Dreamworks’ China deal won’t be access all areas

February 14, 2012

By Wei Gu
The author is a Reuters Breakingviews columnist. The opinions expressed are her own

Dreamworks may soon get an exclusive ticket to China’s closely guarded film industry. The U.S. studio is likely to announce a joint venture with China-based investors during Vice President Xi Jinping’s visit to California on Feb. 17, a person familiar with the situation has told Breakingviews. It should be a good deal for the creators of “Kung Fu Panda”, but does little to lower the Great Wall around film distribution in the People’s Republic.

Movies remain a heavily restricted industry in China. Only 20 foreign films a year can be screened nationally at cinemas, and those must be shown through a designated state-owned intermediary. Beijing said it would comply with World Trade Organisation rules on media by March 2011. But progress on books, newspapers, journals, DVDs and music hasn’t yet followed through to cinema or TV. Only this week China’s broadcast regulator banned foreign shows during prime time.

Joint ventures might get Hollywood closer to China’s giant audiences. By producing in China, Dreamworks can bypass the restrictions on foreign content. The venture will see up to $2 billion investment in the next five years, according to Caijing magazine, more than half likely to come from Chinese partners including China Media Capital and China Development Bank. Dreamworks should get low-cost local talent and wider exposure.

But the deal has political appeal too. Xi Jinping can claim the joint venture as evidence that China is creating a more open market during his closely-watched U.S. trip. And China can pick up animation techniques and merchandise promotion skills from Dreamworks. Meanwhile, more movies in the vein of “Kung Fu Panda” might help Beijing extend its “soft power” around the world.

The deal isn’t perfect by any means. Dreamworks will get only partial control. For movies other than cartoons and China-related family films, the doors may still be shut, and Dreamworks will also have to tolerate Beijing’s restrictions on content and intellectual property regime. Still, even a back-row seat in China’s $2 billion-a-year movie industry should be enough to get Hollywood’s producers feeling animated.

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