How Communist China Outsmarted Hollywood, the NBA, and US Businesses: Chris Fenton

[FULL TRANSCRIPT BELOW] These days, Hollywood blockbusters aren’t making much money in the Chinese market anymore, even when they do make it past the regime’s censors. How come? And does that mean Hollywood self-censorship will stop?

In this episode, we sit down with Hollywood veteran and producer Chris Fenton, author of “Feeding the Dragon: Inside the Trillion Dollar Dilemma Facing Hollywood, the NBA & American Business.”

In this episode, he breaks down how the Chinese regime exploited American companies eager to access the Chinese market.

Views expressed in this video are opinions of the host and the guest and do not necessarily reflect the views of The Epoch Times.

FULL TRANSCRIPT

Jan Jekielek:
Chris Fenton, such a pleasure to have you back on American Thought Leaders.

Chris Fenton:
Jan, it’s always a pleasure. I think this is the third time, right?

Mr. Jekielek:
It is number three, but the topic is perennial. You wrote “Feeding the Dragon: Inside the Trillion Dollar Dilemma Facing Hollywood, the NBA & American Business.” From the inside, you saw how the Chinese regime has been co-opting Hollywood and how it was stealing various intellectual properties and methodologies. Let’s figure out where we are today.

Mr. Fenton:
It’s interesting. When the book came out four years ago in late summer of 2020, no one wanted to talk about issues with China. It was seen as taboo. Industries were nervous about it because it could affect their business over there. Politicians were scared about it in terms of it looking like some sort of Asian hate message. It was a very difficult time to talk about constructive ways to try to fix some of the problems that we had

Of course, that was to the detriment of the long-term health of the United States of America and our Western allies. Cut to today and people are much more open about talking about it. Both the NBA and Hollywood were really prolific when it came to exploiting and monetizing that Chinese market. The problem that we didn’t see was they were trying to duplicate our process, our tech, our IP, and other areas that we were best in the world at. They were trying to learn from us and learn from us as quickly as possible.

On the commercial side, American business faced the same thing, from engineering to automobiles to cosmetics. As we penetrated that market, we started to see them duplicate what we were doing so well on a world-class level here in the United States. They learned more and more about what we were doing to create best-in-class products and services. Cut to today, some of our biggest competitors in that market, not just in the PRC, but in the global market, are now Chinese competitors.

Mr. Jekielek:
This was a very deliberate activity as well. You are featured in our most recent EpochTV documentary, “Hollywood Takeover.” Please give us a picture of how much of a Hollywood insider you are, and how much of a Hollywood-in-China insider you are.

Mr. Fenton:
I came up through the entertainment business. I started in the mailroom at the William Morris Agency and learned how the ecosystem of Hollywood works. I rose up pretty quickly and became an agent in the motion picture and TV businesses at the William Morris Agency, which was the largest in the world at the time. It’s since been taken over by a company called Endeavor, and it’s now called William Morris Endeavor.

After about a decade of working there, I started my own company with another friend who eventually became the head of DC Films at Warner Brothers. We essentially created a boutique version of what we were doing at the William Morris Agency. Over time, I came across a small company in China that was making English language movies, utilizing RMB [renminbi] or yuan for financing. Hollywood is one of those industries that’s always looking for other people’s money.

At the time, we had gone through Wall Street, Silicon Valley, German tax funds, and Middle Eastern money. China suddenly represented a new place that could bankroll our production of content. I had this opportunity to get to know a Chinese company that was bankrolling English language movies and I dove in head first. I got to know them really well and started to help them put together films.

As I did that, I got to know them more and they started using me for all kinds of different business activities between the U.S. and China. Eventually they bought my company. Some of your audience might know the old movie “Gung Ho that starred Michael Keaton. He was a guy who worked in middle America at an automobile factory and didn’t know anything about japan. Suddenly, Japan buys the auto company that he worked for and he suddenly got thrust into the culture and the corporate dynamic that is Japanese. He was a fish out of water.

The same thing happened to me China. I never really thought all that much about it until suddenly I started working with them. It was such an amazing 20-year ride that I wrote a book about it, because it was so colorful and crazy and chaotic. Through practical experience and what I was doing on a daily basis, I became a layman expert in the U.S. and China relationship and on China itself. In fact, I went back and forth to China 39 times. I had to figure that out recently by looking at my old passports. That’s my background.

