GHJ recently hosted the 2019 HLB Asia Pacific Conference
in Los Angeles, marking the first time the conference was hosted in the U.S. HLB is a worldwide network of independent accounting firms and business advisers, with member firms in 150 countries, 25,000 staff including partners in 700 offices worldwide.
This year’s conference gathered approximately 100 delegates from HLB member firms that do business across the Asia Pacific region and featured high-profile speakers covering a variety of trending issues and topics.
As part of the conference, GHJ Principal Anita Wu moderated a panel titled “Hollywood Deal Making Insiders,” that addressed recent developments and cross-border opportunities in the Asia–U.S. entertainment sector and beyond. Guest panelists included:
Below are key takeaways from the “Hollywood Deal Making Insiders” panel:
Trends of Chinese investment in Hollywood: The panel spoke about the cooling off of Chinese investment in Hollywood, citing factors such as China’s tightening control of capital outflow on investments that are considered “irrational,” the current political climate and increased government scrutiny prompted by recent tax scandals in the Chinese film industry. The panelists anticipate seeing more seven to eight-digit smaller deals as opposed to nine-digit mega deals. Simultaneously, there is increased collaboration between China and other regions, such as China-Europe, China-Japan and China-Korea collaborations.
How slate financing deals work for outside investors: Though slate financing deals are becoming fewer and further between, the panel discussed slate financing deals where investors can (and whenever possible, should) diversify their portfolio with the likelihood of having some hits to offset the blows. Although it is helpful for investors to pick and choose individual films, studios ultimately control which films they offer for investors to help fund. Generally, a slate deal provides investors the ability to invest in 90-95 percent of a studio’s output, with certain carve-outs such as franchise films or animation films. However, with certain leverage, investors may be able to negotiate specific films to be included in the slate.
Chinese audiences are developing their own taste for content: The panelists all observed that the taste of Chinese audiences is evolving and becoming more sophisticated. Hollywood films that achieved huge box office success in China are mostly franchise films or big-budget films with major stars or state-of-the-art special effects. Conversely, many of the China-made box office hits are low-budget independent films. As locally produced films appeal more to the culture and emotions of Chinese audiences, and with improved quality of Chinese filmmaking, Hollywood films no longer dominate China box office. Homegrown movies have enjoyed a steady climb in revenues in recent years. The panel also discussed the surprising popularity of Green Book in China. The film earned $71M in China box office, compared to $85M in North America. In addition to great story telling, the panel noted other factors that played a role in Green Book’s success: the film opened in China soon after its Oscar Best Picture win, so it was able to piggyback on the buzz. In addition, Green Book benefited from a lot of publicity and promotion by Alibaba, China’s ecommerce giant, who co-financed and co-distributed the film in China.
The panelists noted that stories that successfully work for both Eastern and Western markets are difficult to achieve due to differences in culture and audience taste. Instead of trying to make films that appeal to global audiences, it would make more sense to focus on making the best possible films for the local audience, as a film doing well in the local market has a better chance of attracting international audiences. While no one has broken the formula of making successful co-productions, the panelists have seen more opportunities in format sales where a production with proven success in one market is adapted, tailored and localized for another market. Therefore, it is important for IP originators to try to retain format rights when negotiating their deals.
The panel did an excellent job of conveying the many opportunities that exists in Asia-U.S. entertainment sector. Contact GHJ’s Entertainment Practice should you wish to discuss how any of the above opportunities can help your entertainment business.