Rebirth of Chinese Entertainment from the Oscars

Los Angeles, mid-February 2002.

The day after returning to Burbank from Berlin, Su Chen, without adjusting to the time difference, went straight to the office of Light & Shadow Studios. He placed the Golden Bear trophy on his desk, rowing it alongside the Silver Bear, Palme d'Or, Golden Globe, and Oscar statuette. The five trophies, each gleaming differently in the Los Angeles morning sunlight, stood like a row of silent witnesses. Jason, standing in the doorway, glanced at the row of trophies, whistled, and then placed the folder in his hand in front of Su Chen.

"The buyers for the rights in Berlin are already lining up. Negotiations for the overseas rights to 'Buried' began this afternoon. Miramax, Fox Searchlight, and Lionsgate have all made offers. Focus Features wants North America and Latin America, and an independent distributor in London wants Europe. In addition, several Asian buyers are inquiring through agents. We have to decide who to sell to and how to sell it."

Su Chen opened the folder and glanced at the prices and additional terms offered by each company. "We'll discuss the copyright details later. But before we talk about 'Buried,' I'd like to talk to you about something else—an issue we should have started discussing when we sold the rights to 'Juno,' but we've been pushed along by the filming schedule and haven't had a chance to sit down and properly discuss it."

Jason pulled his chair forward and sat down opposite Su Chen. Having been CEO of Light and Shadow Era for nearly three years, he had learned to immediately shift all his attention away from the data sheets in front of him when Su Chen said, "I want to talk to you about something else." Because Su Chen never suddenly jumped to Z when he should be discussing A; if he said he had something else to talk about first, that thing was definitely more important than all the price lists in front of him.

"Guangying Era can now consistently produce two to three high-quality genre films every year, from 'Night at the Museum' to 'Juno,' 'Manchester by the Sea,' and 'Buried,' each of which has proven our production capabilities in its respective genre. But we have a fundamental weakness: we don't have our own distribution channels." Su Chen closed the folder. "Without distribution capabilities, we can only ever sell the films we make to others for distribution. That's how it was with selling the rights to 'Buried,' and it was the same with selling the rights to 'Juno' before—the distributors made far more money than we received in royalties."

“This is what I’ve been wanting to say.” Jason stood up from his chair, walked to the wall covered with posters and clippings, and lightly flicked a still from the Sundance premiere of *Juno* with his finger. “Juno grossed over $200 million worldwide. We got the production revenue and a portion of the royalties, but Warner Bros. took the lion’s share of the distribution profits. If *Manchester by the Sea* does well during awards season, we’ll only get a share of the distribution revenue from Warner Bros.’ subsequent large-scale release, based on our co-production ratio. Any extra profits from distribution won’t go to us. Now, a bunch of distributors are scrambling to bid for *Buried*. Why? Because they know this film will make money—they buy it, distribute it, and earn the distribution fee plus a share of the box office, while we only get a one-time royalties or a limited share. We’re raising someone else’s son.”

"So we have to build our own distribution capabilities," Su Chen said. "We'll build our own North American distribution capabilities. Not right now—it's only been six months since 9/11, the market is still recovering, and while our cash flow is ample, it's not enough to support a full distribution department. But we can start planning now. We'll establish joint distribution partnerships with other established independent distribution companies, leveraging their ground promotion networks and theater resources, while simultaneously developing our own distribution team. We'll start with joint distribution and gradually transition to independent distribution. Within three years, Light & Shadow Era will have independent distribution capabilities in the North American market."

Jason turned to look at Su Chen, his eyes filled with a restrained excitement—not the impulsive fervor of a first-time entrepreneur, but the certainty of a producer who had spent years navigating the Hollywood distribution system, finally having a partner willing to put this matter on the strategic agenda. "I agree. We're about to discuss the overseas rights sale of 'Buried,' and this is a perfect starting point."

"Let's start with *Buried*." Su Chen stood up, walked to the whiteboard, picked up a marker, and wrote down a few keywords. "Regarding the sale of the overseas rights to *Buried*, what we need to do is maximize revenue while retaining as many independent distribution rights as possible in some regions, serving as a testing ground for our future distribution network. At the same time, starting with the next film, for any project solely funded or primarily invested in by Guangying Era, we will no longer sell out the North American rights. We will prioritize a co-distribution model, finding an independent distributor with mature ground promotion capabilities to cooperate with. We will provide the film source, use their distribution channels, and share the profits proportionally. Through co-distribution, we will accumulate experience and data, gradually building our own theater network and ground promotion team. After these two steps are solid, we will then launch Guangying Era's independent distribution."

He put the marker back in the whiteboard tray, turned to face Jason, and said, "You'll lead the overseas rights negotiations for 'Buried.' I have only one request—the rights for mainland China are not for sale."

Jason nodded: "You'll handle the mainland China issue yourself, and you'll need to personally liaise with Han Sanping. As for other regions, the distribution team and I will complete the bidding within a week. The goal is for the total overseas rights transaction amount to be no less than 20 million US dollars—with the Berlin event publication rating and the endorsement of the Golden Bear, this figure is entirely achievable. This funding will serve as the seed money for building the subsequent distribution system."