Mr. Jekielek:
You were one of the many people who saw a great market opportunity that had been promoted by U.S. business for quite some time. We said that we were going to turn China into a liberal democracy if we worked with them, and why not become financially very successful in the process. But somewhere along the way, this became problematic. Please catalog for us what happened.

Mr. Fenton:
This idea that it was a bunch of greedy capitalists looking to sell the soul of America by doing whatever it took to sell products and services in China really wasn’t the case. There are definitely those types of people. A lot of people just like me saw a business opportunity and it looked really smart to dive into it. There was this idea of bringing China into the WTO and designating them as a developing nation, in the way Clinton embraced them. He looked past the human rights issues after Tiananmen Square and said, “We want to help you build a global economy that competes on the global scale.”

Mr. Jekielek:
For the record, Clinton started it, but it was Bush that green-lighted it. It was a bipartisan effort.

Mr. Fenton:
It was very bipartisan, but not just bipartisan, it was both public and private. Everyone in the private sector industry wanted to do it too. There was just way too much opportunity to not do it. Those of us in the cultural business felt the more Western culture we got into that market, a very closed-off market firewalled from the global internet and controlled by a Ministry of Propaganda, saw our getting our culture in there as a way for them to feel what it’s like to be Western.

It was an opportunity for them to feel what it’s like to have the freedom that democracies give you, to have them aspire to not be communist anymore, and to become a part of Western democracy. That was the higher calling, even though there was a lot of money to make, too.

Mr. Jekielek:
Chinese dissidents that had come over were trying to explain this to Americans. But the propaganda inside China was so strong that America was seen as an aggressor that had taken away China’s correct position as the top dog of the world. This propaganda had been going on for 40 years. But the population had been sufficiently brainwashed into believing that America was the enemy. They said, “We’ll pretend to be nice, but we’re going to take them for everything they got.”

Mr. Fenton:
Right. As you get older, you start to doubt the idea that people really have these long-term visions of how they’re going to strategize playing with some major chess play. But actually, they do play a long game in Beijing. They’ve been around for over 5,000 years. They tend to look at 50 to 100-year game plans for where they want to go. Because of that, they are able to strategize on future plans much better than we do with our 24-hour news cycles and two to four year election cycles. There was always a premeditated plan throughout the changing of the different leaders of that country.

Mr. Jekielek:
There’s a name for the doctrine, “Hide your strength, bide your time.” I’m sure you’re very familiar with that.

Mr. Fenton:
Yes, and we really did not pay attention in the way we should have.

Mr. Jekielek:
We were in a certain place in 2020 and that has since changed. Please tell us how this all plays into this CCP model.

Mr. Fenton:
It played out exactly as their leaders wanted it to over the last 40 years, and it certainly seems to validate where we are today. In 2020, we still had films that were dominating the market. If you go back to 2012, films from Hollywood were dominating the market by as much as 80 cents on the dollar, compared to the domestic films there. In fact, it got so bad that the government had to tax theaters that were making more than 50 cents on every dollar that was coming into their theaters from foreign movies. They really wanted to stymie the growth of Hollywood, so that their own domestic industry could take hold and start to engage their own consumer market.

If you get to 2019, the biggest hit we had in that market was the last Avengers movie that did over 700 million dollars just in the PRC [People’s Republic of China]. There are not a lot of movies that have done 700 million dollars globally. That particular movie made 700 million dollars just in China alone. Today we have various films in their market like “Furiosa: A Mad Max Saga,” “A Quiet Place,” or the new Garfield movie. At best they’ll make $30 to $40 million and some won’t even break $10 million. That’s a big difference from $700 million.

You once had a market that was roughly $10 billion a year, with 50 percent coming from Hollywood, meaning $5 billion coming from Hollywood films. Now, this market won’t even do half-a-billion dollars. It has been completely cut back, and that’s because they have learned from us. They have learned how to make best-in-class films that cater directly to their consumer.

Mr. Jekielek:
There have been high profile examples of censorship. In the new Top Gun film, the Taiwanese flag disappears from someone’s jacket. There were many censorship requirements and you saw this from the inside. What is happening today? Are they not allowing in Hollywood films that would perform well, or have they just figured out how to give the audience what they want out of their own studios?

