“One of the most dangerous plots ever instigated for the overthrow of this Government has its headquarters in Hollywood.” The year was 1945. The speaker was Rep. John E. Rankin (D-Mississippi). The forum was the House Un-American Activities Committee.
Rankin was a racist, a bigot, and an overall nasty fellow. On this, however, he was absolutely right. The only problem is that he was 70 years too early.
Of course, he was somewhat right when he spoke the words, too. Ronald Reagan was head of the Screen Actors Guild from 1947-1952, and again in 1959-1960. During that time, he watched as Communist revolutionaries infiltrated the unions, attempting to shut down the studios and turn the instruments of culture toward anti-American ideologies. They remained a vocal minority inside Hollywood, but a dangerous one.
Now, the threat is much greater. The threat remains Communist. It is no longer Russian, and it is no longer internal. The threat comes from abroad, and it comes in the form of cash.
The dirty little secret within Hollywood for the last decade has been the industry’s reliance on Chinese cash. The Chinese movie audience is the fastest growing audience in the world; Fox, Warner, Sony and Disney have developed local programming for the Chinese market. James Cameron’s Avatar – which, as an environmentalist critique of first world imperialism, you would figure the Chinese would love – earned over $200 million in country. 2012 and Transformers 2 also blew the doors off the box office in China. During 2010, move than 1,000 movie theaters opened.
During the 1990s, European markets traditionally provided the extra boost for American box office offerings. Frequently, movies with large budgets would be released to certain loss in the United States with the knowledge that the European audiences would fill in the gap, or that the movie could be licensed to different countries at premiums that would fix the balance sheet. As more and more movies began to take advantage of foreign markets, however, the market was saturated. New sources of cash had to be found.
Hollywood, like Washington, D.C., looked East.
In December, Legendary Pictures, producers of Batman Begins, Superman Returns, 300, The Dark Knight, Watchmen, The Town, and the recently-released Sucker Punch, among others, sold 3.3% of its equity to Hong Kong’s Orange Sky Golden Harvest Entertainment. The press release from Legendary explained, “The transaction is party of an effort to explore broader partnership opportunities in China and beyond …” That’s just one case in point. I’ve personally looked at proposals from multiple companies looking to raise significant cash – in the hundreds of millions of dollars – from the Chinese government. Also in December, China Daily reported that increasing numbers of Chinese companies are looking to coopt Hollywood talent, “speeding up their internationalization and strengthening ties with their peers across the Pacific through direct investment in Hollywood, as the dream factor has seen financing from its home market drying up in recent years.”
The idea for production companies is simple. There are two basic benefits to reaching out to the Chinese directly. First, Chinese investment makes the probability of an open Chinese market far more likely. Second, Chinese investment often makes the difference between production of a film and that same film ending up buried on a shelf somewhere.
Of course, every deal with the devil has strings attached.
China is not an open market. Films that screen in China must meet China’s political standards. As of May 2008, China revealed that it would not allow any film to enter its markets that contained hardcore sex, rape, prostitution or nudity, vulgar dialog or music. So far, so good. Then it starts to get odd. “Murder, violence, horror, evil spirits and devils and excessively terrifying scenes, conversations, background music and sound effects” are all banned. The list gets downright sinister when it comes to politics: all films that “distort the civilization and history of China or other nations … or … tarnish the image of revolutionary leaders, heroes, important historic characters, members of the armed forces, police, and judicial bodies.”
Predictably enough, any film that seeks Chinese investment likely must meet these same censorship criteria. That means that films that target China in any way have no hope of ever seeing Chinese bucks.
This is problematic enough on the individual film level. Even more problematic, however, are the consequences for production companies overall. Aside from production companies which do business directly with China – companies like Sony’s Columbia Pictures, which worked with China Films Group Corporation to finance The Karate Kid, in which, coincidentally, China came off like a diverse, clean, and friendlier version of Los Angeles – other production companies are vertically integrated into other corporations, many of whom do business in China.
One perfect example is MGM. MGM’s bankruptcy opened the door to Chinese investment: no less than three Chinese companies bought in. Meanwhile, MGM Resort Internationals announced its intention to IPO a joint venture in China on the Hong Kong Stock Exchange in September 2010. Just a few months later, MGM announced that its remake of Red Dawn, in which the Chinese were slated to replace the Russians, would be changed – now the North Koreans would be the villains. The far-left Los Angeles Times – no friend to capitalism and no enemy of the Chinese government – reported, “China has become such an important market for US entertainment companies that one studio has taken the extraordinary step of digitally altering a film to excise bad guys from the Communist nation lest the leadership in Beijing be offended.” Why the sudden interest in what the Chinese think? Higher-ups at MGM explained that if the Chinese market closed for Red Dawn, the movie might have to go direct-to-DVD or simply get thrown in a closet somewhere.
This is what happens to an industry when it is unionized beyond the point of no return. Production budgets in the United States are out of control. The traditional distributorship model means that production companies must make their cash up front or lose out. That money is no longer as easily available, since overall costs are prohibitive. In the past two decades, production has fled to Vancouver, to Europe, to states with special incentives. Now, in desperate need to dough, Hollywood is directly engaging the same people who tried to infiltrated the industry some 70 years ago. Like America writ large, Hollywood is experiencing its own Red Dawn.
Ben Shapiro is a writer and attorney and a Shillman Journalism Fellow at the Freedom Center.