A perfect storm of strategic partners working with a piece of culturally resonant IP and a key release date helped Legendary Pictures and Universal Pictures’ Warcraft to an Orc-sized $156M opening this weekend in China. At the same time, the expensive film yielded an unimpressive $24.1M opening domestically. While this isn’t the first time that a Hollywood movie bows bigger in the Middle Kingdom, it is an exponentially larger example than those that have come before it. Is it a real game-changer — a sign that reliable China revenue will help studios cover downside risk for pricey global-minded tentpoles that currently lead to painful red ink and write downs when they flop?
At a time when Hollywood movies are no longer getting the same support from local exhibitors and social media as they previously did — while the PROC seeks an annual 30% increase for homegrown films — the restult on the Duncan Jones-helmed Warcraft has left many impressed. Legendary’s move to incorporate Chinese partners helped generate a big opening on a film that was a decade in the making.
Others feel that at the end of the day, it doesn’t matter how much money it makes because it’s a quota film and recoups just 25% of the whole. But that’s a net return. As one studio exec says, Warcraft is “further reinforcement of just how much China can contribute in net contribution to a big film. Assuming Warcraft grosses $250M there, that is at least $60M falling straight to the negative. That is a huge number from one market. Bigger than what something like some of the Harry Potter movies contributed from the UK.”
China’s box office is expected to overtake North America next year; it has also grown massively in the past few years to be the largest offshore territory on most films, and can often dwarf domestic returns. Think big-ticket titles like Terminator: Genisys ($89.8M domestic/$113M China) and Legendary’s own Pacific Rim ($102M domestic/$112M China). The latter film is now getting a sequel and recently cast The Force Awakens’ John Boyega to star.
So, can a franchise be built solely off of international — and specifically China where the tail is short? “Should we be making movies for China first? Not when there’s a quota or 25% box office or no ancillary. When China is four times the U.S., which is where it’s headed, there might be a time when you might have that in mind, but not today,” says a rival studio source. Yet this person adds, “It’s definitely a factor. You don’t make a movie when you think it’s not going to work in China.”
What makes the adaptation of Blizzard Entertainment’s video game franchise particularly interesting is how the film was put together in China. The partnerships were key. Legendary has four local equity stakeholderss in Warcraft: Tencent, China Film Group, Taihe and Huayi, a structure it set up even before Wanda acquired Thomas Tull’s studio in a stunning $3.5B deal in January. Ahead of negotiations on that purchase, Wanda already had said it would put its muscle behind the film to help promote and market it on its networks. Warcraft also has a record 26 brand partners and a bespoke marketing push contributed to getting folks excited over the last 18 months.
There is some precedent in this market where Marvel partnered with local outfit DMG in 2013 for the launch of Iron Man 3. That release came with never-before-seen promotional efforts that brought Robert Downey Jr inside the Forbidden City and created a media buzz felt around the world. It also released in China ahead of domestic — and went on to strong reviews and $1.2B in global box office
A difference with Warcraft is that it has suffered harsh reviews and vastly different scores from critics versus audiences. But it resonated nevertheless. Is the message now that Hollywood can throw any old tentpoles at China and expect them to hit?
Whatever one’s opinion is of Warcraft, Chinese audiences are becoming more discerning. Yet they have proven time and again in the past several years that nostalgia works. Films like So Young, which look back at college years, have been big hits with the key demo. Warcraft taps into a similar nostalgia, plus it’s fantasy which plays well in this market. In the same way that Transformers is an iconic brand from the 1980s when they were the only toys kids had growing up, Warcraft likewise has history. In the game’s early days, when the 3D rendered worlds were first made available, it caused a seismic shift in Chinese gaming and drew players together in internet cafés and online realms. The government also exercised controls which only served to increase its popularity. Legendary acquired rights 10 years ago.
The film is understood to have played beyond the gamers who I hear made up about 15% of the total weekend. Local heartthrob Daniel Wu contributed to bringing out the girls. He’s the Chinese/American actor who starred in last year’s smash Go Away Mr Tumor and who, along with Paula Patton, heavily promoted the film in China. The two took part in a Beijing Film Academy Q&A ahead of opening and got the word out via social media.
What also helped Warcraft was a fantastic release date. Going out on June 8, as high-school exams ended and across the Dragon Boat Festival holiday, was a prescient move — and got the film ahead of the U.S. While studios are at the whim of the powers that be in China and cannot demand a certain window, it’s likely the Chinese elements played a role in helping secure that date.
Wanda’s importance can’t be discounted. It owns 18% of the 39K Middle Kingdom screens which helped Warcraft achieve an unprecedented wide release on 67.5% of those last Wednesday. Other cinemas clearly played the film as it reached a peak of 120K showings in one of the early days. The history of Warcraft in the market being such that it is made this an event. What’s more, a merchandising agreement with Mtime, of which Wanda owns 20%, is already bearing fruit while the streaming rights have gone to PPTV in a record eight-figure deal.
Legendary’s ability to harness these partnerships is seen as a strategic win. China is a difficult place to maneuver but the studio has long been embedded there. The partnerships allowed for that huge opening screen count as well as record pre-sales thanks in part to online promotion and ticketing. (Just yesterday, Wanda rival Alibaba Pictures unveiled a plan to use its online dominance to help creative partners, which some believe could bring potential benefits to Paramount’s Teenage Mutant Ninja Turtles: Out Of The Shadows in which it is invested.)
China was predicted to be the key market here. “There is a solid emotional connection and nostalgia for the Chinese… Wanda and Tencent did great brand promotion last year. They sold the s*** out of it. It may be a shock for people in Hollywood, but if you knew what was going on in China, this was anticipated,” says a rival exec.
Still, with all of this action on Warcraft, not all the watchers of Azeroth are believers. One says, “Not until we see the U.S. get 45% of the box office, or there’s streaming will the game ever change in China. We’re making movies over there, talking about censorship and putting Chinese stars in them, and we’re only getting 34 films in a year. We’re aiming at something that isn’t giving the proper return. Protectionism needs to end there, we need a share in streaming, a better trade agreement and then you make a picture over there that’s a hit and breaks even.”
Does it break even? The jury is out on a reported $160M budget that has an estimated $110M in global P&A. The current worldwide cume is in excess of $300M with more territories to come, via Universal which is understood to be in for about 25% of the budget.
In its Chinese invasion this weekend, the movie blew the doors off some records previously set by the likes of Avengers: Age Of Ultron and Universal’s own Furious 7. While it looks unlikely that it will leg out to Furious 7 levels, one person says, “It cost too much money, but it’s definitely a win… when you’re into $400M worldwide, it’s not a failure.” Still, there are skeptics out there who believe that with all those Chinese partners, this should be doing F7-style business — that film did not have a local partner.
China is a shifting and growing market where transprency has traditionally been an afterthought. There have been curious manipulations of release dates — think the jam-packed 2015 fall — and box office in the past year, as was seen with the inflated performance on local pic Monster Hunt. A source contends, “It’s all changed since last summer, and movies without big Chinese partners will now struggle to achieve Furious 7 and Jurassic World levels.”
And yet, while Hollywood and China continue to figure out their strange bedfellows situation, is the rush on for folks in the Hollywood tentpole business to have a Chinese partner? “No,” says a studio exec, “That’s silly. It’s just a factor.”
Given Legendary does have that strong partner in Wanda, will all of its movies going forward be bulletproof? A source opines, “Not remotely. Wanda is not interested in subsidizing Legendary… unless they are planning on selling it.”
Anthony D’Alessandro contributed to this report