The miracle

On Valentine’s Day, groups of Chinese young people waited for a Chinese movie, “Beijing Love Story” in Monterey Park AMC Theater, which was released day-and-date with China. The film made a strong opening weekend in North America earning128, 000 dollars from a limited release in nine screens over its first three days in the market following a Valentine’s Day premiere. Moreover, the film set a single-day record for a 2D film in China with16.1 million yuan.

“It’s a golden age. China film market is experiencing a prosperous development now…China’s local movies beat Hollywood movies and became to lead the market in the past few years…I remembered that 60% revenues are from our local movies, which could not be imagined in the past,” said Long Wan, Founder of Fire Rock Global Media. Wan is doing pre-production as the supervisor producer for a US-China co-production film, which is going to be filmed in Las Vegas this summer.

“Beijing Love Story” is only one of the “miracles” made in February, the Chinese New-year month. Another blockbuster, “ The Monkey King”, has earned 1.02 billion yuan since it released, which became the third movie in one-billion club in the mainland China. According to box-office record from Huxiu technology blog, China’s February box-office revenues hit 2.96 billion yuan (about 50 million US dollars). Experts predicted that the number would probably hit 30 billion yuan at the end of 2014.

The second largest film market

According to a report from Motion Picture Association of America in March, China overtook Japan to become the second largest film market after America, with box-office receipts of around 17 billion yuan (about 2.8 billion dollars).

More than 5,000 new cinema screens were added last year, and a massive 903 new complexes were opened. The State General Administration of Press, Publication, Radio, Film and Television reported that China now has 4,582 cinema complexes and 18,195 screens, increasing of 25 percent and 39 percent respectively.

The data also shows that cinema visits per head of population are approximately 0.5 per person per year (given that China has a population of some 1.3 billion). That is low compared with China’s neighbors in Asia – South Koreans buy an average of 4 tickets each year – and with developed country markets, according to Variety.

In the past five years, the demographic structures and habits of Chinese audience have been changed a lot. Below the chart shows that 48.9 percent of audience watched two to four films in 2009, but in 2012, we can see that the number of films has been diversity, which means more people choose to watch films in cinemas.

The high price of movie tickets never stops people’s steps into cinemas. In Shanghai, an ordinary movie ticket costs 100 yuan (around 15 dollars) and a 3D movie ticket costs 150 yuan(around 25 dollars), according to Want China Time. China’s movie ticket prices are reportedly the most expensive in the world.

In China, 30.5 percent audiences are 21-25 years old, which are the main-power consumers. “Do you know the average age of our audience is 22….Do you understand those young people born in 90s?” Wei Liang said to the Chinese director veterans in an interview. Liang’s film marketing company, Magilm Pictures, is one of the pioneers marketing companies in China.

China’s cultural market & Propaganda

China has a long history of propaganda on both news media and cultural market. In 1942, Chairman Mao Zedong gave a speech in a cultural panel meeting in Yan’an, which emphasized that literature and art should serve for workers, peasants, soldiers and proletariat. And movies are the tools of propaganda for educating people “right things” and also have to express right political views. At that time, Chinese film market experienced a period of downturn.

During the Cultural Revolution, the film industry was severely restricted. Most of previous films were banned, only a few new ones were produced. The most notable ballet version of the revolutionary opera was “The Red Detachment of Women” (1971). Film production revived after 1972 under the strict jurisdiction of the Gang of Four until 1976, when they were overthrown. The few films that were produced during this period, such as 1975’s Breaking with Old Ideas, were highly regulated in terms of plot and characterization, according to Wikipedia.

China’s economic reform and opening in 1979 gave a new birth to the whole country as well as movie market. The government film distribution reform project, which was released at the same year, said that film distribution companies could keep 80 percent for developing new projects and pay 20 percent of film revenues to central government.

The film industry flourished for a short time as a medium of popular entertainment after the reform project. Around 29 billion audiences went into cinema in 1979, according to historical record. The planned economic mechanism played an important role during the flourished period.

In 1993, Chinese government released a new reform report to doors for private film companies to produce movies. The newly formed SARFT, State’s Administration Radio, Film and Television strengthened supervision over production. Propaganda never stops. “The Founding of a Republic” produced by DMG is one example of new style of mainstream Chinese films in 2009.

Foreign films restrictions & Co-production

Since 1994, China set up an import quota system and started to import ten Hollywood movies every year. “China places a strong emphasis on censorship not only to ensure compliance with the political aims, but also because the country lacks a rating system. The SARFT censorship board regulates the content of movies to make them suitable for the entire national audience”, according to “Government Allocation of Import Quota Slots to US Films in China’s Cinematic Movie Market”.