A week later, the bidding for the overseas rights to *Buried* concluded in a temporary meeting room at Guangying Times. Lionsgate won the North American distribution rights with the highest bid, and on the final day of the bidding, Lionsgate proactively added a clause—if *Buried* grossed over $80 million in North American theaters, Guangying Times would receive an additional 1% of the box office revenue. The major European markets were divided among five independent distributors from the UK, France, Germany, Italy, and Spain; Japan was won by Shochiku Co., Ltd.; South Korea by CJ Entertainment; and the Latin American market was secured by an Argentinian distributor as a regional general agent. The total rights fees for all regions amounted to $27.5 million.

After signing the final contract, Jason placed the summary sheet in front of Su Chen. He tapped the total amount column twice with his finger and then said, "This is the largest copyright revenue since the founding of Light and Shadow Era."

Su Chen stared at the form, silent for a moment. He recalled those nights four years ago, hunched over his desk in the Beijing Film Studio compound, writing novels and submitting them under the pen name Daniel. The advance royalties from those novels totaled only a few hundred thousand RMB. Back then, he gave half to his parents and saved the other half, thinking it was already a considerable sum. Today, his company sold the overseas rights to a film shot in a coffin for four weeks for twenty million US dollars. But he didn't feel much excitement—because he knew that the reason it was twenty-seven million instead of two hundred million was precisely because they didn't have their own distribution channels.

He picked up a pen and signed Jason's summary sheet. "Part of this money will be used for subsequent production, and the other part will serve as start-up capital for building the distribution system."

Jason put the summary sheet into the folder and took out his notebook again. This notebook was different from the one he'd used when he first met Su Chen in Cannes—the cover was now leather, the edges were still frayed, and the pages inside were still densely covered with budget models and market analyses marked in various colors. He turned to the latest page, where a title was written in red pen—"Light and Shadow Era 2002 Annual Strategic Plan."

"Now that the copyright issue is resolved, we can take this opportunity to clarify the company's next development direction. The distribution system you just mentioned is a long-term plan, but we also need to make adjustments on the content production side. I have a suggestion I'd like to discuss with you—in the next two years, Light & Shadow Era should postpone horror film projects and shift its focus to low-budget dramas and comedies."

Su Chen leaned back in his chair, not answering immediately. He knew what Jason was going to say. The Blumhouse model was originally designed to produce horror films on extremely low budgets, relying on precise genre positioning and the high loyalty of its core audience to achieve stable returns. But now this model faces an unprecedented external variable—9/11.

“The core audience for horror films won’t disappear in the short term,” Jason flipped to another page in his notebook, where he had handwritten a market analysis during his time in Berlin. “But their consumer psychology is undergoing a dramatic shift. After 9/11, American audiences’ perception of ‘fear’ was completely changed. Before, the fear in horror films was safe fear—you knew the monsters on screen wouldn’t actually crawl out of the closet. But now, the images people see on television news every day are terrifying enough; they no longer need that experience in a movie theater. Instead, they need works that can help alleviate their anxiety and make them believe again that life still has warmth and hope. That’s why after 9/11, there was a significant increase in box office figures for comedies and family dramas—people crave laughter, crave healing, and crave to see trust and goodwill between people rebuilt. And that’s exactly what we should be doing at this stage.”

Su Chen remained silent for a moment. He recalled what he had said to Ryan while filming "Buried": "The act of repeatedly dialing a phone with no signal while in a coffin is itself an act full of hope. Hope is not the result, hope is the process." Now he needed to apply this statement to the strategic direction of the entire company.

"I agree with your assessment. We'll postpone horror films for the next two years and focus on low-budget comedies and family dramas. Once the psychological trauma of 9/11 begins to subside and audiences' perception of fear returns to a 'safe fear' mode, we'll restart the horror film project." He picked up a pencil from the pen holder and lightly drew a line on the paper on the table. "Low-budget comedies and family dramas typically have low production costs, which is perfectly compatible with the Blumhouse model's low-budget logic. We don't need to change the company's core model; we just need to adjust the content direction."

Jason quickly jotted down the key points of the conversation in his notebook, then drew an arrow in the margin and wrote next to it: "Joint distribution pilot—contact Samuel Goldwyn Films and Roadside View Films." He looked up and clicked the cap off his pen. "Several directors at the company have already submitted scripts; they were all sitting in my drawer before. This is a good opportunity to screen them all. I'll pick out the scripts that fit the new direction and show you the shortlist next week."

Su Chen nodded and put the pencil back in its holder. Outside the window, the afternoon sun of Los Angeles filtered through the palm leaves, casting dappled patterns on the floor. He glanced at the row of trophies on the table—the Golden Bear, the Palme d'Or, the Silver Bear, the Golden Globe, and the Oscar—five trophies standing quietly in the sunlight. They represented the past, but the strategic planning documents spread out on the desk and the still-erased distribution roadmap on the whiteboard represented the future.

"The rules of Hollywood are simple," he said, standing up and walking to the window, looking at the familiar palm trees in Burbank. "If you have distribution power, you're the rule-maker. If you don't, you're just a rule-follower. We've proven we can make good content—from Juno to Buried, every film has been the best in its genre. Now it's time to prove we can also get good content to audiences through our own channels."

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He drew the curtains and turned to face Jason: "Once the funding for the 'Buried' rights is secured, the distribution team will be assembled immediately. We'll hire two people first—one to handle theater relationships and the other to handle on-the-ground promotion and film festival distribution. We don't need many, but we need to be top-notch. Also, I'll be returning to mainland China in a while, and preparations for 'The Hunt' should be put on the agenda as well."