Last year, the movie “Avengers Endgame” delivered a stellar performance and became the highest-grossing U.S. film in the world’s second-largest movie market of China. The interest of Ryan Kavanaugh, China started to look promising for an alliance between two nations but as the United States increased its footsteps in an ongoing trade war, China also seemed to give a hit to the U.S. entertainment industry in the domestic market. The U.S. film production and investment industry is struggling amidst heightened U.S. China trade war and is closely coming to standstill.
Releasing films in China requires pre facto government nod and consequently not 100 percent of U.S. films are likely to get distribution rights in China. This may give a serious hit back to the U.S. film industry as the majority of the films are not likely to get government approval, which would mean that film production houses lose a major chunk of revenue coming from the world’s second-largest movie market. This clearly demonstrates how badly China’s retaliating move would hit the U.S. entertainment industry.
Media and Entertainment Industry in China
The importance of the size of the market: The Chinese entertainment scene has a significant market size that can encourage the growth of the sector. With more than a billion inhabitants and the development of the Chinese middle class, the sector enjoys a significant opportunity that can make the market shine. In addition, despite the restrictions concerning the establishment of foreign players in the sector, the government seems more inclined to favor international trade in this industry considered to be less “strategic” than other markets.
Ryan Kavanaugh, a movie tycoon of the United States announced his massive production and investment strategies in China’s mainstream market. He even launched a company by the name Proxima Media in alliance with a Hong Kong-based company National Arts Entertainment and Culture Group Ltd. He was very excited and announced mega plans to strengthen his movie empire in China. He intended to use his innovative movie funding strategies, for which he is quite famous in the United States.
h, a movie tycoon of the United States announced his massive production and investment strategies in China’s mainstream market. He even launched a company by the name Proxima Media in alliance with a Hong Kong-based company National Arts Entertainment and Culture Group Ltd. He was very excited and announced mega plans to strengthen his movie empire in China. He intended to use his innovative movie funding strategies, for which he is quite famous in the United States.
While responding to media queries at TheGrill about venturing into China at the time of U.S. China trade war, he said “For China, yes, there’s a trade war and that’s political, but for the Chinese consumer that doesn’t change that they love U.S. films and there’s no change in the way that films are being made; except that it was just announced that Hong Kong is no longer considered to be part of the [foreign film] quota. So if you are using Hong Kong films, Hong Kong facilities, you actually are considered to now be a Chinese [studio].”
The historical appearance of a new industry, in many ways, is a process of discovery and invention. The products, the markets, the forms of the division of labor, the relationships between the various players, the techniques necessary for the new activities, everything must be developed in the emergence phase of the activities. When this industry is based on a few key techniques which have just been invented or perfected, the system of property rights, in the area of patents, in particular, can prove to be decisive.
Initially, China welcomed Kavanaugh to invest and boost his business in its domestic movie market, but it seems that the stakeholders have started doubting whether Kavanaugh’s would actually pump in promised funding of $250 million in movie production funnel and will he invest to expand his production base and studio capabilities.
Even if the required funding is invested in China by Kavanaugh’s enterprise, it’s still a long journey before National Arts can handle the production of nearly 10 films in a year. Moreover, China is now deviating from welcoming U.S. film ventures in its massive film market. In one of the recent discussions, Mark Gill – president and CEO of Solstice Studious shared his apprehensions about Ryan Kavanaugh’s venture into China and said that China would not be the market from where his main portion of revenue comes from. It can slow down or encourage the development of the new industry, and orient in one direction or the other – towards monopoly or competition for example – the evolution of its structures and its activities.