A Dragon Awakens: Jun Zhao Prepares China's State-owned Assets for the Future

2011/12/2 16:52:00 (Beijing Time)   Source:Film Journey    By:Keping Qiu

The last time Jun Zhao was in Los Angeles in 2006, he was heading up Guangdong Film Company. Five years later, he is back in town as the director/general manager of Guangdong Zhujiang Film & Media Corporation Ltd. (GZF&M) and has brought along the new company’s first feature.

72 Martyrs (Ying Xiong Die Xue) premiered at the seventh Chinese American Film Festival, receiving one of ten Golden Angel Awards at the prestigious event. At home, GZF&M opened the drama in commemoration of the 100th anniversary of the Guangzhou uprising, which was led by South China’s progressive artists and became a prelude of sorts to China’s Xinhai Revolution overthrowing the Imperial Dynasty. On Sept. 16, more than 2,000 guests sold out Zhongshan Memorial Hall, marking the first time that a film broke RMB Yuan 90,000 (US$14,200) at a Guangzhou premiere and surpassing After Shock’s previous 70,000 Yuan record.

What has not changed is Zhao’s drive and dedication. Immediately after delivering his opening remarks before the festival screening at Baldwin Park Performing Arts Center, he was heading off to the East Coast to visit a former colleague with whom he worked on a tea plantation during the later part of the Cultural Revolution. Zhao then returned in time for the American Film Market. Our exclusive interview was taking place in the festival-provided car on his way to LAX. Thanks to the Los Angeles traffic, even on a Saturday, we had a good full hour to talk.

Publicly announced on Sept. 30, 2011, Guangdong Zhujiang Film & Media Corporation is the aptly named subsidiary of Zhujiang Film Group and Guangdong Film Company. Guangdong is the province which Westerners used to call Canton and have often compared to California as the People Republic’s sunshine state. Zhujiang stands for Pearl River, the third-longest river, which runs through the capital Guangzhou, where Jun Zhao and his team are based. The two parent companies of GZF&M remain the custodians of the state-owned assets that they both brought into the new corporation. Under the old system, which has been in place for over 50 years, GFC was the distribution arm for primarily domestic films, including for those made by Zhujiang Film Studios.

GZF&M now combines the previously separated functions of production, distribution and exhibition under one umbrella entity, as well as advertising and talent agencies.

“This is one of many steps in our film reform that have taken place here since around 2004,” Zhao explains. “It has all been about transforming a cultural undertaking into an industry.” Furthering that goal, “this change represents a major restructuring,” however. Anticipating the next question, Zhao notes, “I know that in the United States there is anti-trust law. However, in China, our film industry is in its beginning stages. There is no such law preventing what is happening.” This type of vertically integrated structure the Chinese describe as “One Dragon” chains of industry.

Zhao also states the company’s goal and mission of being the preeminent content provider of South China, offering a model of collaboration. 72 Martyrs, for instance, was produced with major funding from China and Korea, with a Hong Kong director and actors. Currently, GZF&M has three more co-productions with Hong Kong and Taiwan in the works, with an additional four in various stages of planning.

Talking about American films, Zhao confirms, “Chinese audiences love them” and that they are taking in more than 40% of the box office while Chinese local films account for 50+%. “However, local films are on the rise,” he insists. Jiang Wen’s Robin Hood-style martial-arts action comedy Let the Bullets Fly has earned 700 million Yuan (US$110.4 million), for example. “None of the American films except Avatar has exceeded that number.” While acknowledging “the leading position of Hollywood films,” Zhao is also “very proud” of the rise in local productions.

In 2010, he continues, overall box-office revenue in China was 10 billion Yuan (US$1.58 billion) in comparison to about the same dollar amount in North America. Moreover, he says, “Chinese box office has been growing annually at a pace of more than 25% over the past several years. When ‘American big movies’ began entering China by the end of 1994, the Chinese box office was ranging from 700 to 800 million Yuan [US$126.8 million]. In mid-October 2011, it has already passed 10 billion Yuan, and is estimated to reach 13 billion Yuan by the end of the year.”

