We Have 6 Questions That Might Give You Some Clues to Understanding China's Film Industry | Shanghai Film Festival

Over 200 events across nine days, revolving mostly around these key words.

From the industry's point of view, it is hard to say whether China's film festivals create any real value or merely stage a ceremony — unlike Cannes or Berlin, they rarely push a deal through, which was supposed to be the whole point of gathering a roomful of peers.

Judging by past editions, "a result" may describe them better than "an event." If you want to know what people in China's film industry care about, these nearly 200 events over nine days are the best clue. But hunting for keywords may not be the best approach, so we have distilled six questions for you — and we welcome your own.

1. Why Hasn't the Internet Disrupted the Film Industry?

On June 15, 2014, Yu Dong, president of Bona Film Group, told that year's Shanghai Film Festival that film companies would all end up working for BAT — Baidu, Alibaba and Tencent: "Whatever BAT wants, we'll do." Two years later, at this year's festival, the three are keeping a much lower profile, appearing together only at one large industry forum.

That does not mean the internet power BAT stands for matters less.

Yu Dong had it backwards. Film companies have not gone to work for BAT; BAT has come to look more and more like a traditional film company. Alibaba and Tencent in particular have each set up a film arm, and with their capital and their distribution channels they are now a new force in film and television.

The internet is no longer a hot concept, just as we no longer gasp at how it is changing our lives — it has become part of life. Neither Alibaba nor Tencent, big as they are, has upended the order of this industry; both still organize themselves around investment, development, production and promotion. The internet has brought money, online marketing channels and new ways to distribute, but it has not changed what the business is.

The reason is simple. Traditional film companies hold the content and the production skill that internet companies find hard to acquire — a skill so complicated that it is close to human nature itself, and therefore beyond the reach of an internet that is good at efficiency. Internet companies can build a long tail and make collaboration easier, and products may change because the channels have changed, but screenwriting, special effects, marketing and distribution... nothing that has to be there has gone away.

That is why internet companies usually choose to work with film companies instead. Maoyan is now controlled by Enlight Media.

Tencent also made a loud entrance with the newly released Warcraft, showing the film business how much force it can bring once it mobilizes everything it has. But that also shows that Tencent, too, has to enter this industry slowly, following its traditions. It bears out a line from the film critic Zhou Liming: almost every new industry that looks as if it will destroy the movie business ends up becoming part of it.

2. Is "IP" About to Go Out of Fashion?

Xu Yuanxiang, the Alibaba Pictures vice president who set off an uproar last year by saying the film and television industry would no longer need screenwriters, has left the company. Answering a question on Fenda, he said: "The market is a funny thing, actually. This time last year, not knowing what IP was made you 'out.' Now talking about IP makes you 'out.'"

Xu's remark is obviously built to shock, but it is true that more and more people see that talking about IP alone adds nothing to their standing in this industry. Only two forums this year have anything to do with IP: Douban's "From Good Stories to Good Films — How Douban Read Can Use Its Community of Writers to Get Film Projects Moving," and NetEase's "A Bellwether for Chinese-Language Film: Films and Games Living Off Each Other."

Both companies are newcomers — more precisely, they are still circling the edge of the industry. Douban launched a "Film and TV Adaptation" section half a month ago, inviting industry professionals to work on adapting pieces from Douban Read for film and television; NetEase set up its own film and television company last December, hoping to work out how a game can be turned into a film successfully.

The market's response to both has been mostly doubt. How Douban will attract good screenwriters, and how novels turn into scripts, are still open questions. NetEase has to break the curse that game adaptations flop. The market has not applauded either company simply because both appear to sit on a great deal of IP.

The essence of the film and television business is still a good story. Developing IP can lengthen a film company's production chain and hedge the risk inside any single project — the road Hollywood has taken. But Hollywood's prospects keep sliding: tickets sold fell from 1.575 billion in 2002 to 1.334 billion in 2015, and it is getting clearer how much audience confidence so-called IP development — more accurately, sequel development — has burned through.

3. Will Capital Save Film, or Wreck It?

Film is an expensive art everywhere in the world. But the relationship between China's film industry and capital is stranger than most. As a place to park money, China may hold more hot money than any other country — not only because it is the world's second-largest film market, but because of the wider economy around it.

These days the film world sounds far more wary when capital comes up. In practice, the two sides still clash on many fronts.

In Hollywood the major studios are themselves enormous pools of money, large enough to pay for most films on their own. China does not yet have enough film companies able to keep putting money in and hold the market up, which has left plenty of room for outside investors.

Many investors are no longer content to put money into a few films. They try to invest in film companies, or start their own. In the first half of this year, companies with no previous connection to film — Zhongnan Heavy Industry, 58.com — opened film businesses, and so much hot money poured into the industry that the China Securities Regulatory Commission took notice. At the Shanghai festival, many new film companies and funds will hold press conferences to say hello to the rest of the trade.

What capital does once it is inside the film business goes well beyond a few films or a few new companies. In March the box-office fraud around Ip Man 3 came to light: Dr. Shi Jianxiang used companies he controlled to run the film as a financial product, trying to recover its investment before it reached theaters.

Investors are bound to chase the largest possible return. Another event at the festival will take up return on investment in film. Film is, objectively, a high-risk, high-return business, and how to dodge that risk — or pass it to someone else — is the first thing many investors want to talk about. It is around return on investment that every kind of financial instrument has been brought to bear on film, until a film becomes a sort of security. Guaranteed distribution, buying out a film's share of the profits... none of these are new, but the new players give them fresh force.