Mr. Fenton:
There are some nefarious things that happened over the last 20 years. Regarding censorship issues, Hollywood saw the country as a golden goose opportunity to make extra revenue, so they were doing everything possible to make Beijing excited about the movies that were coming into the market. When we initially started bringing films in, we would try to create relevancy around the films. We tried to put in a Chinese actor, utilize Chinese crews, and use Chinese locations, things like that. But then slowly, you would start to incorporate other Beijing-pushed narratives.

In the movie “Looper,” the narrative took place 40 years in the future. Beijing really wanted to showcase their country as the place everybody wanted to be, a utopian society where people wanted to retire. It was the perfect country, different from the rest of the misfit countries of the world. It was interesting that the original script of the movie used France as that utopian country.

We went to the Chinese government and said, This is a movie we want to bring in. It stars Bruce Willis and Joseph Gordon-Levitt, and it’s directed by the Star Wars director, Rian Johnson. They said, “We need you to do a little more with this film to get it in. We really don’t want France to be seen as the best country in the world. In 40 years, we want China to be seen as the best country in the world.” We placated them by doing that.

Mr. Jekielek:
That was quite a propaganda coup for them.

Mr. Fenton:
It was a huge propaganda coup. We did it so well on a creative level that if you watched the film and didn’t know what we were doing, you just thought the movie was great. The movie was extremely successful. It took $30 million to produce, and made about $200 million worldwide. It was a hugely profitable film. Beijing liked it because it showcased that China is where you want to go in the future.

Mr. Jekielek:
Overall, why are these films performing so poorly today? Are there still films that don’t get in? Are there still studios that are bending over backwards to make changes so that the film will be acceptable to the Chinese censors?

Mr. Fenton:
That’s a great question, and there’s a great answer. But it’s not the answer that China hawks who want to condemn those placating Beijing are looking for. Hollywood has lost its foothold in that market at a pretty big level. Because the opportunity to make revenue there has dropped so much, the studios have realized that it’s not worth kowtowing to Beijing by putting Chinese plots or characters into films. They have stopped doing that.

However, studios aren’t going to be making a movie about the Tiananmen Square massacre, Tibet, Hong Kong, or Taiwan. They are avoiding those subjects. You could argue they are avoiding them because there’s just not a lot of money to make with those kinds of films. But to make money and be relevant in terms of a plot point, you could argue the next James Bond movie should have a Chinese villain.

Why not have James Bond go up against another kind of superpower spy, especially with Taiwan being front and center of the next potential geopolitical conflict? Why do we keep going back to these Cold War-type villains that don’t even exist anymore? Let’s make it more realistic for today’s market. But a studio won’t go there, because if they do, they might get banned in China for a long time, if not forever.

Even though the market there isn’t that strong, studios want to make sure they have an opportunity to get films in there and make some money. Now, if they make money, it is actually just gravy to them, because the market has become so tricky and difficult. When you green light a film, you do projections around the world of what it’s going to make in the domestic market, plus on streaming and cable and broadcast, in order to come up with a budget that can make a profit.

Back in 2015 and 2016 you would ask, “How much money is this going to make in China? Here’s the estimate, and let’s add this much more to the budget to make it more of a big scale film.” Now, they don’t even estimate a number for China anymore. It’s always zero, which is very different. That has only happened over the last few years. China represents a way to get extra gravy revenue, rather than a way to really make serious money out of that market.

Mr. Jekielek:
There are films like “The Meg,” which are giant action films. Some of them are Chinese productions, and to me, they have a weird feel to them. Have the roles reversed? Are Chinese studios making Hollywood-like blockbusters for America?

Mr. Fenton:
“The Meg” originally came from the U.S. Its IP was co-owned by a studio in China and it was a collaboration with American studios and American financing. It was done with just enough Chinese input to have a lot of Chinese credits on there and get the wind to its back from Beijing, making them believe that they were supporting a Chinese domestic film. But it was obviously an English-language film. It had a lot of the characteristics that Hollywood brought to the table.

If you’re looking at a purely Chinese film and saying that this Chinese movie is going to make money all around the world, I would argue these films are very few and far between. You could look at movies like “The Wandering Earth” or various other films in their wolf warrior, Rambo-style film franchise that has come out over the past few years. Those movies are very much imitating the Hollywood way of making films.