More stunning yet, this number is based on revenue sharing alone and does not include collections from the vast rural market where many millions of villagers are watching movies for free. “Taking money from the farmers is strictly not allowed,” Zhao cautions, “although the rural operators do pay film rental to the circuit that they participate in.” Some 30,000 mobile exhibition units, called “Projection Troops,” are showing films “on mostly 0.8K with pretty decent sound in outdoor settings,” he further elaborates. “Most of the Troops are privately owned by and with two or three individuals in a unit. The program’s funding comes from two sources, advertising and government subsidies.”

For the first time in the Republic’s 5,000-year history, the population in metropolitan areas now equals that number across the countryside. “Rural was always larger than the city,” Zhao notes, foreseeing major changes. “This is a tipping point that will have great impact in many aspects of Chinese society and people’s lives, including the movie business.” GZF&M is well-situated for those changes, he believes. Guangdong is number one in economic growth, in paying taxes, and also number one in box office “for nine consecutive years.” Last year alone, the province accounted for 1.6 billion Yuan (US$ 252 million), in comparison to Beijing and Shanghai with 1.1 billion and 950 million Yuan, respectively (US$173.5 and 150 million).

Zhao also provides a potential reason why. Three major exhibition chains were founded in Guangdong and have since expanded into other parts of the country as well. GZF&M’s circuit, China Film South Circuit Co. Ltd., is a joint venture with China Film Group and represents the fourth-largest operator with 130 theatres and some 1,000 screens. With close to 70 locations and close to 400 screens, Jinyi Zhujiang qualifies as the People’s Republic’s number-six circuit, followed by Dadi Digital Cinema’s 152 locations and 600 screens.

What is called a circuit or cinema chain in the U.S. and the rest of the world is not necessarily the same as Yuanxian in China. While an operator such as China Film South Circuit has ownership stakes in some of the locations, theatres are not operated under a unified brand. Instead, they retain individual names and ownership structures with contracts defining participation in the circuit. For GZF&M’s chain of affiliated theatres, the breakdown is 10% with ownership and 90% by contract. Among the group’s high-profile sites under contract are the privately owned Feiyang Cinemas with 16 screens and 3,000 seats at two locations in Guangzhou. “Each one of them ranked among the top ten grossing single locations in the nation last year. In 2011, the combined box-office gross is expected to be 120 million Yuan [US$19 million].”

Another one of Zhao’s contract partners, Chongqi Jiangbei UME, is likely to be topping the number-one spot for a single location, however. The cinema’s 15 screens and 1,500-plus seats are expected to approach some 90 million Yuan (US$14.2 million) by the time this edition hits CineAsia. Another major achievement in GZF&M’s exhibition crown is Chuanqi Time, in which the company holds a majority ownership. Located in Chaoyang District of Beijing, its seven auditoriums with 1,100 seats are deemed “the most luxurious and deluxe movie house in China.” After opening at the end of 2008, “the first year box-office receipts were more than 10 million Yuan, doubling in 2010,” he proudly states. “This year we are hopeful to reach 30 million Yuan [US$4.73 million].”

As a vigorous promoter of his films, his company and theatres, and his province, Zhao expresses concern that production activity in Guangdong is falling behind its fast-paced cinema development and strong box-office performance. “So far, Guangdong has not had any movies that impacted the nation. There is no Zhang Yimou, no Chen Kaige, no Feng Xiaogang.” Therefore, GZF&M is very much “a strategic move,” he admits. “The next step is inviting domestic private companies to join forces and to partner with. The eventual goal is to transform a 100% state-owned enterprise into one that has a controlling position where partners provide various sources of capital. This process is happening right now and should take about two months. The next time you interview me, it won’t be the same.” GZF&M is prepared to be publicly listed on the Chinese stock market in two years, Zhao further reveals. If so, GZF&M would be the first in line among the state-owned film companies.

“In the end,” Zhao concludes, “making films is not only doing business, it is also about cultural awakening and a sense of social mission and responsibility.”

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