The path to Dan Mintz’s office starts in a dimly lit penthouse lobby of glass panels, Buddha heads and traditional Chinese wooden doors. Take a right at the stone bridge over a carp pond. Pass a room filled with fresh-faced staffers brainstorming over laptops and go inside.
You’ve just entered the DMG zone, where marketing, movies and chutzpah collide–and where Hollywood comes for a bigger share of the world’s hottest box office, worth $2 billion last year, more than double its take in 2009. “They have to figure out China, one way or another,” says Mintz, a raspy-voiced former actor from New York who cofounded DMG, or Dynamic Marketing Group, in 1993, with two Chinese partners.
The ad agency-cum-production house started out shooting spots for multinational brands in China. Now it’s financing, distributing and producing movies. In April it snagged its largest deal yet: the third installment of one of Disney’s biggest franchises, Marvel’s Iron Man , which DMG is coproducing. Starring Robert Downey Jr., with a reported budget of $200 million, Iron Man 3 is slated for release next May. While the main filming is under way in North Carolina, DMG has been trying to nail down shooting schedules and regulatory approvals in China. Despite the hoopla, it’s far from a done deal, and CEO Mintz is under the gun. For an aspiring movie mogul who spent decades trying to crack the industry, the stakes couldn’t be higher. “This is the tip of the spear,” the crop-haired 49-year-old says.
Sensing a gold rush, U.S. studios are piling into China. DreamWorks Animation is building a studio in Shanghai with local partners. News Corp., which owns Twentieth Century Fox, has taken a 20% stake in Beijing-based Bona Film Group, a Nasdaq-listed producer and distributor. The traffic goes both ways: Dalian Wanda Group, a real estate conglomerate that runs China’s biggest theater chain, agreed in May to pay $2.6 billion for AMC Entertainment.
Hollywood’s embrace of China has caught the eye of regulators at home. The Securities & Exchange Commission is investigating whether U.S. studios made illegal payments to government officials for market access in China. No charges have been filed, but the SEC has made its point. Says Mathew Alderson, an entertainment lawyer at Harris & Moure in Beijing: “The message is ‘This isn’t the Wild West, fellas. The sheriff is here. ‘”
Not long ago China was mostly a source of frustration for Hollywood. While few foreign films were shown in cinemas, pirated copies sold freely on the streets. China’s entry into the World Trade Organization in 2001 raised its annual quota of film imports to 20 titles. But it didn’t break the iron grip of China Film Group, a state monopoly that imports all foreign titles, as well as produces, finances and distributes films and runs theaters.
It took a decadelong boom in cinema construction–China is adding thousands of screens a year, and exhibitors need content–and a WTO ruling in 2009 against China to crack the door open. In February, during a state visit by leader-in-waiting Xi Jinping, China finally agreed to let in 14 more films and share more revenue, with a 25% box-office split for imports, up from 13%.
Foreign films dominated China’s box office, worth $1.2 billion, in the first half of 2012, led by Titanic in 3-D. Many of China’s 10,000-plus screens are 3-D-equipped, which is handy since the 14 extra imports must be 3-D or IMAX versions.
But why settle for 25% when there’s a juicier offer on the table? By making Iron Man 3 as a U.S.-China coproduction, Disney would collect a 38% cut of the box office as befits a domestic film. In order to qualify as a coproduction, a movie must contain “Chinese elements” in the story and be partly shot in China. Scripts must pass China’s censors, whose sensitivities to perceived political or cultural slurs are legion. (Of course, this also applies to films imported to China: Men in Black 3 lost several scenes showing Chinese-Americans being zapped.)
On a blockbuster franchise like Iron Man , every point counts. And with DVD piracy rampant in China, it’s big screen or nothing for getting paid. Hence DMG’s growth, since it can navigate China’s bureaucracy, put up financing and deliver on logistical and creative challenges. “They’re spending hundreds of millions of dollars on these films, and they can’t make any mistakes,” Mintz tells FORBES.
The surest way to avoid mistakes in China is to placate the powerful regulators who can make or break projects, notably China Film Group. DMG courted it by coproducing its 2009 propaganda flick The Founding of a Republic and bringing in commercial sponsors. The regulators have since returned the favor by allowing DMG to import and distribute nonquota films such as Twilight and Resident Evil 4 . “Our relationship with them is extremely, extremely tight,” boasts Mintz, who sports the black T-shirt and black-jeans look of those trying to appear creative. “Tighter than pretty much anyone else.” Mintz has even accompanied China Film Group executives on buying trips to Los Angeles, say industry sources.
In China such back-scratching is all part of guanxi , or relationship building. It’s a word that frequently attaches itself to DMG, often with a dig at its meteoric rise. Mintz insists that relationships matter in China, but so does track record. “Anyone in a position of power, if they give you access or help out on something, they want to know that it’s going to be successful,” he says.
