Warcraft and China: What lessons should Hollywood learn?

Warcraft is not a good movie, and American audiences seem to agree since the film only opened with $24.1M domestically. By all accounts, word of mouth has not helped the film grow any legs, and the overwhelming number of negative reviews will continue to be an anchor around the movie’s neck. At the time of this writing, Warcraft has a dismal 29% rating on Rotten Tomatoes.

The silver lining for the Legendary Pictures and Universal Pictures’ film is that it is over-performing in China. This development has led some industry watchers to believe that Warcraft is some kind of bellwether for Hollywood films, portending a focus on China and treating North America as a secondary market. Fortunately, these prognostications are premature at best, and purposefully sensational to drive readership at worst.

Is China the future of movies?

It’s worth noting that Warcraft is not the first Hollywood “industry” film to perform much better in China than in the US. Terminator: Genisys and Pacific Rim are two films in recent memory that performed better at the Chinese box office by several millions of dollars. Of course, when it comes to certain culturally American iconic franchises, those films still perform better in the US – like Star Wars: The Force Awakens, which earned 50% of its gross in the United States. In turn, it makes sense that Warcraft would be embraced by moviegoers in China because of that country’s particular affinity for the MMORPG World of Warcraft.

From Deadline:

China, which has a penchant for fantasy, has had a decade-long fascination with World Of Warcraft; its name there is understood to translate to “World Of Magical Beasts.” The market is estimated to make up about half of the game’s five million players, according to the BBC. The history has been fraught at times, however, as the government exercized (sic) controls over the years — only serving to increase the game’s popularity.

In the early days, when the 3D rendered worlds were first made available, it caused a seismic shift in Chinese gaming. The University of Edinburgh’s Lara Arnason recently told The Telegraph that as players were drawn together in the physical spaces of internet cafes and the online realms, “It was the first converged media experience. People were able to form real friendships, and have shared experiences and shared failures, with real online communities of real people. It quite literally changed the game.”

What it takes for a film to succeed overseas

Assuming that every WoW player in China went to see the film, that’s a built-in audience of 2.5M moviegoers. Assuming that each of them drags along one or more friends, and that’s a lot of tickets sold. The impressive numbers have made at least one Chinese entertainment icon speak out about the success.

From the Hollywood Reporter:

 Hong Kong action star Jackie Chan on Sunday extolled the Chinese film industry’s emerging market prowess at the Shanghai International Film Festival.

Saying that China was overlooked as a “nothing market” for decades, Chan suggested that the world has come to see the country’s entertainment sector in a very different light of late. He cited the phenomenal Chinese box-office performance of Legendary Entertainment’s Warcraft as evidence of the new order.

“Warcraft made 600 million RMB [$91 million] in two days — this has scared the Americans,” Chan said. “If we can make a film that earns 10 billion [$1.5 billion], then people from all over the world who study film will learn Chinese, instead of us learning English,” he added.

Not so fast there, Jackie. All things being equal, China is definitely a market that shouldn’t be ignored, since there are roughly 40K theaters there, and their box office returns have been growing by 30% year-over-year for the past five years. But all things aren’t equal. What Jackie fails to mention is that China doesn’t make it easy for Hollywood films to perform well there.

Foreign media is highly regulated in China, limiting the amount of foreign films to 30 per year. One must assume that this includes not just Hollywood blockbusters, but independent films from all over the world. Furthermore, foreign films do not have any say on their release dates in China, unlike in the US where studios can target major holidays or long weekends and, at the very least, not schedule a release on the same day as another film’s opening. According to Hollywood insiders, China has been known to double- or triple-date foreign films in order to protect the performance of local films. Finally, foreign films only receive 25% of the net box office.

It’s easy to think that since Warcraft performed well, that a blueprint for success has already been drawn up, and all it takes is to follow the directions. Unfortunately, it’s not as easy as all that. First, it isn’t clear that Warcraft is a success yet. The majority of its estimated $100M marketing budget was spent on China. Add that amount on top of the already large $160M production budget and then factor in the measly 25% cut foreign films get, and Warcraft is going to need to clear over $1B to break even. Secondly, it’s important to consider that Legendary Pictures was bought by Chinese conglomerate Dalian Wanda Group in January of this year. And Wanda owns 18% of the near 40K theaters in China, making it easier to guarantee screens. No doubt, with the influence of other local partnerships, Warcraft also secured a prime release date, which occurred after high school exams ended and during the Dragon Boat Festival holiday. Most Hollywood films aren’t going to be this lucky.

On the other hand, who knows what the future holds for Chinese regulations over their film industry? In 2015, they increased the limit of foreign films per year, so it’s obvious that they are not intransigent in their policies. As such, the worry over Chinese-focused “American” films is not entirely unfounded. One just has to look at recent films like the Red Dawn remake, which saw Chinese invaders changed to North Korean invaders in post-production. Transformers: Age of Extinction set its third act in China, prominently featuring Chinese pop icons and product placement. Even Batman: The Dark Knight devoted a portion of its screen time to China. These concessions, however, are still the exception and not the rule.

And so is Warcraft.