They apply every process that we have taught them. They hire the crews that we have trained, and copy our procedures. They’re making best-in-class versions of these very high-profile films that have big budgets. But they are a repetitive plot that we’ve all seen here for a long time. It’s essentially Rambo, but the villains are Westerners and the people that are the heroes are from China. “The Wandering Earth” is another film where China is the savior of the day.

Are these films going to resonate around the world? Probably not as much, nor do they really feel completely original to the rest of the world. Those films aren’t going to make the type of revenue that Hollywood makes around the world, because they just don’t have the relevancy factor that Hollywood has been able to tap into for multiple markets worldwide.

But if you ask why our films aren’t working out there, it goes back to the long-term strategy of the Chinese Communist Party. They came up with a very smart plan. We were doing the same thing in the 1800s to Europe. If you want to sell fish in the Chinese market, you’ve got to teach them how to eat fish. If you teach them how to eat fish, you’re going to sell your fish there. But eventually, they’re going to learn how to fish and catch fish on their own. Then the government’s going to want only the fish they catch to be sold to their people. That’s essentially where we are today.

A film gets a release date, which means it’s released on the same date around the world, in order to mitigate the amount of piracy that happens. A movie that gets a long release date so that it’s in theaters for a long time, gets a good timing as far as the release date. In order to do that, we had to bring over mentors to do a mentor-protege relationship on these sets to teach the Chinese how to be gaffers, how to be the electricians, how to be the cameraman, how to develop the scripts, and how to build the sound stages.

When we did shooting for “Iron Man 3,” the China Film Group made us shoot in their brand new studios way outside the outermost ring road of Beijing. Every day we shot there, by the end of the day, you couldn’t even see from one end of the sound stage to the other. Why? Because they built the floors with this clay brick that when you had the dollies and all the people walking on it and all the different equipment moving around all day long it essentially turned these bricks into dust. Clouds and clouds of dust would rise up through the set and by the end of the day it looked like you were shooting in fog.

It was simply because they didn’t understand how to build a soundstage. They didn’t understand how to put in the racks like we see here with the lights and everything that’s hooked up in a technically-savvy way. They didn’t know how to do any of that, so we had to teach them. When you teach them, they start to get good at it.

Then we see these movies like “The Wandering Earth” and “Wolf Warrior” that are done in a best-in-class kind of way with three-act structures that have that beginning, middle, and end. They also have that low point that draws the emotional core of the audience into the film and wants to see our hero save the day by the end of the film.

They learned that Hollywood process from us and they mastered it. Even with knowing all that, they’re not making relevant films globally, but they’re making very relevant films for their own audience of 1.3 billion people. That’s a lot of people.

Mr. Jekielek:
This is a process that happened to almost every other industry that did business in China.

Mr. Fenton:
It’s rinse and repeat,100 percent.

Mr. Jekielek:
What’s up with the NBA?

Mr. Fenton:
The NBA is a similar story. You have this incredible world class league. It’s a premier league like the NFL or NHL. China loves basketball and they’ve loved it forever. It was the missionaries that were bringing in basketball back in the early 20th century. Then the different leaders of the Chinese Communist Party started to embrace this sport because people having the height of an average Chinese person could play it.

Mr. Jekielek:
Pierre Trudeau, the father of the current Canadian prime minister, famously beat Nixon in going to China. Nixon was extremely unhappy about this. He went there when some terrible things were happening in China, but he got to play basketball. He came back and that was his memory of the visit.

Mr. Fenton:
We were trying to figure out how to get the NHL [National Hockey League] in there, but the NHL has complicated rules and ice skating wasn’t a big thing in China. Although the top half of China does have ice, it’s not as populated up there. Getting people to embrace hockey was difficult. But you can play basketball anywhere because there is blacktop or hard ground everywhere. It only requires a ball and a hoop and it’s an easy game to create camaraderie around.

It really took off when Michael Jordan and David Stern went over there in the late 80s and early 90s and really wanted to bring the NBA into that market. But as part of the deal Beijing said, “You can come in here, but we want you to create a Chinese version of the NBA called the CBA, the China Basketball Association. We want you to put a couple of your players on these teams. We want you to teach us the process of how you build teams, how you do the attendance, how you market, and how you create star players.