This board consists of 40 members including government officials, filmmakers, academics, and representatives from interest groups. The Hollywood films, which apply for a quota slot, must submit either a script or a finished film to the board. If it is passed, then making edits for the film eligible release. The SARFT reviews the finished product before passing it for cinematic release.

In 2008, the SARFT published a list of offensive content that would not be allowed in any imported films, which includes “disparaging the image of the people’s army,” “murder, violence, terror, ghosts and the supernatural,” and “showing excessive drinking, smoking, and other bad habits”, according to “Government Allocation of Import Quota Slots to US Films in China’s Cinematic Movie Market”.

Each Hollywood studio expects to get four to six studio films each per year in to China through the revenue-sharing quota system that expanded from 20 per year in 2011 to 34 in early 2012. The expanded total includes an additional 14 Imax and special category movies, according to Variety.

“Every week, there is at least one Hollywood producer asks me if there is any good co-production projects in China…They are eager to producing co-production films with China,” said Wan.

The main point of co-production films is that they have the same right to share revenues with cinemas as local movies, around 43 percent of revenues, but imported quota films only share 25 percent. “The Expendables” ever “lost” a lot of revenues from China after selling copyright to a Chinese distribution company.

“They want Chinese culture to spread around the world so that they are known and have influence. So we look at the problem from the macro level to figure out what we need to do so that all our partners—U.S. and Chinese—feel like their needs are being met,” Dan Mintz said to The Hollywood Reporter, CEO of DMG Entertainment Company.

“The Growing Pains”

Expansion was the key word of China’s economic development in the past years as well as film market. Hot money played roles in movie production industry and lots of non-professional enterprises such as coal companies entered into film market accelerating the bubbles. Moreover, Genre films became main powers in the market like fast-food movies, fans movies and young idol movies, which lack of deep cultural elements. Most of Chinese moviemakers follow the trend of popular topics and hardly create real art. Most of Chinese movies lose money and only a quarter of them are shown into theatres.

Chinese audiences used to watching films in cinemas recent years but still don’t get used to thinking deeper. Examination style education kills the ability of creative and critical thinking among the new generations in China.

Where is the future?

Economic austerity is the policy that China released for the new planning years in 2013. It is hard to predict if there is any influence on Chinese film market in the future.

“It’s actually really hard to tell one movie produced by one specific country…there are co-productions all over the world,” said Bo Guan, international selection committee member of FIRST International Film Festival.

More Chinese students choose to study film production in US and they will be the main power of China’s new generation filmmakers.

“I want to learn the technology and the ways they tell stories from US film school and then tell Chinese stories to the whole world,” said Chen Feng, a student in US film school.

 

 

 

 

 

 

 

In the past 15 years the neighborhood of downtown Los Angeles has seen a dramatic rise in the number of businesses that have decided to open up shop downtown. But what is driving this dramatic rise in demand for businesses to open downtown? Definite signs of gentrification have been seen, and the catalyst of this movement is in large part due to the creation of the Staples Center in 1998. According the official Staples Center website, this multi-purpose stadium hosts over 250 events and around 4 million visitors a year, an outstanding number of people to see the revitalized downtown neighborhood. Before the completion of the arena, downtown was best known for the juxtaposition of skid row and financial businesses in the financial district. In the early 1990’s, banks located in downtown began to consolidate and merge their offices, thus creating empty office buildings and spaces throughout the neighborhood.

Los Angeles is a city that, despite the economic woes of its state, can be seen as a beacon of hope with a global interest. This sentiment has become increasingly more evident with the construction of the Wilshire Grand building that is owned by Korean Airlines. The Wilshire Grand building will become the eighth largest building in the United States, once completed. And as an economic indicator of a city, the more skyscrapers and tall buildings a city has, the healthier its economy is. That is not always true, but in this case it demonstrates that Los Angeles, and the booming downtown, want to compete on a global scale. Sure, the rebuilding of the downtown neighborhood has been a slow process since the late 1990’s, however, according to Nate Berg, “many in the city are hopeful that the Wilshire Grand is part of a new wave of investment downtown that will help the city compete internationally” (Nate Berg, The Guardian). It seems as though Nate’s sentiments are justified in terms of the investments being brought to the neighborhood, when there are plans for chains like Whole Foods, retailers like Urban Outfitters, and several local restaurants who have decided to expand to the downtown area.

In order to put the rise of downtown in the context of data, towards the end of 2013, “Six parking lots in downtown Los Angeles recently sold for $82 million” according to Dawn Wotapka of the Wall Street Journal. A staggering amount of money for some parking lots that have plans to be turned into an apartment complex. This is just one deal of many that have transpired over the past 15 years, and the figures seem to keep rising.

