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The perils of product-placement pact

Release of new Transformers movie almost delayed in lucrative Chinese market over dispute

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A replica of Transformers: Age of Extinction's Bumblebee was quickly set up in Beijing after the Pangu Plaza sued Paramount over product placement dispute.


A replica of Transformers: Age of Extinction's Bumblebee was quickly set up in Beijing after the Pangu Plaza sued Paramount over product placement dispute.

BEIJING -- Hollywood studios, salivating over China's booming movie market, are falling over themselves to sew up deals on the mainland. But just days before its global launch of Transformers: Age of Extinction, Paramount Pictures got a crash course in just how fraught such tie-ups can be.

The studio had been hit with a sudden punch: Pangu Plaza, a Beijing luxury hotel, mall and office complex, was livid over what it claimed was a product-placement deal gone sour. Pangu said last week it was cutting off co-operation with the film, launching a lawsuit and asking Chinese regulators to postpone the movie's release.

Any delay of Friday's opening could potentially have cost Paramount millions -- the first three instalments of the Transformers franchise have done increasingly massive box office on the mainland: 2007's original grossed $45 million, the 2009 sequel took in $72 million and the third film hauled in $172 million in 2011.

So Paramount sprang into action over the weekend.

They swiftly moved a giant replica of the Bumblebee Transformer to the entry of the dragon-shaped Pangu hotel. Paramount vice-chairman Rob Moore, director Michael Bay, producer Lorenzo Di Bonaventura and star Jack Reynor jetted in to hold a news conference, and a big Beijing première was quickly organized.

The whirlwind of activity shows the lengths to which Hollywood is willing to go to keep its Chinese partnerships on track. The alternative is to become an L.A. studio branded by Chinese business partners as unreliable in the world's No. 2 movie market.

"It was unfortunate that we had this misunderstanding," Moore said at a news conference inside a massive ballroom at the hotel. "Pangu has been a great partner for us. We've taken steps to put this behind us, we've worked through all of the issues, and we're excited that Pangu is now excited to support us."

He and the Paramount entourage answered questions onstage in front of a giant screen reading "Celebration Before the Premiere." The local press corps ate canapés, drank wine and pocketed $50 "transportation fees" for attending the event on four hours' notice.

But the tensions were still palpable when the 13-minute ceremony ended.

In the hotel's driveway, Moore haggled over the wording of a joint English and Chinese statement that was supposed to go out to the media. Several Americans affiliated with Paramount huddled in hotel hallways making phone calls and saying things like, "This is crazy," and, "I don't understand what's going on."

A Pangu executive puffed on a cigarette and yelled at an interpreter that he was dissatisfied. The Beijing event came after Paramount had the film's official unveiling in Hong Kong last week, then followed that up with a big showing at the Shanghai Film Festival.

Lu Tao, chief executive of Beijing Pangu Investment Co., even called his own news conference. He told reporters that the company dropped its request to block the movie's release, but still planned on filing lawsuits over the product-placement contract.

He said Monday that the investment firm paid $1.6 million in the product-placement deal.

In exchange, Pangu was to benefit in five ways: It would appear in the film for at least 20 seconds; host an exhibit of Transformer props at the hotel lasting at least eight months; be allowed to license Transformers imagery for consumer products and retain all income from their sales; appear in all promotional materials; and host a "VIP celebration" with cast, director and Paramount leaders ahead of a première.

Lu said Pangu started to get nervous about the arrangement in February, and reached out to two companies that signed the original deal -- Jiaflix China and Chengxin. Lu blamed the two companies, which acted as middlemen in forging the contracts with Paramount.

Jiaflix is one of Paramount's production and marketing partners in China. It was founded by former Paramount president Sid Ganis, his cousin Marc and Kenneth Huang. Chengxin is run by Zhou Ning, a former soccer star.

At the 2013 Shanghai Film Festival, the Ganis cousins, along with Ning, appeared alongside Paramount executive LeeAnne Stables and touted the Pangu Plaza product-placement deal. "We're thrilled to be showcasing China within the film," Stables said at the time.

But Pangu officials began to figure out that terms of the contract Jiaflix and Chengxin set up were not being honoured.

And during the Hong Kong première, they realized that the hotel never got its 20 seconds in the film.

Lu said Pangu decided that it had been "cheated" -- and started pursuing litigation.

Representatives from Jiaflix and Chengxin could not be reached for comment.

Paramount's last-minute dash of diplomacy appears to have worked as far as Pangu is concerned.

Lu said the studio's response over the weekend was "positive" and "sincere" and that Pangu wants the film "to be a huge success in China."

"I think this is a very good reminder to Chinese companies seeking international co-operation not to be cheated by the middleman," Lu said.

The Pangu deal was but one of several Chinese product-placement deals for the film, which also shot in multiple locations in the country. Bay filmed scenes for Transformers: Age of Extinction in Hong Kong, Beijing, Tianjin and elsewhere.

Along the way, Bay faced various difficulties while making the movie in China, including being assaulted by a man in Hong Kong who attempted to extort money from the production.

But Monday, with the finish line in sight, Bay and his studio tried to put on a positive face. For now, it seems, the Transformers show will go on in China.

On Monday night, the Pangu hotel's lobby was advertising Transformers Juice, a green concoction reportedly favoured by Bay during his stays at the hotel.

"I want to put all this misunderstanding aside and just celebrate the great movie we shot in China," Bay said. "I hope everyone enjoys it."


-- Los Angeles Times

Republished from the Winnipeg Free Press print edition June 26, 2014 C17

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