Covid & Politics Prove An Unpredictable Mix – Deadline

Reading the tea leaves with regard to China in 2023 is even more difficult than usual. The country’s about-face on its longstanding zero-Covid policy has implications from geopolitics to economics and, closer to home for Hollywood, the state of the market after a dismal 2022. Exactly what those implications are is where the guesswork comes in.

On the one hand, the loosening of restrictions already seems to have led to more tickets being sold in local cinemas. On the other, the sudden reemergence of a massive population with little natural or vaccine-derived protection will likely provide kindling for a wildfire of infection and emerging variants unseen since the very beginning of the pandemic.

The Chinese box office was down an estimated 36% last year, reaching $4.35 billion with only two local titles in the global Top 10, versus three the previous year which were in much higher slots.

Hollywood, for its part, had relative hits in Jurassic World Dominion and more recently Avatar: The Way of Water. But it increasingly had to deal with late notification of release dates or no dates at all — there were only 12 studio movies to gain entry (there were also fewer than 20 in 2021 compared to 30-plus in 2019) and there still hasn’t been a Marvel title cleared in the market since Spider-Man: Far From Home. Even local films struggled with short lead times in 2022.

While there were lockdowns throughout the year, there were windows where theaters could certainly have benefited from major imports, yet some of the biggest worldwide grossers never saw a screen in the Middle Kingdom. And then, amid a flurry of local protest movements, China wiped out its zero-Covid policy, leading to massive infection spikes and concern among much of the population about leaving their homes.

Just how big those spikes are is up for debate. According to data available in the World Health Organization’s Weekly Epidemiological Update, cases were up 45% in the past week with 218,019 reported. Deaths in the country were up 48%, with 648 reported in the week. Those percentages may tell us more than those totals, since China is thought to be vastly undercounting its Covid-related totals

Mike Ryan, executive director of the WHO health emergencies program, said: “We believe that the current number being published from China underrepresent the true impact of the disease in terms of hospital admissions, in terms of ICU admissions and particularly in terms of deaths.”

Indeed, testing implemented this weekend on airline passengers arriving in South Korea and Taiwan from China revealed infection rates of over 20%. And it’s not just Asian countries.

There are now various Covid-prevention requirements for travelers from China to the following countries: U.S., UK, Japan, Italy, France, Spain, Germany, Sweden, Australia, Canada, Korea, India, Israel, Qatar and Malaysia. These vary, though most require mandatory testing, and some will do random testing on arrival. Morocco has banned Chinese visitors altogether.

In Italy, all arrivals from the Middle Kingdom must be teated. Authorities there found of passengers on two flights from China in late December, about one-third on one flight and half on another tested positive.

Fear about the infection spikes was initially a drag on the opening of Avatar: The Way of Water, but signs have been encouraging as the movie saw strong holds and is now projected to final at about $220M by local ticketing platform Maoyan.

Still, there is currently no clear picture as to when the latest waves will cease rolling. It’s been said there could be a Covid surge as late as March — and with Chinese New Year kicking off early this year, on January 22, it remains to be seen what comes of the typically-lucrative period for local movies. (Chinese New Year is frequently cited by epidemiologists as a major driver of spikes in the seasonal flu each year.) Anticipated sequel The Wandering Earth II is due then, as are such potential breakouts as Zhang Yimou drama Full River Red, historical drama/thriller Hidden Blade, comedy Five Hundred Miles and animated pics Deep Sea and Boonie Bears: Guardian Code. If those movies can reach the level of last year’s New Year numbers, one watcher says, “I put (the market) on an upward trajectory.”

Further out, The Meg 2: The Trench could be a bright spot on the horizon. A Chinese co-production, the Warner Bros sequel is expected to release in August. That’s around the same time the original did over $150M back in 2018.

But across the board, beyond just during the Lunar New Year or Golden Week in October, exhibition needs movies. “There can’t be three months without a new film,” exclaims one international exec. The impact of Covid in 2022 had a knock-on effect on local production meaning releases could be thin this year even as China wants to maintain 55% (at least) market share for its films. Gower Street Analytics, which is being cautious when it comes to China, is projecting $5.55B for 2023, a rise on 2022 but well short of its 2021 figure.

Meanwhile, the government has been encouraging exhibitors to build more cinemas in order to increase foot traffic in shopping malls, but still dragged its feet on access for some of the biggest titles of the year worldwide.

