Signs From China Suggest A Good Deal For Hollywood on Imports

Chinese officials indicated last year that the local industry should prepare for a greater number of imported films in the local marketplace.

China appears to be preparing to allow more movies from Hollywood into the country, loosening a strict import quota system that has limited the amount of competition from overseas studios into the world’s second-largest entertainment market.

As Chinese officials and industry representatives from the US prepare to re-open negotiations around the film quota, signs from multiple stakeholders on the Chinese side indicate they’re preparing for more competition from Hollywood.

Officials, industry leaders, film industry analysts and local media reports are all indicating that there could a relaxation of the quota from anywhere between 12 to up to around 36 extra Hollywood films.

Under the current five-year deal, China’s film importation system restricts total foreign movie imports to either 34 titles per year on a revenue-sharing basis, allowing Hollywood studios to take home up to 25 percent of the box-office receipts.

Flat-fee releases are also available but are usually reserved for independent and smaller titles, normally between 20 and 30 each year. In a flat-fee arrangement, Chinese distributors pay a lump sum upfront and all the box-office proceeds stay in China.

Also on the table will be negotiations over issues other than the quota including Chinese marketing restrictions, distribution rules, and ticket revenue splits.

Government officials and industry representatives have begun preliminary work on the negotiations, but are remaining tight-lipped so as not to prematurely show their hand.

Nonetheless, there have been some positive signs trickling out from the Chinese side that reveal a willingness to budge quite considerably, potentially adding billions to Hollywood studio’s coffers.

In an early sign that China was laying the ground for an increase in foreign films, officials waved through a number of Hollywood blockbusters in the final months of 2016 in order to bolster sagging annual box office growth figures.

Despite the clear surfeit, film regulators maintained that the films imported was considered “cultural exchange projects” and aren’t counted in the 34.

Nevertheless, 39 Hollywood films managed to secure release dates in China in 2016, five more than was previously allowed. How much China’s film regulators are prepared to loosen their grip on the number of foreign titles allowed in is uncertain.

In October, China Film Bureau chief Zhang Hongsen warned the country’s film industry to prepare for competition from more foreign films entering the market in the near future.

“China’s film is not at a turning point where it would decline but heading towards a healthy, positive, and rational direction. We are confident to turn China into a film powerhouse.” Zhang said at a local film festival forum.

More recently, Wang Changtian, president of China’s largest private entertainment firm, Enlight Media, sought to reassure investors and the local industry in an op-ed about the signs of the impending Hollywood onslaught.

“2017 is starting to be called a strong year for Hollywood films,” the executive wrote. “Just take a look at the list [of potential films to be imported], it truly is extremely strong.”

MTime, China’s leading film portal and news website that was recently acquired by Wanda, maintains a list of foreign films which have a possibility of making it to Chinese cinema screens.

 The list has exploded this year with almost 70 titles listed as having a chance of making it to the world’s second largest theatrical film market.

Speaking at the Davos economic forum in January, Shanghai Media Group CEO Li Ruigang hinted that the film import quota could soon go up as high as “50, 60, or even 70 US films.”

On Thursday, local film industry analyst Chen Changye told The Global Times newspaper that he predicts a dozen more films will be added to the quota and that no quota will be specifically assigned to 3D movies.

Huang Guofeng, an analyst from Beijing-based consultancy Analysys International, told the paper he predicted the share of revenue going to US distributors will likely move toward the international average of 40 percent, but added it might “not be as large as the previous 12 percentage points increase.”

Adding uncertainty to the negotiations is the question of whether the new Trump administration will make promoting Hollywood’s global interests a priority – especially after the new president has been assailed by the likes of Meryl Streep and others.