Some Thoughts about Disney’s China Deal

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In short succession to Dreamworks, Disney has now signed a cooperation deal with two Chinese companies.  The goal of the newly established National Animation Creative Research and Development Cooperation is to create animated content for Chinese and international market, and act as an incubator for the broader development of the Chinese animation sector by training talent and raising the quality of the content and technical level of Chinese animation. Disney’s contribution will mainly consist of expertise in “story writing, screening, story refining, market research, creative revision and the creation of international standard intellectual property to foster local content and franchise development.” The other two sides of the cooperation are Tencent, which will provide expertise in e-commerce, online promotion and testing, and the China Cartoon Group Co., the cartoon-producing subordinate company of the Ministry of Culture.

To a certain extent, it’s surprising that it has taken so long to make these deals, given that the development of the cartoon industry was one of the first spearheads of the cultural industry development plans, and comprehensive policies to support this have been put in place since 2006. However, while the initial plans stressed the importance of attracting foreign expertise and capital, later policy of the Ministry of Culture (on the cartoon industry in 2008 and general cultural industry development in 2009) did not mention this at all. The Ministry’s Five-Year Plan for the cultural industries, published in February of this year, did allow for closer cooperation with “foreign powerful cultural organs”, in order to “learn from foreign advanced production technology and management experience”.

It would be interesting to know how the legal structure of this deal is framed. Although investment in cartoon production companies isn’t explicitly prohibited by the Foreign Investment Guidance Catalogue, related activities, such as investing in film production companies (as opposed to individual film projects), audiovisual publishing and distribution, and on-line audiovisual services, are. The picture of the ceremonial signing indicates that officially, the Disney contribution comes from Walt Disney (Shanghai) Co. Ltd., which was established after moving the Asia-Pacific department of Disney Consumer Products from Hong Kong to Shanghai in 2005. It is unclear to me under which regime this would operate, but then again, rules have been bent before to allow Warner to operate cinemas and film production enterprises in Shanghai. It would be interesting, also, to see how the division of responsibilities, equity and profit is organized, but I’m afraid that will be too much to ask.

Also, it will be interesting to see how the products of this collaboration develop. The success of the Kung Fu Panda series seems to have driven home in the Chinese creative sector that foreign enterprises are able to develop entertainment products on the basis of Chinese themes that are highly successful and profitable in the global marketplace, while Chinese producers so far have not developed this ability. Reading the policy papers, the official philosophy seems to be that there is a mechanistic relationship between input (money, technology, talented personnel) and the success of the resulting product. However, a significant portion of Hollywood films fail to become big-hitting blockbusters – even allowing for dubious accounting methods. Disney’s latest big budget production, John Carter, seems to have become one of Hollywood’s most costly flops.  In other words, while Chinese policymakers like to use the word “perfecting” (wanshan 完善) in their plans for industrial structuring, there always seems to be a random element in deciding which films are going to be successful and which aren’t. The question is whether this serendipity will be a part of the way the Chinese cartoon market develops.

One last interesting question is the relationship of the Ministry of Culture with distribution channels. The Chinese media bureaucracy is fragmented, and relationships between different departments are often rivalrous. While the exact boundaries between the different departments are fuzzy and sometimes disputed, the Ministry of Culture at the moment has little jurisdiction over the main distribution channels for cartoons. Officially, the Ministry of Culture only has responsibilities for “cartoon management duties (not including film and television cartoons, and cartoon programmes part of network audiovisuals); […] coordinating cartoon and gaming industry planning, industry bases, programme establishment, exhibition trading and market supervision, guiding sector association work.” Audiovisual product retail chains and Internet cartoon distribution powers have gone to the General Administration of Press and Publications in 2008, while SARFT remains in control over television. While this venture will be considered as a domestic producer for the purposes of market access, being able to negotiate these institutional barriers will be crucial to the success of this cooperation.

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