Then over time, the CBA started to grow. In fact, it grew so much that you started seeing NBA players want to play over there, because they could make good money. Maybe they weren’t a star over here in the NBA, but they had an opportunity to work in the CBA. They could be a king of their own little fiefdom over there, and take advantage of that massive sponsorship market to create revenue that they weren’t able to do in the U.S. or Europe or anywhere else the NBA was carried.

The CBA started to take off. You started to see the CBA come up and the NBA was still rising too. There were great television rights with Alibaba Sports and big partners like Nike. Then there was that fight for freedom, stand with Hong Kong tweet from Daryl Morey, the GM of the Houston Rockets. The Houston Rockets was the team that had Yao Ming. The Houston Rockets was the biggest branded team in China out of the NBA.

When that tweet came out about supporting the democratic freedoms of Hong Kong, that tweet was not liked by Beijing. Beijing immediately banned the Houston rockets from China. Then it banned the NBA from being seen in China, and then it banned all partners of the NBA in China. It banned stores from carrying NBA products.

The NBA was trying to figure out the best way to solve a really difficult problem. Not only did they need to support the free speech rights of one of their own, Daryl Morey, they needed to figure out how to kowtow to Beijing to fix the problem. It was then that the CBA started to rise, because something needed to fill that huge vacuum.

Mr. Jekielek:
They control the entire information ecosystem, so they said, “We’ve got the CBA. Let’s put that everywhere.”

Mr. Fenton:
Exactly right.

Mr. Jekielek:
It becomes a matter of national policy, not just an attempt by a large studio or a sports league. The term industrial policy comes to mind, except here it relates to culture.

Mr. Fenton:
The NBA had been taken off the air for a long time. Then Covid came, so not only did the NBA become less and less relevant simply from less exposure on television screens, but on top of that, the athletes couldn’t go over there anymore. The country was shut down. In fact, those athletes just started going back in the last year-and-a-half or so.

The relevancy of these NBA athletes with massive partnerships and sponsorship deals started to wane, along with the NBA itself. Cut to today, the NBA is still there, but it’s not like it used to be. The NBA players are going over there and getting marketing dollars and selling some shoes, but not like they used to. It’s a rinse and repeat of the same exact story that we saw with Hollywood.

It is the same exact story as these sports apparel brands involved in the NBA, like Nike. It’s the same kind of situation that Elon Musk has to deal with concerning Tesla. Intel, which has been in that market since 1984, is dealing with it. It’s being repeated often and it’s not going to stop.

Mr. Jekielek:
There are huge AI operations inside China by American companies. That is troubling, because this is a technology which could become incredibly dangerous. Why are we doing that?

Mr. Fenton:
I’m currently in Washington, D.C. because I’m still an informal advisor to the Select Committee on the CCP in the U.S. Congress. I’m also still a trustee member of the U.S.-Asia Institute. We do panels and hearings on Capitol Hill. In fact, the last hearing I did on the Hill last fall was about AI. AI is obviously an extremely beneficial technology to society, but in the wrong hands it could have potentially harmful and world-ending capabilities.

One of the questions at those hearings was, “What is the U.S. doing about guardrails around that development? How is investment going to work? How is it going to cooperate with other countries. How do we deal with China’s innovation and subsidy and pushing the envelope on AI? How do we stay competitive with them without breaking through guardrails that are going to make it dangerous here? How do we even know whether they even have guardrails in China?”

It’s a very difficult issue. You’re obviously seeing the USTR [United States Trade Representative] and the Commerce Dept. and the Administration and Congress trying to mitigate the amount of technology that we’re sharing with China on AI. We’re also trying to mitigate what is getting into our country that might actually create data that can be used in their versions of AI, like the LIDAR technology that is essentially geo-mapping every city in the country.

We’re trying to understand the national security issues involved. The AI frontier is a more dangerous version of what we have already seen. Whereas, with Hollywood, the NBA, Tesla, and Intel, we had a head start. They were trying to catch up to us. But in the AI world, it’s hard to say who is ahead.

Mr. Jekielek:
We have a number of companies with big research budgets who are in their own arms race with each other around AI. They have massive R&D operations in China. But if you’re going to work there, you have to collaborate with the Chinese. One of these companies actually refused to share its research and development with the U.S. military. First, in the context of AI development in China, we have massive R&D dollars there. Second, we’re teaching them all our best methods. Third, there are no guardrails.

