Thursday, June 6, 2013

The Squirt in China

"Mother Jones" looks in its May/June issue at Jeffery Katzenberg as a rising force in politics ("The New George Soros") includes an interesting summery of DreamWorks' China agenda, and at The Squirt's role in pushing the PRC to relax import quotas on US films.

The industry's expansion into China's $2.7 billion film market, which is expected to supplant the United States' as the world's largest in 5 to 10 years, hasn't been without obstacles. Several studios, including DreamWorks, are under federal investigation for potentially violating US anti-bribery laws in China. And until recently, the Chinese government would allow only 20 foreign films to screen in its theaters each year, and kept a greater cut of ticket sales than Hollywood thought was fair. In 2009, the United States won a World Trade Organization ruling urging China to open up, but to no avail.

In July 2011, ahead of a trade visit to China, Vice President Joe Biden met with industry leaders who asked him to press their case. Biden, too, returned empty-handed. Seven months later, Xi Jinping, then China's leader-in-waiting, made his first official visit to America. On hand to greet him was Katzenberg, who scored a seat next to Xi at a State Department luncheon.

Later that week, Xi and Biden traveled to Los Angeles, and Katzenberg joined them for lunch with Gov. Brown. Biden spent the day pushing Xi on the film quota and profit sharing disputes. The White House wanted to bump the studios' portion from 13 percent to 27 percent, but as the negotiations intensified, Biden asked Katzenberg and Disney CEO Bob Iger what they could live with. Then Biden made Xi a new offer: 25 percent. Xi agreed, and he also said China would let in 14 more foreign-made 3-D and IMAX movies each year.

Katzenberg was simultaneously working on a $350 million deal to open Oriental DreamWorks, a new animation studio in Shanghai—and it couldn't happen without Xi's approval. That same day, at a US-China economic forum held at a downtown LA hotel, Katzenberg officially unveiled the project—and proudly announced that it now bore Xi's personal endorsement. "It's hard to overestimate how big a deal this is for DreamWorks Animation," he told the Financial Times.

Spahn insists Katzenberg had no discussions with "anyone in the Obama administration" about the Shanghai project, and denies he had any role in the WTO resolution. But those wins did more than show the perks of having friends in high places; they put Katzenberg's deal-making savvy on full display. At the end of Xi's visit, all parties walked away as winners: The White House rushed out a press release celebrating the WTO agreement as a "breakthrough" in trade relations. Xi got a Hollywood ending to his trip. And the entertainment industry—including DreamWorks Animation, which has invested heavily in 3-D—won more access to a booming film market.

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