However, the other side of this story is the issue with occupancy rates, and whether or not there are too few apartments or too many people. Wotapka reports that “With more people flocking downtown, the vacancy rate for apartments has fallen. In the third quarter, downtown Los Angeles had a vacancy rate of 3%, down from 3.3%” Along with the dropping vacancy rates in downtown, which means in increase in demand, the consequence is that the average price of rent jumped almost 4% in the final quarter of 2013.

To shed more light and data  on the rise of housing in downtown, Wotanka found “There are about 14,000 apartment units in downtown Los Angeles. About 5,100 units are under construction, and more than 3,400 units were built between 2008 and 2013, according to Polaris Pacific, a real-estate sales, marketing and research firm. More than 3,000 additional rental units have been approved, with another 7,000 proposed. Meanwhile, there are only 17 condo units for sale and 68 under construction.”

Although there are some concerns that there has been such a vast amount of investment for housing downtown that we could see a drop in prices, the consensus among real-estate executives is that the demand will still stay fairly constant and strong. This prediction is justified by a recent report on the diminishing availability of apartment buildings and the relationship with rent prices. Since 2010, rent in the downtown neighborhood has increased by an outstanding 18.2% and is still predicted to grow because of the strong demand.

Another major indicator of the downtown area boom, although it may seem trivial at first glance, is the addition of Whole Foods to the flourishing neighborhood. The development of a Whole Foods in downtown serves not only high-priced, fair trade organic groceries, but as a symbol of the seriousness of downtown as a vital area in Los Angeles. As David Pierson of the Los Angeles Times reports, he calls it “a major development in the neighborhood’s gentrification efforts.” He is not the only one praising the development of the high end grocery store with City Councilman Jose Huizar recently stated “”Downtown Los Angeles is like a city within the city that needs a diverse range of services – including grocery stores,” Huizar said in a statement.  “Bringing Whole Foods Market to downtown is long-awaited news that represents a major coup.”

But Whole Foods is not the only tremendously successful chain that has chosen to explore the downtown area, the recently remodeled United Artists Building now called the hip Ace Hotel provides another example of what downtown has become. With locations in London, New York, and Panama to name a few, the expansion to the downtown area exemplifies the “hip” and “young” vibe that the area now exudes.

Downtown has made tremendous strides and has hurdled many obstacles to get the state that it is in today, and many real estate executives believe that the best has yet to come for this burgeoning neighborhood. With rising rents and diminishing vacancy rates, an interesting few years are expected to come in the housing market, with several apartment complexes to be completed. However, in retrospect, you have to look back to the addition of the Staples Center and the subsequent development of L.A. Live as the genesis of this downtown explosion.

 

Sources: http://www.theguardian.com/cities/2014/feb/14/world-largest-concrete-pour-la-trucks-los-angeles, http://www.aegworldwide.com/facilities/arenas/staplescenter, http://online.wsj.com/news/articles/SB10001424052702304281004579220210670242326, http://articles.latimes.com/2013/jul/31/business/la-fi-mo-whole-foods-downtown-20130731,

In November 2013, a Francis Bacon piece was sold for $142 million at Christie’s auction house, which gave the piece the title of “the Most Expensive Artwork Ever Sold at an Auction.” Only in this past year a Picasso was sold for $155 million, a Warhol for $105 million, a Pollock for $58 million, and a Lichtenstein for $56 million. Although arts has long been seen as an investment and a long-term profit, with new collectors from emerging countries such as China and Russia, and with the market experiencing substantial growth in the past 25 years, it is not surprising that prices are increasing dramatically for the finite art pieces – especially those by artists who are no longer alive, often referred to as DWMA (dead white male artists) – causing the market to be known as a Rich Man’s Game.

 

How much money each artist grossed at auction in each year from 1998 to 2013 adjusted for inflation (Salmon, Reuters).

 

The art world is one we ‘commoners’ have a hard time understanding and making sense of. It is a totally different parallel universe, where millions are spent momentarily to buy a painting, a sculpture, or an art piece by a recognized artist. While we debate over and over if going through with a 20-year mortgage to get an apartment is a good idea, people in the art world would go through with a transaction worth millions instinctively over a conversation they have with their art consultants. The market has its own unique economic indicators, which explains why supply-demand theory doesn’t apply in this case.