DMG has one hit under its belt: Looper , a time-travel thriller from Endgame Entertainment starring Joseph Gordon-Levitt and Bruce Willis it distributed in China. The original script by the film’s director, Rian Johnson, was set in France in 2047. After DMG signed on the setting was moved to China, a local actress joined the cast and scenes were shot in Shanghai, though not all made the final cut. (Chinese audiences saw a longer version.) In China Looper opened Sept. 28 on 3,000 screens, the same day as in North American theaters. It has since raked in some $116 million worldwide–half from outside the U.S. “Dan’s a very compelling figure,” says James Stern, chairman and CEO of Endgame.
Mintz first traveled to China in the mid-1980s to train in martial arts and met Wu Bing, a former gymnast. They fell in love and, according to friends, got married (Mintz and Wu, curiously, both decline to confirm this). They moved to Hong Kong and began working on action movies. Mintz hung out with a group of foreigners who played tough guys in films such as Jackie Chan’s Operation Condor. He was cast as a thug or bodyguard or simply a “bearded foreigner,” according to Hong Kong’s version of IMDb.
In 1990 Mintz went to Beijing to shoot a commercial that never aired, and he ended up staying. He found the city tough but was hooked on the possibilities of a society in transition. “He didn’t just hang out and go with the flow,” says Mark King, a psychology professor in Hong Kong who acted with Mintz. “He could see over the horizon and could see what was coming.”
Three years later he set up DMG with Wu and Peter Xiao, the son of a military officer. The agency’s first major client was Volkswagen, the largest foreign automaker in China. Other multinationals such as Nike and Johnson & Johnson followed, and this success was parlayed into movie production, before U.S. studios came knocking.
At corporate events Mintz switches between fluent Mandarin and an accented mother tongue that a producer later described to me as “Tony Soprano comes to Beijing.” (Mintz was born on New York City’s Staten Island and attended the fabled High School of Performing Arts in Manhattan.) Wu and Xiao typically show up at media launches but leave Mintz to do the talking.
Mintz’s pitch is a double-edged sword. Even in two industries known for hype–advertising and entertainment–DMG has a reputation of pitching ideas that never pan out. And its willingness to splash, and sometimes overstate, its every move leaves others cold. “The real guys who make movies don’t announce a lot. They just do it,” says David Lee, a producer in Beijing.
Lee has worked on several coproductions, including The Forbidden Kingdom , starring Jet Li and Jackie Chan. (The film topped the box office in China and the U.S., a rarity for a Chinese-themed movie.) When I ask Endgame’s Stern about Mintz’s hints to me that he had a hand in shaping the Chinese elements in the Looper script, he replies, “We didn’t change anything.”
DMG’s fast-and-loose reputation will be proven or disproven in the highest-profile way possible with Iron Man 3 . Signs of trouble are already creeping up. At Comic-Con in July, director Shane Black set off a wave of nervous speculation in China by saying that neither he nor any of the film’s stars would visit China. Backdrops would be shot there for postproduction use. “Basically we’re setting aspects of the film in China, but we won’t be filming in China,” he said.
Such tokenism is unlikely to satisfy China’s watchdogs. Asked about the project, Zhang Xun, general manager of a subsidiary of China Film Group, the regulator, said it hadn’t crossed her desk. “They haven’t applied” for permits, she told FORBES. In a statement Marvel Studios said, “Subject to approval by the Chinese government, the Iron Man 3 production hopes to film scenes in China with cast and crew this fall, as well as hold a movie premiere in China with cast members in attendance.”
Should approval be withheld, Disney/Marvel would feel the sting in terms of the box-office split. And DMG would lose lucrative distribution rights, a future calling card–and a lot of credibility.
Mintz insists Iron Man 3 will be a Chinese co-production. “We know what we can do. We put our money where our mouth is,” he says. He declined to discuss DMG’s share of the budget, citing confidentiality clauses. (Industry sources say coproducers typically pony up 10% as a down payment before filming starts.)
Though he declines to discuss specifics, Mintz reckons DMG has posted 40% annual growth in billings and other revenues since 2005, which would push it close to $1 billion based on his past statements. This inflates its real income, since the vast majority is in billings. A more realistic estimate of overall revenues would be about $150 million, yielding margins in the range of 10%.
Mintz sees growth in owning movie houses: DMG has begun building branded cinemas in malls in cities like Beijing, Shenzhen and Nanjing. As admen the company also remains big on product placement. Its 2010 romantic comedy Go Lala Go!, a $2 million coproduction with China Film Group, was in the black before its theatrical release, thanks to sponsors like Dove Chocolate and Mazda. Chinese brands also appear in Looper . It’s all enough to earn the respect even of those who sometimes criticize DMG. “They’re really out there,” says Lee, admiringly. We will soon see if they are crashing back to Earth or not.