Legal Roundup: Government to Pay Theaters for Screening Domestic Films

  • Chinese theaters to be rewarded for playing fewer imported films, favoring homegrown pictures 
  • Dalian Wanda Group has already raised $2.4 billion from Chinese investors
  • Though online publishing by foreigners is now illegal, experts calling the new rule a ‘non-event’
(Credit: Jonathan Papish)

(Credit: Jonathan Papish)

Foreign movie imports soon will face more challenges getting screen time in China. Following up on last week’s news of plans to provide cash rewards to Chinese films that do well at home and abroad, Chinese industry regulators announced that they also will reward theaters for helping out Chinese movies. The State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) announced that theaters that obtain at least two-thirds of their box office receipts from domestic films will be eligible to keep half of the amount that they normally pay into the China Film Bureau’s Special Fund Administration, which is 5% of all box office receipts. Ticket sales must be accurately recorded using its nationwide ticket sales reporting platform, and no cheating or fraud will be tolerated, according to the official notice posted by Chinese media (read in Chinese here).

As China’s movie market continues its impressive growth, expanding by nearly 50% last year, the foreign share of the pie has been on the decline, with imports accounting for 38.4% of total revenues in 2015, down from 45.5% the previous year.

While China doesn’t (yet) have rules on the books that formally limit the box office receipts from foreign films or that require a certain percentage of screen time to be devoted to local productions (like, say France and South Korea), the unofficial message has been loud and clear, with the new financial incentives just sweetening the deal for theater operators.

New Online Publishing Rules Took Effect, Now What?

China’s infamous new rules for online publishing took effect on March 10, but two weeks later the jury’s still out on what exactly they will mean for foreign companies doing business in China. While it’s clear that the rules ban foreign entities from engaging in publishing activities in China (which was already the case), the impact on publishing information when it doesn’t fall within a company’s main scope of business is less clear. Over at CFI partner site Jing Daily, publisher Hung Huang offers her take, focusing particularly on the fashion/luxury goods sector:

“My interpretation is that you can continue to publish if you are not a media company. So Dior, Chanel, and Hermès can continue to exist on social media, but not VogueElle, and Marie Claire. This is funny, since there is no big difference between their content anyway.”

She describes the March 10 effective date as “the most talked-about non-event,” albeit one that makes foreign publishing “officially illegal.” That sentiment is echoed in this Financial Times article: “Whereas formerly the government’s press censorship was widely denied and hidden from view, today the government is making its powers and the limits of dissent more explicit and public.”

Zuckerberg ‘Likes’ China Some More

That isn’t stopping Mark Zuckerberg from continuing his quest to get the world’s most popular social network into the world’s most populous country. During a widely covered (and mocked) visit to China to attend an economic forum, Zuck paid his respects to propaganda chief Liu Yunshan, in a meeting where he reportedly praised China’s Internet development, and said he wished to gain a better understanding of the country and work with its tech leaders, such as Jack Ma, with whom he was paired for a fireside chat at the conference.

He should be careful what he wishes for, however. A deeper look into what a Chinese version of Facebook would look like would include hosting servers in China to store user data within its jurisdiction, partnering with a local company (Alibaba, perhaps?), and, of course, censoring user content with what could become “the largest, most complicated censorship apparatus of any non-government media company on earth.”

And China’s censors already stepped in during Zuckerberg’s trip, warning the media to tone down the malicious comments about him and “stop hyping the story.”

Deal News

In a pre-IPO share sale for Wanda Pictures, parent Dalian Wanda Group has already raised $2.4 billion from Chinese investors, far exceeding its original target of $1.5 billion. That money will help with the costs of Wanda’s $3.5 billion acquisition of Hollywood’s Legendary Entertainment, and a reverse IPO is expected through Shenzhen-listed theater operator Wanda Cinema Line, whose shares halted trading last month pending disclosure of the deal.

In post-IPO news, the two lead private equity investors in IMAX China, which was listed in Hong Kong in October 2015, agreed to extend the lock-up on their shares for another three months from April 8, though it was disclosed that they were allowed to sell 20 million of their pre-IPO shares ahead of the upcoming lock-up expiration date. The agreement is expected to allow for “an orderly transition of shares into the market and minimize potential volatility in the market for IMAX China shares around the expiration of the lock-up on April 8,” according to Richard L. Gelfond, the IMAX China chairman and CEO of IMAX Corp. Sounds like IMAX China is expecting a big selloff in the coming weeks, though it could already be starting as shares took a tumble on the release of the latest news.