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Chinese Hold Back on Admission Payments to Hollywood Studios

In following-up to a post of last week - "Chinese Censors Ban Minions But Cuddle-up to Smurfs" - where I addressed the issue of censorship by the Chinese government of U.S. and other imported movies,  I discovered that the Chinese were also holding back box office receipts owed the Studios.

The China Film Group, the organization which represents Chinese cinema distributors, has not paid the six major Hollywood studios for a number of months, during which time the summer blockbusters grossed hundreds of millions at the Chinese box office. The China Film Group says they are holding back admission receipts because of a disagreement over a newly imposed 2% tax on all admissions that Beijing wants the studios to pay.  The studios insist that the tax violates the World Trade Organization (WTO) rules, but thus far have not withdrawn any movies from distribution, fearing retribution by the Chinese government regarding censorship or shortening of play-dates.

The studios are arguing that under WTO rules, they are to receive 25% of Chinese box office gross receipts with no additional payments coming out of the studios' share.  The Motion Picture Assoc. of America (MPAA) is now involved in trying to settle the dispute and hopes to avoid issuing a formal complaint with the WTO. 

Estimates have monies owned the studios at: Warner Bros. - $31million, Sony - $23million, Disney - $35million, Paramount - $30million.  Large amounts are also owed to Fox, Universal, and MGM.   However, the studios are treading lightly as they are looking at a very rapidly expanding Chinese cinema market, where over 25,000 screens are scheduled to open over the next 5 years.

The Chinese do not deny that they want to promote there domestic film industry, and part of making it possible for 'home-grown' films to find an audience, against better quality content from Hollywood, is to manipulate release dates, issue phony censorship restraints, shorten play-dates, etc.  Chinese critics say that the worldwide movie market is dominated by Hollywood - this is very true.  But Hollywood produces more films than anyone else - over 600 major releases in 2012, of which only 50 were released in China.  The reason Hollywood dominates is because the U.S. film industry has players willing to risk hundreds of millions of dollars on products (movies) that have reason to fail but for the uncontrollable whims of moviegoers.

Chinese officials can't force movie going, but the Chinese film industry can risk millions and produce films that attract moviegoers; however, they must be prepared to lose millions on box office flops - as Hollywood does on a daily basis.

I'll keep you updated on this story as it unfolds.

Best
Jim Lavorato