Why China, not the U.S., is the audience Hollywood wants

Last weekend Marvel’s (DIS) Guardians of the Galaxy opened with a bang. The ensemble production, depicting a team of superhero misfits on the run from a band of extraterrestrial bounty hunters, blasted away at the box office to the tune of $94 million domestically, the largest ever U.S. weekend opening in August. While a smashing success thus far domestically, Hollywood will be looking even more closely at the numbers when the film opens in China sometime in September.

The film stars a mix of stars from various backgrounds, and for Hollywood these days that is no accident. As box office numbers domestically have been sinking in recent years, the tallies have been booming abroad, specifically in China and other Asian markets. Box office receipts in the U.S. are sliding nearly 20% compared to last year, while China’s is booming in 2014, up 33% in the first quarter alone. Indeed, Last year China brushed past Japan to become the second largest film market in the world.

The size of the Asian box office shouldn’t be too surprising at this point, and neither should its influence on how studio movies are made says Josh Brown, CEO of Ritholtz Wealth Management. “American audiences haven’t really caught on yet, or don’t seem to mind. Ironman 3 was essentially made for the Chinese audience, and it worked. They even went so far as to change the villain from being of Asian descent, to being kind of like a non-threatening drunken British actor, and that’s a huge departure from the source material in Marvel comics.”

Transformers takes on China

The game-changer for China becoming the primary target of Hollywood’s blockbuster movie focus has been the performance of Transformers: Age of Extinction. Paramount (VIAB), the studio behind the film, laid much groundwork in China, from moving physical production for part of the film there (and hiring famous Chinese actors) to featuring many well-known Chinese products in the form of placements in the movie (even Chinese viewers were perplexed by a scene were a character uses an ATM card from the China Construction Bank while deep in the heart of Texas).

As far as Transformers goes, “[Paramount] didn’t even bother having a premiere here, they did the thing in China,” Brown observes. The numbers do speak for themselves. Transformers has pulled in over $300 million from China alone, whereas box office receipts in the U.S. are around $241 million for a movie that just crossed the $1 billion mark in worldwide ticket sales. Transformers has now beat out Avatar to be the number one grossing film in Chinese box office history.

“It’s a massive audience, [the Chinese] get really excited about going to the movies,” Brown opines. “They’re sleeping in the streets for Spiderman there, it’s a totally different ballgame.”

Changing plot lines and movies in Mandarin with English subtitles?

Examples of changing plot lines, from World War Z taking out reference to zombies originating from China, to the aforementioned Iron Man 3 altering the ethnicity of a villain, abound. While hard-core moviegoers and fans of works of fiction adapted to the screen may complain, it’s hard for Hollywood to ignore the situation at hand.

“Hollywood looks at this and says, ‘wow, what if there were a place that has four times as many people [than the U.S.], where movies were still a novelty, and we could charge a premium price in the cities?’” In Brown’s mind, it makes complete financial sense for companies outlaying hundreds of millions of dollars to minimize risk of cultural offense when releasing their movies abroad.

Brown has noted previously that it wouldn’t surprise him if major studios released a film or two in an Asian language using English subtitles. While that may be a turn off to some U.S. moviegoers, the fact remains if the movies are actually good, audiences on both sides of the pond will be willing to pay money to see them.

“I think there’s room to make quality movies that appeal to a broader audience without offending any sensibilities,” Brown concludes, pointing to the Christopher Nolan helmed Batman Dark Knight trilogy as movies that were popular, as well as critically-acclaimed both here and abroad.

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