{"id":26320,"date":"2017-11-15T22:57:24","date_gmt":"2017-11-16T03:57:24","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/"},"modified":"2017-11-15T22:57:24","modified_gmt":"2017-11-16T03:57:24","slug":"thats-all-folks-warner-bros-in-china","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/","title":{"rendered":"That\u2019s all Folks: Warner Bros in China"},"content":{"rendered":"

Through its onscreen portrayal of the American dream, Hollywood has itself come to represent the fulfillment of that same dream. What\u2019s more, the influence of Hollywood extends far beyond the shores of the US and the borders of the entertainment industry. Hollywood has propagated western culture as the benchmark of aspiration and in the process cultivated a global movie industry worth $38Bn in 2016, of which 70% of revenues come internationally.[<\/span>1]<\/span> In turn, Hollywood douses American made brands with an aura of aspiration, stimulating significant export demand. Perhaps it is ironic then that the President\u2019s recent escalation of anti-trade rhetoric with China could disrupt Hollywood\u2019s supply chain \u2013 making it impossible for studios to access Chinese consumers. While the movie industry\u2019s financial flows are small compared with other business sectors, movies are highly visible, symbolic, and politicized. [<\/span>2]<\/span><\/p>\n

Warner Bros (WB), founded in 1923, is the largest movie studio in Hollywood, with a 26% share of the Global Movie Industry.\u00a0<\/span>[3]<\/span> WB owns distribution rights to movies, either by producing them internally, or by purchasing rights from other studios. WB then monetises these rights through distributors who sell the movie to end consumers (of which WB receives a share of revenue). Revenue is generated through three major sources: cinema ticket sales (c.40%), home entertainment (DVD, Pay per View) (c.30%) and TV licensing (c.30%). It is important to note that cinema sales set the tone upon which the two other segments capitalise. [<\/span>4]<\/span><\/p>\n

China is the biggest and fastest growing export market for WB movies. Chinese box office revenues were $6.4Bn in 2015 and have grown 144% since 2012 (a stark contrast to the 6% growth in the US over the same period). [<\/span>5]<\/span> China’s box office is disproportionately skewed toward blockbusters and was responsible for c.50% of worldwide revenue for the top seven grossing films in 2016.\u00a0<\/span>[6]\u00a0<\/span>Thus, the Chinese market is a significant driver of profitability for these \u201cblockbuster\u201d productions and offer redemption to those which underperform in Western Markets.<\/span><\/p>\n

This pace of growth is astonishing in light of the regulatory framework that governs all cinematic releases. <\/span>Access to the Chinese consumer is defined by a single agreement between Hollywood and the Chinese Government limiting both the number of foreign films allowed into China (57 per year), and the profits allowed out. [7]<\/span>\u00a0In addition, the Government requires movies to be censored, posing problems for WB, as it is difficult to satisfy the tastes of the US consumer and Chinese Government all at once. <\/span>To secure a valuable release slot Hollywood studios are beginning to portray China in a more positive light (a strategy which seems to be delivering results – in 2016 only 34 movies were allowed into China). <\/span>This has not gone unnoticed in the US political sphere; representatives from both sides of the political aisle have expressed “growing concerns about China’s efforts to censor topics and exert propaganda controls on American media.” [8<\/span>]<\/span> If a trade war with China were to occur then it is possible that distribution access to China would become impossible for WB.<\/span><\/p>\n

To mitigate this risk and evade government quotas, WB has recently been entering into co-producing agreements with Chinese movie partners to create local Chinese content.\u00a0<\/span>[9]<\/span>\u00a0However, the explicit tailoring to Chinese consumers results in content which cannot be monetised outside of China. This represents a change to WB\u2019s current content model which has historically relied on global blockbusters to drive demand. <\/span><\/p>\n

Whilst this provides a short term solution for WB, the co-production model is unsustainable. There is a risk that, as in other industries, China wants WB to hand over expertise to their Chinese partners, only to have the Chinese companies eventually replacing WB. [<\/span>10]<\/span>\u00a0Right now, Chinese studios produce mainly comedies with limited appeal \u00a0which lack the brand names that make a reliable hit. However, investment is taking place and local quality movies will improve over time; <\/span>Dalian Wanda (China\u2019s largest commercial property group) is currently developing one of the largest movie\u00ad production facilities in the world in Qingdao. [<\/span>11]<\/span><\/p>\n