The people crossing over from other industries do not know much about film. All they have to go on is which movie is hot at the moment. Plenty of filmmakers grumble about it, saying the newcomers interfere too much with the freedom to make films and leave China's already fragile film industry in greater disorder.

4. Sino-US Cooperation: Is China Holding Americans Hostage With a Huge Market?

Ten years ago, or even five, a film-industry conference on "overtaking America" would have drawn mostly laughter. But China's total box office will pass America's within three years, and that is enough to swell a good many egos.

In 2015 QDaily spent a month reporting on Hollywood, and one large part of that work asked what Chinese audiences mean to Hollywood.

Bob Simonds, president of the young American entertainment company STX, has argued that Japan, Germany and the UAE all once brought money to Hollywood and almost without exception came away the worse for it — China is different. Compared with those countries, China has a huge home market, and as Hollywood's main battlefield shifts from a stalled North America to the rest of the world, China is naturally a market it has to fight for. Money and a market together are what make Hollywood's dealings with China so unusual.

Chinese companies used to need Hollywood's management systems and its creative output, and they still do. Alibaba Pictures has wrapped only one project since it was founded, See You Tomorrow, but for its latest film, Legend of the Ancient Sword II (《古剑奇谭二》), it brought in Renny Harlin, the director of Die Hard 2, to supervise. With a big Hollywood director's name behind them, Chinese companies feel steadier.

More important, the Americans have grown more willing to make the first move, hoping that one or two Chinese stars and a few local scenes will bring them closer to this market. This applies only to mainstream Hollywood — the most easily recognizable strand of American cultural DNA. If all goes well, the American way of telling stories may cross over into China, the way we took so eagerly to their T-shirts and jeans.

5. Why Are More and More People Worried That Box-Office Growth Will Stop?

To follow on from the last question: box-office growth — the one thing about this market most worth talking about — is close to the lifeblood of China's film industry. It matters not only to Chinese people but to Americans and to the film business worldwide. The cold market in April and May this year has already made many people nervous. The forces driving it have begun to look weak and self-contradictory: audiences are still eager to go to the movies, but there are not enough films to fill the market's capacity.

Elsewhere on the program, this year's festival has a forum on a fairly obscure subject: the completion bond. The term means that if a film cannot be finished, an insurance company pays for the losses.

When Paul Walker, one of the stars of Furious 7, died in a crash during filming, people wondered whether the film would be abandoned altogether, and how large the studio's losses would be if it were. We will not go into the mechanics of completion bonds here. Look at it from another angle: people in China's film industry are already trying to work out how to guarantee, from an investor's side, the return on film as a product.

For a long time the boom in China's box office has rested not on films but on cinemas. Land-grab expansion has kept the market growing about 30 percent a year. But research by the film consultancy Fanying suggests that the box-office growth built on opening cinemas may soon hit a ceiling, even though the moviegoing population still has plenty of room to grow. Fanying will discuss all of this at the Shanghai festival, along with where cinemas, now close to saturation, should go next.

The cinema-chain giants are thinking about the same thing. Dadi Cinemas will discuss new directions for chains, and Wanda Cinema Line will keep asking what the cinema of the future looks like. In their view a cinema should not be only a retail counter for tickets and popcorn — otherwise the business becomes a thing of the past.

6. If VR Isn't a Gimmick, How Far Is It From Real Change?

On June 9, before the Shanghai festival formally opened, the "Chuang Shi Ji" VR Park opened as the earliest official event. It gathered companies working on virtual-reality content or technology — PPTV, Heyi Group, HTC and others — who brought their products for visitors to try.

At the Shanghai festival a year ago, VR was still a meaningless pair of letters to most people; now it is the most fashionable concept in film circles. This time, though, VR is probably more than a gimmick: the festival also holds a three-hour virtual-reality summit, with Xiaomi Pictures, Digital Domain, Motion Magic and a number of Chinese and foreign VR companies attending.

Traditional filmmakers are less eager about VR films than the technology companies are, but "cautious" describes them better than "flatly opposed." Their worry is mostly about how to put VR to use in a film. "Honestly, nobody can see clearly yet how virtual reality becomes film," Chen Hongwei, general manager of Tencent Pictures, told QDaily at a VR film festival run by Gewara last December. "We are still full of questions and expectations about using VR in film."

Few technologies in the history of film have overturned the whole industry and changed its nature. Perhaps only sound brought a complete, fundamental change. Just as 3D never replaced 2D, VR is unlikely to set off a real change of kind.

But like the other technologies film has accumulated, VR may change film in ways that last and cannot be undone.

The last technology that changed the nature of the film industry probably goes back 40 years, to Star Wars. In the words of the film critic magasa, Star Wars amounted to inventing the concept of the "blockbuster," steering film toward a model built on action spectacle, visual effects and franchise spin-offs.

All of that rests on better computer effects. George Lucas founded Industrial Light & Magic for Star Wars; James Cameron and Scott Ross, who had left ILM, put together Digital Domain; Peter Jackson and his partners founded Weta Digital. Computer effects became an industry of their own.

Computer effects also changed how films tell stories. As films like Independence Day arrived, the tough-guy action picture that used to sell tickets faded. Spectacle and effects became part of the storytelling. The box-office pull of effects blockbusters pushed all of Hollywood further in that direction.

Cover image source: chuansong.me, Visual China Group