China is inching closer to becoming the world’s largest entertainment market and Hollywood studios are struggling to adapt.

Cameos by Chinese film stars are being jammed, often nonsensically, into Western movies. Studio executives are flying in to meet with cash-rich Chinese moguls. And praise for China in Hollywood films has become commonplace. This is increasingly being described as self-censorship. I tend to use the word “slobbering”.

But the China phenomenon that could impact Hollywood the most is not the “big money” or the “big market” stories that are now so common. It is the millions of artists, animators and other creative professionals who are now emerging in China. Of the 19M students in Chinese universities in 2009, over 1M were studying art and design, more than the students in science, law, education, or economics. And this wave of creative talent is now entering the workforce in droves.

We are witnessing the rise of a huge new creative class in China – literally millions of artists, designers, animators and other creative professionals are entering the workforce. Oriental DreamWorks (ODW) in Shanghai is at the forefront of this new “creative China” – and may end up being its midwife.

In 2016, the Oriental DreamWorks’ co-produced film “Kung Fu Panda 3” was released in China and set a new record as the top-grossing animated movie. It’s a good indication of what is to come: world-class animated movies made mostly by Chinese talent and with Chinese characteristics.

Artist colonies, not business units.

Oriental DreamWorks was launched in 2012 by company chiefs Jeffrey Katzenberg and Li Ruigang. It now has a creative team of about 150 artists and animators based in Shanghai. And 90% of these artists are native Chinese, most trained in local art and design schools. The staff overseeing project development are roughly an equal mix of native Chinese and Chinese-Americans with Hollywood experience. This “best of both worlds” team structure and Oriental DreamWorks creative chief Peilin Chou are good examples of what “creative China” will likely look like.

We are starting to see large numbers of domestically trained artists working with creative teams with both Hollywood and China experience. And while it is tempting to think of these teams as business units, in practice they function more like artist colonies. The process is fluid and creative. Success comes from a mix of talent, process and culture. And given the sheer volume of Chinese talent emerging, there will likely be thousands of these creative teams soon. They are going to create a ton of content. For example, during the National Day holiday week in October 2016 alone, seven new animated movies were released into Chinese theaters.

According to Peilin Chou, “There is just a tremendous amount of talent here. I would say the biggest difference between artists here and artists that have worked on major Hollywood films is not lack of talent or lack of drive or ambition. It’s just that that they haven’t had the opportunity yet to work on world-class quality animated films until now.”

And in a nice bit of karma, Hollywood’s relatively few Asian-Americans have become increasingly critical for the industry’s China ambitions. It turns out making films that resonate strongly with Chinese families requires actual experience in Chinese families, or at least in the culture or language.

Chou is a good symbol for this. Born in Taiwan and raised in northern California, she graduated from the University of California Los Angeles’ communications department the same year that Katzenberg, then head of Walt Disney Studios, launched an internship program to bring minorities into the studio system. That first year’s crop of interns included Chou, who was placed at Touchstone Pictures, and Leo Chu, who ended up at what is now Walt Disney Animation Studios. The two soon discovered they were just about the only Asian-Americans executives in Hollywood.

Chou recalls her first meeting of Coalition of Asian Pacifics in Entertainment (CAPE), an industry advocacy group. “There were maybe a dozen of us at most, and most were assistants,” she said. “CAPE just celebrated its 25th anniversary this year with a gala event filled with hundreds. It’s so gratifying and exciting to see.”

Over the following decades, Chou worked in development at Touchstone Pictures and Walt Disney Animation as well as at several television networks (Spike TV, Nickelodeon, AZEAN TV) and on Broadway theater productions. She was also one of the executives responsible for overseeing the Walt Disney film “Mulan,” the first animated movie based on a Chinese character. Around the same time, she was also lobbying her studio to hire a then-unknown Taiwanese director named Ang Lee.

Twenty years later, Katzenberg would ask Chou to come to Shanghai to oversee creative development at Oriental DreamWorks, making her one of a select group of executives who have run creative development at both Hollywood and Chinese studios. Indeed, the few Asian-Americans in Hollywood with development experience now find themselves in great demand as studios struggle with how to appeal to Chinese viewers.

“The studio system in L.A. today is very different than when my career started,” Chou said. “Hollywood now is pretty exclusively focused on tentpole films and superhero movies, star actor or director vehicles. The more modestly budgeted romantic comedies, for example, are not really part of the game anymore. In China, the opposite is true. Every year, more and more movies are getting made. People are taking chances, and it’s really exciting to be a part of an industry that’s growing and expanding, and have the opportunity to be part of a culture that is still development-driven by great ideas and stories first.”

Get ready for entertainment hyper-competition

Millions of Chinese artists and animators means lots more movies and TV shows. It also means things are probably going to happen cheaper and faster. Studios in China can simply deploy far more artists than they can in Hollywood.

For top quality films this probably won’t make much difference. Per Warren Buffett, you can’t make a baby in one month by getting nine women pregnant. But for lower quality films and TV shows, the Chinese entertainment market is probably going to surge in volume. And it is going get a lot faster and more ruthless.

I suspect we are at the end of what has been Hollywood’s golden age in China. A period when Chinese consumers had money and flocked to theaters to see the latest films, but when serious Chinese competitors had not yet arrived. However, this will happen soon, just as it has for so many other industries. As Chinese studios increase their production quantity and quality, they are likely going to wipe out (or at least challenge) much of Hollywood’s current success in China.

In practice,“mass creativity” in China will mean lots more creative teams, operating at a lower cost base than Hollywood and fighting far greater domestic competition. Creative China is going to be a larger, faster and more ruthless industry than its U.S. counterpart. ODW is in good shape for this fight. But I suspect Hollywood studios that haven’t built their own operations in the Mainland will be in trouble. Stay tuned.

Thanks for reading, Jeff

(originally published in Nikkei Asian Review, here, reprinted with permission)

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

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