Wanda’s $150 Million ‘Great Wall’ to Test China’s Film Boom

(Bloomberg) -- “The Great Wall” debuts Friday in China with a lot more at stake than just the $150 million spent to make the Dalian Wanda Group Co.-backed action-fantasy epic.

As the most expensive film ever shot in the country and the first major Chinese-American co-production, it is also a test of blockbuster demand in a cinema market that’s slipped from boom to bust. Prospects that the movie will draw audiences across continents have also raised expectations that it will be the new model for China-Hollywood collaboration.

Wanda’s $150 Million ‘Great Wall’ to Test China’s Film Boom

Peter Loehr

Photographer: Jasin Boland via Legendary Entertainment LLC

Starring Matt Damon and directed by Zhang Yimou, one of China’s most celebrated filmmakers, the “Great Wall” got underway as a project when box-office sales were surging more than 35 percent a year. Now, years later, ticket sales have dropped for three months straight and some are asking whether movies are getting worse, audiences are getting pickier, or both.

"I know what the movie would do in last year’s market, but I don’t know what it’s going to do this December," Peter Loehr, the film’s producer, said in an interview last week in Beijing. "One of the reasons that the market is flat this year is movies haven’t been very strong and that people are waiting for an event movie to happen. I hope we can be that," said Loehr, chief executive officer of Wanda unit Legendary East.

The film is also the biggest test yet for Legendary East, the China subsidiary of Legendary Entertainment, which Chinese billionaire Wang Jianlin’s Wanda Group bought earlier this year. Loehr, who came to China 22 years ago and now speaks fluent Mandarin, is an industry veteran, having produced some of the country’s first commercially successful films.

“Great Wall” tells the story of crack troops assigned to defend attacks from flocks of beasts called Tao Tie (TAO TEE-YAY), which is a symbol of greed in ancient Chinese folklore for its voracious appetite. The special effects and battle scenes involving one of China’s best known cultural artifacts have stoked expectations the film’s domestic appeal will translate globally.

Wanda’s $150 Million ‘Great Wall’ to Test China’s Film Boom

As of Wednesday afternoon, “Great Wall” had pre-sold 10.2 million tickets for Friday, the opening day, according to entertainment data provider Ent Group. That’s out of pre-sales of 13.4 million yuan for all films scheduled for that day, the data show.

Damon, who’s been nominated for Academy Awards as an actor and won one as a co-writer of “Good Will Hunting,” is seen as an anchor from drawing a U.S. audience, while Zhang, director for the Beijing 2008 Olympics opening and closing ceremonies, along with the films “Hero,” and “House of Flying Daggers,” should assure a big Chinese audience as well.

Still, these are no guarantees, said Johnson Hu, an analyst at UOB Kay Hian.

"Chinese movie-goers have become more demanding and sophisticated,” said Hu. “They don’t necessarily buy the fame of big directors or stars now.” He predicts “Great Wall” will gross around 1 billion yuan ($145 million), the minimum to be called a hit film in China.

Co-produced by China Film Group, Le Vision Pictures, Legendary Entertainment and Universal Pictures, the film won’t be released in the U.S. until February. That leaves more than a month of reviews in other markets to help promote the film in the U.S., still the world’s biggest market for movies.

While movie-information website Imdb.com estimates "Great Wall" cost $135 million to make, two people familiar with the matter said the figure was about $150 million. They asked not to be named because the matter is private. A Legendary representative said they were unable to verify any investment number.

"There are a lot of expectations, as well as suspicion, over this film, over the plot, special effects and cast," said Jane Li, head of research at Beijing iMiner Data Technology Co., an entertainment consultancy. She expects ticket sales in China to come in at around 500 million yuan.

Beating ‘Warcraft’

“Warcraft,” another big-budget Legendary title became a summer hit in China selling 1.47 billion yuan in tickets, only to flop in the U.S. at $47.2 million.

Legendary is taking fewer chances with “Great Wall.” The marketing budget is “significantly larger” than that of the video-game adaptation, said Loehr, though he declined to disclose the amount.

Distribution for the film in China will be massive. China Film and Wanda’s distribution arm Wuzhou together work with 70 percent of the country’s cinemas, said Loehr.

Richard Huang, an analyst at Nomura Holdings Inc., said “Great Wall,” may not match the success in China overseas, given its theme may not appeal to audiences in Europe and North America.

"Grossing 2 billion yuan is possible if the film does have a good story,” Huang said. “But the majority of revenue would be coming from China, because the film doesn’t look particularly appealing to western audiences."

Wanda’s $150 Million ‘Great Wall’ to Test China’s Film Boom

Andy Lau, Matt Damon, Zhang Yimou, Jing Tian and Pedro Pascal at "The Great Wall" news conference.

Source: VCG via Getty Images

“Great Wall” also gives Legendary a chance to offer Hollywood flair, while receiving a higher share of revenue than it would get for a movie shot in the U.S. At least 43 percent of after-tax ticket sales go to the studios and distributors. By comparison, Hollywood studios can claim only 25 percent of sales for films imported into the country.

China will need more co-productions and big event films to maintain growth now that the market is maturing, said Vincent Fischer, a partner at Eastward Entertainment.

"The truth is that 80 percent of Chinese box office growth from the past years comes from more movie theaters being built, and only 20 percent from Chinese films’ quality improvement," Fischer said. "If ’The Great Wall’ works, it may encourage more capital to be put on the table for co-productions."

The film was also the first to shoot -- and the first to obtain subsidies -- at Wanda’s Qingdao Movie Metropolis, a sprawling complex that’s still under construction and billed as the world’s largest movie studio.

Wanda’s Wang in October unveiled incentives to lure Hollywood to shoot films in the 200-hectare (494 acre) Qingdao complex. Other than Legendary, eight other studios including Lions Gate have agreed to use the facility.

Loehr said that in making “Great Wall,” he tried to steer away from the cliches of Hollywood tent-poles.

"There are no super heroes in this movie,” Loehr said. “Everything is practical and possible at the technology of the time. No one can jump off the wall, fall 100 feet and not die."

(An earlier version of this story was corrected to show the correct title of the film Damon wrote and the date of the Loehr interview.)