Back in 1995 when they released their debut feature-length movie, Toy Story, the filmmakers at Pixar had little reason to give much thought to the Chinese movie market. There was scant money to be made there, and no reason to think China would ever be a significant source of revenue for the company’s movies or movie-related toys and merchandise. China’s entire, aggregated national box office gross that year was barely a tenth the amount of Toy Story’s $360 million worldwide gross, and when Toy Story became a ‘hit’ there, the 11th highest grossing film of the year, it mustered up just $3.8 million in ticket sales. The only things China was useful to Pixar for were manufacturing of its Woody and Buzz toys, and perhaps a few ‘made in China’ jokes around the office.
Image credit: Disney-Pixar
20 years later, China’s box office is more than 200 times bigger than it was in 1995, but Pixar is still making very little money there. Although other animation companies have earned windfall returns in China, success has been elusive for the Disney-owned studio. The company’s 10 PRC releases since 1996 have barely earned $100 million in aggregate, and its latest release, Inside Out, finished its China run this week with a mere $15 million in ticket sales. Compare this to the $87 million box office gross earned last spring by the Japanese anime import Stand by Me Doraemon. Or the $153 million earned over the summer by local animated hit Monkey King—Hero is Back, and the $392 million earned by live action-CGI animation hybrid Monster Hunt. Even The Little Prince, a French animation that barely made a ripple in the global market, has easily out-earned Inside Out in mainland multiplexes.
If ‘Made in China’ was ever a joke at Pixar, it should be no longer, it should be a principal strategy. Since Toy Story was first released, China’s global market share has grown from less than 1 percent to about 16 percent this year, and it will climb to 20 percent next year and 33 percent by the middle of the next decade. Yes, the company is doing just fine without China — Inside Out will gross a phenomenal $830 million in ex-China global box office receipts — but as each year goes by and China’s market continues to boom, Pixar is missing out on a bigger and bigger audience opportunity. As the Chinese movie-going audience broadens both geographically into the third and fourth tier cities, and demographically to families with children, and as marketing to these audiences improves, business opportunities for animation producers in China have mushroomed.
Another reason for Pixar to be concerned has to do with competitive strategy. As Chinese animated films become increasingly able to generate hundreds of millions of dollars in revenues at home, their ability to compete globally for talent and IP will increase. Top directors, writers and artists will go where the money is, and China is well on its way to becoming the global capital center, if not yet the creative center, for the world’s movie industry. Pixar has a choice: it can either attempt to ride the China wave, or be swamped by it.
The main problem for Pixar in China has been that its stories simply lack appeal there. Its offbeat, quirky, and thought-provoking style works wonderfully well in most of the world, but it has repeatedly fallen flat in the People’s Republic. And the cultural specificity of its movies sometimes works against it there. It was apparently too much to ask that Inside Out's focus on the thoughts and emotions of an angst-ridden American teenage girl would go over there. Whereas The New York Times celebrated the fact that “The film solves a thorny philosophical problem with the characteristically Pixaresque tools of whimsy, sincerity and ingenious literal-mindedness,” China rejected those very same qualities. What China wants in its animation, at least for now, is simplicity, straightforwardness, and linear plotlines.
Pixar’s prodigious capabilities in animation, in storytelling, in technology development, and in audience engagement are vastly superior to any domestic Chinese company’s, and if it decides to focus on China its potential for becoming the country’s most successful animation house is high (see Pixar founder Ed Catmull’s book “Creativity, Inc.” for an excellent overview of how the company drives and manages its creative process). Pixar’s strategic choices include setting up shop in China with a local partner, as Dreamworks Animation has done, or making movies in the U.S. that are targeted at the Chinese audience. The advantages with local production are avoidance of the import quota, higher shares of distribution revenue (around 43% vs. 25% for imported ‘quota’ films), and greater latitude regarding release dates, marketing campaigns, and length of theatrical runs.
Pixar could make movies intended mainly for the Sinosphere, or films that better target China’s moviegoers while simultaneously appealing to the global market. These are not necessarily mutually exclusive choice– the key variables are the availability of Pixar’s talent pool and its management time and attention. But one thing is certain: the longer Pixar goes without a focused and effective China strategy, the more its clout will diminish in the global animation business.