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Friday, December 16, 2016

Will The Cinema Industry Be Trumped?

Trade Wars: Reciprocity is the new game in town
How will the cinema industry react to the newly elected Trump Administration? Certainly threats of tariffs would be bad news for the major studios.

For example, Hollywood has been counting on increasing access to Chinese moviegoers to fuel global box office growth. Currently, China allows 34 foreign films (virtually all U.S. produced) into the Chinese market each year.  That rule ends in February and the major studios were counting on the quota being increased or totally lifted. So, if Trump is looking for fairness in trade and quid pro quo in international dealings then China should lift the ban.

Chinese investors, particularly the Wanda Group,  has been allowed to make substantial investment in both cinema production and exhibition within the U.S. On the flip-side, China has been rapidly building new cinemas to placate its growing middle class and the theory is that China will need U.S. films to fill those seats. Yes, the Chinese film industry has entered into co-production deals with all of the major studios to produce locally made films but these projects will not be sufficient to fill their cinema entertainment needs.

For many decades, both Democratic and Republican administrations followed the same policy in the way the U.S. handled its relationship with the Chinese government.  The notion was that a stronger engagement would lead to the growth of a huge Chinese consuming middle class.  Indeed, a middle class has developed but the Chinese government has not moved toward a freer society - instead the U.S. policy has resulted in the development of a major rival that didn't previously exist.

With the Trump administration the opportunity for a more pragmatic approach to our dealings with the Chinese government is open. There will be lots of bluster and threats but in the end a mutually beneficial and cooperative deal will be struck for the entertainment industry. Reciprocity is the new game in town and I predict that in February the Chinese will increase their film quota limit on films.

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