethical compromises.

Which, in and of itself, is not necessarily noteworthy.  China is a country with 1.3 billion consumers and many industries are clamoring for access.   But, considering the rhetoric that movie studios use here in Washington, one could be forgiven for thinking that China was a market uniquely unattractive to the movie industry.

The fact that it is not – that it is so attractive that studios are willing to brave the ire of human rights activists, the SEC, and Chinese censors – suggests that maybe some of the MPAA rhetoric here at home is overblown.  Even with its host of intellectual property problems, China remains an attractive and growing market for Hollywood. 

All of this raises the simply question: if the movie studios can find a way to compete with infringement in China, why can’t they do it here at home?