Legal Roundup: Film Ratings, Online Censorship, Box Office Fraud, Wanda and More

  • Movie ratings could shake the base of the censors’ power
  • Wanda Pictures sells 6.6% stake to Oceanwide Holdings
  • Huayi, Tencent eye acquisitions abroad via Hong Kong back-door listing
National People's Congress Standing Committee Chair Zhng Dejiang (Credit: the Foreign Ministry of Peru, Creative Commons)

National People’s Congress head Zhang Dejiang (Credit: the Foreign Ministry of Peru, Creative Commons)

The Film Law at the China’s Annual Legislative Sessions

As China’s movie industry has grown, so has the impetus for a comprehensive law that will provide a framework for regulation. The latest iteration of the draft Film Industry Promotion Law was released in late 2015, and it has since gone through an initial round of discussion and solicitation of comments by the Standing Committee of China’s National People’s Congress, according to Zhang Hongsen, director of China’s Film Bureau (article in Chinese here), In his work report delivered to the annual legislative sessions this week, National People’s Congress head Zhang Dejiang said the film law is one of the key pieces of legislation that will be “formulated” over the coming year, though it wasn’t clear whether that means the long-awaited law would actually be passed anytime soon, and no further details on the law’s progress or timeline were made available.

A Call for Movie Ratings

While the language in the latest draft of the film law isn’t entirely clear, a formal ratings system for movies is part of the regulatory landscape it envisions, a number of delegates at this year’s legislative sessions renewed calls for film ratings to protect minors from inappropriate content. Although China’s lack of ratings means that all films screened should be suitable for all audiences, in practice the results can be skewed. Recent hits such as Mr. Six, which featured plenty of profanity and heavy tobacco smoking, and The Mermaid, which was rated R in the U.S., have left many scratching their heads about what standards apply in China. (Read more on this from CFI here).

Censorship, the Elephant in the Room

After a prominent real estate tycoon with a huge social media following in the many millions was shut down for daring to criticize President Xi Jinping’s media policy, a pall was cast over this year’s legislative sessions, where a “dazed” atmosphere of silence was reported to prevail.

A worrying expansion of media control can be seen in the recently announced online publishing regulations (which took effect this week), the announcement that online programs will be subject to the same censorship as regular television shows, and a newly expanded long list of content banned from television. Industry professionals are beginning to chafe against these growing restrictions — Top TV writer-producer Zhang Guoli said he was giving up on scripted programming in favor of reality television as a result. (Zhang is the same guy who had state media put words in his mouth expressing support for the new rules on web television).

Representatives from the legal field, journalism, and academia also have been speaking out on the free speech restrictions, with their comments being reported in state-run media as well – another sign of increasing resistance to Xi’s overstepping.

Ip Man 3 Fights Box Office Fraud Allegations

The delayed release of the latest Donnie Yen action flick was met with a bang at the box office with a weekend gross of over $70 million, but that figure was apparently boosted in part by “ghosts” in the audience and serious ticket price inflation. As CFI box office analyst Jonathan Papish explains, the film’s backer, Shanghai Kuailu Investment Group, partly financed the project through “crowdfunding” on Chinese peer-to-peer lending platforms that promised returns of 8%-11%, which may have added financial pressure to bring in the sales by whatever means necessary.

Industry regulators responded with vows to investigate and crack down on any fraud, demanding to see contracts between distributor Dayinmu (a Kuailu subsidiary), online ticket sellers, and theaters, and calling in the parties involved for questioning.

Kuailu has gone on the defensive, shifting responsibility, variously, to movie theaters, online ticketing platforms, and “competitors and criminals” who are trying to blackmail Kuailu and other companies. The company said the perpetrators are aiming to “let Ip Man 3 and Shanghai Kuailu Investment Group die and to rip off a layer of the skin of Mr. Shi Jianxiang, the chairman of the group.”

In the meantime, shares in a related Hong Kong-listed company that owns rights to 55% of the film’s mainland China net box office, are tanking, and the market for Ip Man 3 is expected to see a heavy correction in its second weekend on the mainland.

Another Take on the Online Publishing Regulations

China’s new and somewhat onerous-sounding Online Publishing Services Management Rules took effect this week (on March 10), though it’s still too soon to see any impacts from the rules. Writing for CFI, entertainment lawyer Jesse Weiner provides another perspective on what the regulations will mean in practice: “It does not seem as though the government is about to start shutting down or suddenly blocking all foreign, non-permit-holding content that may be viewed in China, but is simply reiterating concerns about the same things it’s always been concerned about,” namely, preventing foreign-invested enterprises from getting into the business of publishing in China, online or off.

A Good Time to Be a Hollywood Import

Following the February Lunar New Year foreign import blackout period (during which Chinese screens were, typically, reserved for domestic productions), March will see a steady stream of Hollywood films, many gaining favorable weekend opening slots and increasingly-less-rare day-and-date releases with North America. Is this a sign of better things to come, or just a temporary reprieve that inevitably will be scaled back if foreign films begin claiming too large a share of box office receipts?

2015 in Review

Mathew Alderson, a lawyer with the firm of Harris & Moure and frequent contributor to CFI partner site China Law Blog, reviewed some of last year’s top legal issues from a film industry perspective in this interview. Copyright protection, the draft film law, and China’s IP craze are among the topics of discussion.

Monster Hunt Distributor Sues Online Shopping Giant Over Infringing Toys

Speaking of IP and copyright, the distributor of last year’s blockbuster Monster Hunt, YL Pictures, has filed a lawsuit against online shopping mall and 32 of its stores, alleging that they sold unauthorized toys of the film’s lead monster, Wuba. (story in Chinese here) This case is just the latest example of the challenges faced by rights-holding parties in trying to exploit China’s underdeveloped ancillary market for movie product tie-ins (see CFI’s recent story here) yet it also shows how parties with valuable IP are no longer willing to accept rampant counterfeiting and are seeking to protect their legal rights in court.

Deal News

We’ve seen a lot of Dalian Wanda Group making major entertainment buys, but now one of its companies is taking on investment from another Chinese conglomerate. Oceanwide Holdings is buying roughly 6.6% of Wanda Pictures for $163 million, and investing another $221 million in Qingdao Wanda Pictures, the unit behind the massive studio-resort-property development complex that’s under construction in the eastern Chinese city.

Meanwhile, independent film studio Huayi Brothers and online giant Tencent are on the lookout for deals in South Korea and Hollywood through their joint investment in the Hong Kong-listed shell company Jiuhao Health, which will serve as a vehicle for foreign acquisitions. Jiuhao’s annual report states that “the Group will also actively seek investment and acquisition opportunities in the international film-production and entertainment market, in particular, focusing on the Korean and Hollywood markets.”