Challenges Ahead for China
www.betoptech.com)." />"There are a lot of hoops you have to go through to get approved by the government to produce a film," says Geiger. "If the government doesn't approve it, it can't be done. But [the rules are] not articulated that clearly." He adds, "The government is very attracted to the commercial side of this, but that pesky little freedom-of-speech thing is a bugaboo for them."
Jan Nagel, a consultant known as the Entertainment Marketing Diva, who has worked with several studios in China, explains that SARFT has a two-times-per-year submission system. The producer must first get the script and concept approved, and then the finished production. In addition to having "proper" messages, the show or film must have Chinese producers and they must hold the IP for the Chinese market. In addition to the national approval system, each province has its own approval process that animators must go through if their properties are distributed in that region.
Challenges Ahead There is some government funding available, as well as private money. "There's quite a bit of wealth in the mainland," says Nagel. "Private investors are investing."
On the other hand, it can be difficult to find investors, distributors or coproduction partners from outside China. The Road to Home is hoping to change that on the feature film side. In addition to government and private investment in China, Geiger expects an international distributor to fund up to 50% of the production, which will be costly by Chinese standards. (A typical animated film is produced for about $1 million to $5 million.)
Studios also have difficulty generating revenue beyond the cost of production. Ancillary products -- from publishing to licensed merchandise to VCD (China's DVD-like home entertainment format) -- are rarely profitable due to rampant piracy. "Additional earnings from repurposing the property in games, books and especially toys are an important offset to perhaps-insufficient earnings from government funding and television licensing alone," Ching explains. But with illegal distribution so prevalent that TV stations air pirated content and VCD stores carry pirated U.S. films while the movies are still in U.S. theaters, those earnings are hard to come by. "We think that achieving a multiple-revenue model for a property is one of the biggest challenges facing the Chinese animation studios currently," says Ching.
One significant challenge for Chinese studios is creating a viable business model. "Even the most 'generous' broadcaster, CCTV, pays an airing right that only covers a tenth of the average production cost," Wu explains.
Cultural, translation and creative issues also abound, especially for properties with global intentions. Technically, Chinese animators are catching up with those in the West. "If our professional work [ranges from] four to 10 on a scale of one to 10, in China it [ranges from] about one to seven," Geiger says, adding that there is ongoing improvement.
But storytelling and characterization are weaknesses, with properties emphasizing education over entertainment. "It's like having a librarian make a film," Geiger says. He believes Kung Fu Panda, which has been popular in China, has shown people that a film can be fun while still demonstrating an understanding of Chinese culture. "It's caused a lot of soul-searching in the Chinese animation community," he explains. "They're asking, 'why can't we do that?'"
Wu believes the biggest challenge facing Chinese studios today is the need to attract good talent. "Not only excellent creatives. Not only experienced directors and producers. Highly skilled executives, marketing staff and translators are also in urgent need."
Although Chinese studios have many hurdles to clear, there are positive signs for the future. "The China market has not been a viable market, but it is showing signs of definitely becoming one," Bristow says.
"In the short term, I think the local competition for the domestic market will reveal some winners and losers," Ho says. "Logically, the winners will selectively absorb the talent from those who cannot afford to play on. So in the long term there will be a group of elite studios getting all the best people, who are geared up for the international markets, leaving behind the local markets for the middle tier to play on."
Karen Raugust is a Minneapolis-based freelance business writer specializing in animation, publishing, licensing and art. She is the author of The Licensing Business Handbook (EPM Communications).
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