 

It is a market, in which the price confirms the objects worth; as Ernst Beyeler, Swiss art dealer who helped found Art Basel said: If [you] can’t sell something, [you] just double the price.” It is a rare market that defies simple economics by functioning without the notion of exchange value. An art piece is worth more one day and less the other, just because an auction house creates hype over a specific artist, or a Russian billionaire drives the prices up for a piece that wouldn’t be considered valuable before. If a consultant or a collector agrees with a dealer on the worth of a piece, that becomes its value – it’s as simple as that. It’s what psychologists refer to as ‘anchoring bias’, which is fancy wording for saying that when a specific art piece is linked to a price, the anchor is set and that becomes its ‘natural’ price – no questions asked. Arne Glimcher, founder of world-renowned Pace Gallery, justifies this by his statement: “all you need is two people to make a market.”

 

Although one imagines that a market dominated by the richest people in the world would not even slightly be affected by the changing economy, taking a look at the statistics, it is safe to say that the stock market crash in the 90s and in 2008 extremely impacted the market, causing price to decrease by 30%. Olav Velthius notes that confidence in the art market had dropped 40% in just a few months after the 2008 crash, bursting the bubble of confident auction houses, dealers, and collector. There is definitely a correlation between the art marker and the financial environment; simply because if the economy is doing well or is stable, the consumer confidence index will be higher, where collectors would be expected to be more actively buying within the market. Today, with recession coming to an end and the stock markets doing well, the consumer confidence is higher; and richest of the richest are competing to buy art worth billions of dollars again, driving the prices up in rocket speed.

 

Another approach to look into the relation between the art market and the economy is that people buy art in unstable economies, with the belief that it is a better investment since it’s more tangible and lucrative. A study by New York University economist Michael Moses supports the argument that art is a solid investment. Through applying economics theories and equations, Moses found that art as an investment showed significantly better returns than any class of bonds. These are not the billionaires though; they are upper middle class collectors, more interested in pieces worth 5 figures rather than millions. Their activity in the market, again in which they compete with other collectors for a finite number of pieces, result in driving the prices high in the overall market. Swapnil Pawar, chief investment officer at Karvy Private Wealth, suggests that “during the global financial meltdown, the works of most artists saw a steep fall in prices [while] [well-known artists] remained on top.” He claims that after the recession, qualitative works of renowned artists are now more in demand than ever, as they proved to be lucrative investments.

 

An additional argument to why the prices are increasing in the art market is the exponential growth of the market itself. In 1990 the market was valued at $27 billion, whereas this figure doubled by 2013 ($56 billion). There are now more buyers, more auction houses, and more dealers than ever before. More of everything except for the most sought after art pieces, which are finite in number since they’re mostly by DWMA. The main cause for the market growth is primarily the increasing demand of the newly rich from the emerging countries such as Russia, China, and India. This is now a global market, in which China accounts for 25% of sales, with United States leading with only 33%.

 

These newcomers, often in search of an identity for themselves in the elite world, turn to the art market to justify their presence. They are attracted to the glamorous life the market promises: parties, art fairs, and biennales. Eli Broad, a Los Angeles based collector, proving that buying art is the way to justify one’s position in society says, “spending [money] on huge yachts is despicable. I have a lot more respect for the people who put their money in art.” They are most often attracted to DWMA because they want to their names to be heard, and what better way to announce their presence than buying a $50 million worth Pollock? “It’s become extraordinarily unpleasant to compete for work in this market with people buying for social-status reasons… What you have now is more buyers overpaying and creating misaligned values,” Dean Valentine, a major art collector states, because while purchasing respect and status through purchasing art, the newly rich drive up the prices in the art market.

 

While the prices of DMWA art keep rising as collectors compete for “super-status” effect, the mid-market is slowly and steadily dying down. Small galleries are closing, emerging artists are struggling, and niche art is disappearing. Polarization in the market is evident, with the super rich driving up prices for the super valued finite art pieces, and a handful of auction houses benefitting from these major transactions. However, the mid-market is struggling and looks far less optimistic. With creativity no longer valued as art, and art being valued for what it is said to be worth, it seems that the market has become a rich man’s game – maybe all you need is two rich man to make a market after all.

 

 

Sources:

 

http://www.bbc.com/culture/story/20130417-why-is-art-so-expensive

http://www.newsweek.com/why-art-so-damned-expensive-65919
http://nymag.com/arts/art/features/16542/#print

http://businesstoday.intoday.in/story/invest-in-art-for-sound-gains—not-trading-but-investment/1/18151.html

http://www.scmp.com/news/world/article/1427264/global-art-sales-hit-record-high-china-top-buyer-fourth-straight-year

http://www.newsweek.com/blake-gopnik-pop-goes-art-bubble-63443

http://blogs.reuters.com/felix-salmon/2013/12/16/art-market-chart-of-the-day-auction-gross-edition/