Dream on

Signs of a Hollywood JV unravelling?


Aside from Kung Fu Panda 3 the JV has done little else

When DreamWorks’ chief executive Jeffrey Katzenberg approached China Media Capital, Shanghai Media Group and Shanghai Alliance Investment in 2012 about setting up an animation joint venture to produce the third Kung Fu Panda film, the Chinese partners jumped at the opportunity. For a start, the franchise – themed around China’s favourite animal – is hugely popular in the country. So much so that it had become an embarrassment that it was the US that came up with the concept.

So when Katzenberg promised that the joint venture – called Oriental DreamWorks – would produce animated and live action products “for China, by the Chinese, in China, at a quality that actually can be exported to the rest of the world,” the hopes for such a tie-up were high.

But five years on, that marriage is heading for a divorce. Variety recently reported that Comcast, the new owner of DreamWorks, is in talks with the three Chinese partners about giving up DreamWorks’s 45% stake in the venture. If that happens, it will render Oriental DreamWorks a 100% Chinese-owned company. It would also mark the end of what Katzenberg called a “historic” link-up between Hollywood and China.

Industry observers say the restructuring has been a long time coming. Inside the animation industry, there have been grumblings that not all is well with Oriental DreamWorks. Turnover at the top suggests so too: in five years, the company has had three different chief executives. Early this month, it also laid off over 40 employees at its Shanghai office.

Even the highly anticipated Kung Fu Panda 3 was a disappointment. Granted, Chinese ticket sales surpassed the US in box office takings, but that wasn’t enough to match the franchise’s prior outings. It raked in only $520 million globally, compared with $631 million and $660 million for the first two films.

“Since the beginning, there have been a lot of uncertainties surrounding the project. Even though the intention was good, the outcome is a result of the clashing of two dramatically different cultures. It is not unusual for the two sides – China and the US – to have a conflict of ideas. But when the Chinese side controls the money and the Americans control the creative and content, who are you going to listen to,” one insider told Sohu Entertainment, a portal.

The culture clash is reflected in the creative process. “The story development generally starts in the US, which takes about two years. By the time China sees it, it is almost in the latter stage of the development process,” another insider told the portal. “But what happens all the time is that the Americans would find a scene really hilarious only to be met with muted response from the Chinese employees. It means the process had to start over again.”

“China’s animation film market is still in many ways quite rudimentary, lacking skilled production personnel. And film investors in China want to make quick cash and need to see returns within 18 months. That does not agree with Hollywood’s practice of often pouring three or four years into an animation,” Li Bin, an editor-in-chief of a film industry portal, told Yibada, a Japanese newspaper.

Oriental DreamWorks is expensive to run. In fact, at one point, the cost of its China operation was even higher than its US arm, says Shantou City Daily. The company, which has less than 100 employees today, had as many as 250 three years ago.

The pending exit of Katzenberg is another reason Comcast wants to leave the joint venture. The chief executive of the animation giant is expected to step down soon and it remains to be seen who is going to be his replacement. After years of serving as the go-between for Hollywood and China, it will be difficult to find someone who has that same relationships with the local partners.

“Now that Katzenberg is leaving, Comcast also lost the understanding and rapport it took Katzenberg seven years to form,” the industry observer confides.

China Media Capital has responded to the reports with a statement about its intentions: “The Chinese animation industry has been actively adjusting in coordination with the restructuring in Hollywood. CMC will conform to the market changes and continue to seek overseas collaboration with leaders in production, creativity and distribution.” It also maintained it would keep Oriental DreamWorks headcount at around 100.

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