The Box Office Booms — and It’s Corrupt: Part 7 of the First CFI Guide


Welcome to the seventh installment in a 10-part series of practical tips that will make up the CFI Guide to Film Production in China. Publishing each Friday from now until just before the annual U.S. China Film Summit and the American Film Market in Los Angeles in early November, the CFI Guide is built upon wide-ranging research and reporting checked against specific case studies and available official documentation. It is for writers and producers, directors, actors, and members of the film marketing and distribution chain who believe that working with China is a part of their future. With Chinese ticket sales up nearly 50 percent in 2015, and likely to surpass U.S. sales inside the next year, it’s clear that this market is too big to be ignored. CFI is here to help you better understand China’s filmmaking process and industry.—Jonathan Landreth, Founding Editor

Chinese regulators impose unofficial blackout periods of varying lengths on imported films, preserving the market for domestic productions during peak moviegoing periods: a week at the Lunar New Year (late January-early February), four to six weeks during summer vacation (July and August), the first week in October for National Day (October 1), and a week around Christmas and the New Year by the Western calendar. The blackouts ensure that domestics films’ gross account for more than imported films’ take at the end of the year. (Box office revenue from co- productions counts toward the domestic side.)

Under-regulation of accounting systems has allowed for prevalent ticketing fraud. Exhibitors and distributors sometimes work together to skim revenue off the top by under-reporting grosses. Several films in the past year have been accused of tampering with box office figures.

In August 2015, propaganda war film The Hundred Regiments Offensive was released to commemorate the 70th anniversary of the Allied victory over Japan in World War II. Netizens quickly leaked a State Administration of Press, Publications, Radio, Film, and Television (SAPPRFT) directive ordering movie theater chains to use “any means necessary” to bring in a fixed amount of box office revenue for Hundred Regiments in order to “extend societal influence” and build “feelings of patriotism and national sentiment.” To motivate them to complete their “mission,” theater chains could keep 100 percent of the box-office revenue instead of giving the usual 43 percent to the distribution company.

Following the directive, posts on social media showed printed tickets for Hundred Regiments with names and times for rival films—including Hollywood’s Terminator: Genisys—scribbled hastily over them. One Beijing cinema chain manager claimed nearly US$11 million could have been siphoned out of Terminator’s final box office tally.

That same week, Monster Hunt—then trying to overtake Furious 7 as the highest-grossing film of all time in China—was caught fudging its own box office numbers. Images began to circulate on social media showing Broadway Cinema, the theater circuit owned by Monster Hunt’s distribution company Edko, selling out multiple late-night “ghost” screenings. Even stranger, screenings were scheduled just 15 minutes apart in the same exact movie hall. Edko issued a statement later in the weekend claiming the sold-out shows were legitimate and just part of a public charity screening drive, but that it had failed to supervise the handling of the activity.

SAPPRFT continually claims it is trying to crack down on illegal box office activity, even releasing its own real-time box office website. But ticketing fraud was in the headlines once again in March 2016 when the 12 producers of Ip Man 3 were accused of bulk ticket buying and setting up “ghost” screenings on its opening weekend.

Distribution revenue in China comes predominantly from the box office (90 percent). There’s a very small ancillary market in the country, though that is changing with more official merchandising outlets and subscription-based streaming sites becoming widely accepted by the burgeoning middle class.

Online ticketing plays a huge role in the Chinese box office, as 75 percent of tickets will be sold online in 2016. Every major release will partner with one of the big apps for access to their big data since that data can help launch targeted marketing campaigns. Subsidized tickets—some as low as $1.50—flood the market on opening weekend for major films. — Jonathan Papish

Read Part 8, “Copyright Protection Does Exist.”