China Allows Hollywood to Audit Box Office for First Time: Report

US studios, keen to capitalize on China’s enormous box office potential, are taking a look at the box office books for the first time.

The Motion Picture Association of America (MPAA), Hollywood’s powerful global lobby group, is auditing China’s box office figures for the first time reports Bloomberg, citing a person familiar with the matter.

The MPAA, which represents the six major studios, has hired an accounting firm to audit the sales of selected films, according to Bloomberg, with the results coming as soon as the third quarter of this year.

According to the report, the audit is part of a market-access agreement Chinese officials reached with the MPAA almost two years ago.

Recommended ReadingHow Important Is China To Hollywood’s Bottom Line?By Jonathan Papish

China sets annual quotas on the number of foreign “imported” films screened in commercial movie theaters each year, and grants studios only 25 percent of the box-office revenue as their take.

Other films can be imported on a flat-fee basis -– in which Chinese distributors pay one fee and keep all of the profits.

Allowing international auditing of Chinese box office sales follows moves within China to deal with various types of box office fraud. In March, 326 cinemas were named, shamed, and punished for box office fraud as officials began to enforce the country’s new film law.

In August, a U.S. government delegation is due to travel to Beijing to try to convince officials in China to allow more foreign films — especially Hollywood films — to be imported under revenue-sharing terms.

A previous deal in 2012 increased the number of foreign imports from 20 to 34 and also improved the share of profits US studios received.

China’s ticket sales growth slowed last year to the weakest pace since at least 2008, but Hollywood studios are still banking that spending on movies in the country will still surpass that of the U.S. in coming years.