How Viacom's 'Transformers' Is Charming China's Hollywood Skeptics, Cashing In

TAIPEI, TAIWAN (TheStreet) -- Hollywood blockbuster Transformers: Age of Extinction is smashing box-office records in China, a country that historically squelches Western movies to stoke nationalism on the way to promoting its domestic film industry.

Transformers 4 was also a big hit out of the gate in the U.S., despite mixed reviews. But its sales have dropped drastically after the opening weekend. The film sold $100 million in tickets in its first weekend in the U.S., ending June 29, and $36.4 million for the week ending July 6 according to Rentrack (RENT).

Beijing is welcoming this latest summer thriller partly because it was filmed in China and the government wants local filmmakers to learn from U.S. production companies so that they might develop a stronger domestic movie industry.

When Paramount Pictures, a unit of Viacom (VIAB) released Transformers over the past week, it earned $101.6 million, about equal to box office returns in North America, the official Xinhua News Agency reported. The fourth in the Transformers series also won the distinction of being China's biggest ever cinematic opening at 200 million yuan, or $32.2 million.

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Chinese viewers welcomed the film not because they're so hot on Hollywood itself but because parts of the sci-fi plot were set in China, specifically Chongqing and Hong Kong.

That means global exposure for the country's sights, an income generator for cities that supported the crews and proof that China is on the world film map.

"People's taste in film is pretty varied and they don't watch just American films," says Mei Feng, a professor at Beijing Film Academy.

Chinese actress Li Bingbing, known at home for roles in earlier action films, also starred in the latest Transformers. Her role suggests that the brains behind Transformers wanted a large China audience.

China is further unopposed to the local box office bounties being hunted down by Transformers 4 director Michael Bay and executive producer Steven Spielberg because they will stoke local filmmakers to perfect a domestic industry.

Future releases would ideally reach cinemas outside China where audiences know little of Chinese dramas, even its trendiest ones such as The Breakup Guru, released June 27. China, keen to expand its culture abroad to match its economic supremacy, expects to develop a global film industry with the takeoff of an $8 billion movie-making complex built over four years by Wang Jianlin, one of China's richest people. "It's a two-way street," Mei says.

More releases of American films in China or Chinese films abroad will help major film distributors such as Time Warner's (TWX) Warner Bros. and projection system designer Imax, which already has stakes deep in China.

China's total box office revenues are expected to reach $5 billion by next year, a sign of increasing wealth and attendant growth in cinemas, particularly in its fast-growing cities. That figure is nearly half the returns of North America.

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Talk about transforming. China once limited foreign films to 20 releases a year, fearing they would taint people's minds with polluted ideas uncensored by the Communist Party. In 2012 the quota rose to 34 releases a year, and is forecast to rise again. Beijing has accepted that foreign films rule.

Transformers 4 may eventually depose Avatar, which brought 1.3 billion yuan, as the highest-grossing film ever shown in Chinese cinemas, Xinhua notes.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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