Mr. Fenton:
First of all, human resources are expendable over there. If you’re walking down the street you might see a shop owner berating an employee or worse. They have this freedom from regulation to keep pushing the envelope on certain things. You could argue that maybe that’s how the Covid virus started at the Wuhan Institute, and why we didn’t have something like that here in the U.S. We had it over there where things got out of control.

With AI, we’re going to see real competition. Space exploration is another area where we’re seeing that competition. Obviously, military weapon design and innovation is going to be massive as well. When it comes to American companies, reckless capitalism to generate revenues, no matter how you do it, just has to end. We’ve been doing that for a long time.

We have to take seriously what we have built in America since 1776. We have to protect the values that make our republic great. We have to protect this foundation that makes our country as great as it is. We have to protect national security interests. In my speeches, I always talk about the idea of patriotism before capitalism. There’s nothing wrong with Americans being a patriot and being capitalistic at the same time.

But in order to have our form of capitalism, we have to protect the foundation of what our country is about. There is a bipartisan effort, which includes the bipartisan committee that I work with in Congress, to address these issues. These are problems coming from Beijing that are affecting the health and welfare of the United States of America. This is new.

That really didn’t exist before, because until just very recently we had some leverage and some power and some influence. I like where we have progressed in terms of getting smart about China. We no longer think that we are going to make them into a democracy. It’s very difficult to imagine that happening anytime soon. But I also like this idea of not going to war with them, because the world is not large enough for a kinetic conflict to break out.

We are also smart enough to know that there is a non-traditional war going on between the U.S. and China. It is financial, technological, and informational. That’s why you see TikTok being forced to sell and probably eventually it will be banned. That’s informational warfare. You’re seeing technological warfare, where we’re now banning certain and certain collaborations. We are banning investment coming from China into national security technologies.

You’re seeing financial warfare. They are raiding offices of diligence firms that are looking at Chinese investments over there, trying to decide whether they’re smart or not. We are delisting some of these Chinese companies and not allowing them to go public. We’re waking up because the fire alarm has been pulled. We’re not getting all the people out of the building yet, but we’re getting a handful of people out. It makes me feel a little hopeful that we’re going to steer the ship into a place where we can coexist.

Mr. Jekielek:
What would be the single most important policy update to shift things in a more positive direction?

Mr. Fenton:
It is about getting people clear-minded and understanding what is going on. We can’t be reckless in the way that we operate with China just to make money. Beijing is playing very strategic games, and making chess board moves. They are not necessarily trying to take over the world. I’m going to disagree with you and a lot of your audience on that.

They have major scarcity issues, which is causing them to create this massive outreach, whether it’s through the Belt and Road Initiative, influence campaigns in Africa, or setting up infrastructure. They want to put in their people and mine different rare earths wherever it is around the world. They have commodity scarcity issues, they have water scarcity issues, they have energy scarcity issues, and they have food scarcity issues.

If Xi Jinping and the Communist Party don’t take care of their 1.4 billion people, they have real problems. That’s why that outreach is happening and that’s where all that influence is going. That’s why you see the fishing boats off of Chile and the fishing boats off of the Maldives and why you see really bad environmental pollution going on inside deep Africa.

They need a lot of resources that they don’t have internally. They don’t mind drafting off of somebody worried about being the world leader. They know that’s a losing proposition for them and probably for the world leader too, as they both get mired in a lot of things.

The policy issue is that Washington, D.C. needs to make sure that businesses connecting the two countries are aware that there are major
ramifications for them not thinking about the welfare and health of this country and our allies first, before they sell their products and services there. That is key.

The more CEOs that understand that, the more shareholders that understand that, and the more boards that understand that,the better off we’re going to be. That’s where I’d like to see education outreach occurring and actually making an impact, and we’re seeing that today.

Mr. Jekielek:
Chris Fenton, it’s such a pleasure to have you on the show.

Chris Fenton:
Thank you and I look forward to coming back.

Mr. Jekielek:
Thank you all for joining Chris Fenton and me on this episode of American Thought Leaders. I’m your host, Jan Jekielek.

This interview was edited for clarity and brevity.