“How can they tell them to keep growing when they’re not letting any movies in?,” wonders one veteran international exec. This person continues, “Bureaucrats are killing the business because they’re so afraid of losing their government assignment. At some point, someone in the higher up government has to say, ‘You’ve got to start letting movies in again so the theaters don’t go out of business,’ because they are going to. I don’t know how we don’t start seeing massive bankruptcies if box office doesn’t start coming back in a big way.”

Zhu Yuqing, secretary-general of the film division of the Beijing Cultural Industry Investment and Financing Association, told Sixth Tone in late December, “Those of us in the film industry felt very desperate and lost throughout this year… Due to uncertainties both from Covid and film-related policies, we didn’t have any direction on production, shooting, investment and promotion. Such disorder led to an absence of new films, which was rare in the past three years.”

And yet, now that the 20th National Congress of the Chinese Communist Party, as well as 2021’s 100th anniversary of the Party, are out of the way, we hear there’s less fear within the government agencies. This was the big issue, many say: No one wanted to make decisions or be seen as doing anything wrong at a time of geopolitical uncertainty and uncertainty within China.

A number of (non-Disney) execs we spoke with suggested that the return of Disney CEO Bob Iger could perhaps spread a little Magic Kingdom magic in the Middle Kingdom for Hollywood. Opined one, “Does Bob Iger go over there and smooth things out? Does that open the market again? If he wants to be a diplomat, then going to China on behalf of Disney would show the government this is the guy we need.”

The Marvel question looms large indeed. Next up for the mega-brand is Ant-Man and The Wasp: Quantumania which begins international rollout on February 15. In order to secure a day-and-date release with domestic, Disney will have to submit it in the coming weeks, prior to Chinese New Year.

China expert and USC professor Stanley Rosen is not bullish on studio prospects, telling us, “I think the market for Hollywood is not going to come back to what it was. No, I just don’t see that possibility.”

Although studios only recoup 25% of grosses out of China, it remains an important market with its population of 1.4 billion, but if the public there is being weaned off of Hollywood movies it creates the conundrum of potentially missing out on a new generation of audiences.

At a forum during the Hainan Island International Film Festival in December, Yu Dong, Bona Film Group Chairman and producer of such patriotic films as The Battle at Lake Changjin and its sequel,  appeared to slam Hollywood for a lack of originality. According to China.org, he said, “The Hollywood studios are pursuing profits. They repeatedly make various sequels and various superhero blockbusters. But now, the Chinese film industry has more originality after sufficient development, plus, China is in a great era that can produce more stories with zeitgeist. This is very inspiring for Chinese directors and producers.”

Rosen notes this is a “very challenging time for China, and film is very low down on the list… They want the patriotic films, they want the films that will socialize the population and there’s no real benefit since China’s given up, it seems to me at least in the short term and intermediate term, on being the largest film market in the world.”

Still, citing a meeting and photo-op for Chinese President Xi Jinping when he met with U.S. President Joe Biden on the sidelines of the G20 summit in Bali in November, as well as the PRC’s renewed relationship with Australia, Rosen says China is “on a kind of charm offensive right now.”

He explains, “There will be a loosening up and then a tightening up. It goes back and forth, and right now they’re in the cycle where things are not looking good with the economy and everything else. They’re loosening up in terms of being nice even with the U.S.” And part of that means “it’s possible that in this relaxation cycle some Hollywood product will be let in. But it’s short-term, it’s not really a long-term position.”

Adds Rosen, “China’s concern with soft power is more domestic than international and it’s not the most important thing for them. The influence to get people to do what you want them to do and not do what you don’t want them to do  — that’s much more important to them.”

A long-form contract between China and Hollywood that the studios hoped would increase box office share and provide more clarity over release dates was shoved to the back burner during the Trump years, and doesn’t appear likely to be negotiated any time soon. Quipped Rosen when we asked when he thought that might happen, “2203.”

Says an international distribution veteran, “I’ve given up trying to predict China,” but this person does think the Xi/Biden meeting was helpful as it was reported within the market as a positive.

Still, with the Republicans controlling the House of Representatives, there’s “no chance” of those long-form negotiations getting started again. However, as they don’t have a massive majority, things could have been worse. “That’s the wild card, in terms of what the Americans do and if they antagonize” China.

Some folks are cautiously optimistic for 2023.

“We are hopeful that there will be positive developments in the new year but we just don’t know until that actually happens,” says one well-informed China watcher.