To lock in longer term supply chain security WB should invest in local production infrastructure. The movie industry is changing, success in China is no longer about censoring US content and selling it to western obsessed Chinese consumers. To retain access to the market, and embrace the shift in consumer tastes, WB must move to a fully owned local production model and own locally produced content, circumventing political quotas and maintaining control of their IP.<\/span><\/p>\n

This throws up a number of questions: Is this the beginning of a paradigm shift in Hollywood\u2019s content strategy? Is the rising dominance of China fundamentally changing Hollywood? Does moving to a local production model creating locally relevant content mean that budgets for US movies will decrease? <\/span><\/p>\n

(800 words)<\/span><\/p>\n

 <\/p>\n

    \n
  1. https:\/\/www.statista.com\/topics\/964\/film\/<\/span><\/a><\/li>\n
  2. Patrick Frater, Variety.com, \u201cUS and China struggle over film quotas\u201d February 2017<\/span><\/li>\n
  3. https:\/\/www.statista.com\/statistics\/243196\/market-share-of-the-leading-film-studios-worldwide-by-region\/<\/span><\/a><\/li>\n
  4. Stephen Follows, \u201cHow Movies make Money in Hollywood\u201d, July 2016<\/span><\/li>\n
  5. Michal Lev-Ram<\/span>, Fortune Magazine, \u201cCan China Save Hollywood?\u201d, July 2017<\/span><\/li>\n
  6. Mark Hughes, Forbes.com, \u201cHow China Has Taken Over The Worldwide Box Office In 2017\u201d, April 2017 <\/span><\/li>\n
  7. Patrick Brzeski, The Hollywood Reporter, \u201cChina Box Office Remains Sluggish in 2017, Despite Big Hollywood Gains\u201d, July 2017<\/li>\n
  8. Hannah Beech \/ Hengdian, Time Magazine, \u201cHow China Is Remaking the Global Film Industry\u201d, Jan 2017 <\/span><\/li>\n
  9. Patrick Brzeski, The Hollywood Reporter, \u201cWarner Bros. and Ratpac are doubling down on Chinese-language film production\u201d, April 2016<\/span><\/li>\n
  10. Nancy Tartaglione, Deadline.com, \u201cDoes Trump\u2019s Trade Probe Impact the Film Industry?\u201d, August 2017 <\/span><\/li>\n
  11. Michal Lev-Ram, Fortune Magazine, \u201cCan China Save Hollywood?\u201d, July 2017<\/span><\/li>\n<\/ol>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Is the Curtain Falling on Hollywood’s Chinese Dream?<\/p>\n","protected":false},"author":9687,"featured_media":26773,"comment_status":"open","ping_status":"closed","template":"","categories":[154,1601,2052,148,2147,1519],"class_list":["post-26320","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-china","category-donald-trump","category-hollywood","category-movies","category-time-warner","category-trump","hck-taxonomy-organization-warner-bros","hck-taxonomy-industry-entertainment-and-recreation","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nThat\u2019s all Folks: Warner Bros in China - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"That\u2019s all Folks: Warner Bros in China - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Is the Curtain Falling on Hollywood's Chinese Dream?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/WB4.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"620\" \/>\n\t<meta property=\"og:image:height\" content=\"388\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/\",\"name\":\"That\u2019s all Folks: Warner Bros in China - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/WB4.jpg\",\"datePublished\":\"2017-11-16T03:57:24+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/WB4.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/WB4.jpg\",\"width\":620,\"height\":388},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thats-all-folks-warner-bros-in-china\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"That\u2019s all Folks: Warner Bros in China\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"That\u2019s all Folks: Warner Bros in China - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/","og_locale":"en_US","og_type":"article","og_title":"That\u2019s all Folks: Warner Bros in China - Technology and Operations Management","og_description":"Is the Curtain Falling on Hollywood's Chinese Dream?","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/","og_site_name":"Technology and Operations Management","og_image":[{"width":620,"height":388,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/WB4.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/","name":"That\u2019s all Folks: Warner Bros in China - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/WB4.jpg","datePublished":"2017-11-16T03:57:24+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/WB4.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/WB4.jpg","width":620,"height":388},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thats-all-folks-warner-bros-in-china\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"That\u2019s all Folks: Warner Bros in China"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26320","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/9687"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=26320"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26320\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/26773"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=26320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=26320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}