Chinese cinemas under-report US films' ticket sales

BEIJING • It was not a bumper summer for movies at the North American box office and now Hollywood will feel another pinch.

Over in China, cinemas underreported ticket sales of American movies by 9 per cent last year.

This is according to an audit that found that the operators in the world's second-largest film market are shortchanging Hollywood studios, two people with knowledge of the matter said.

The Motion Picture Association of America (MPAA), which represents the large movie studios in the United States, including Walt Disney and Comcast's Universal Pictures, hired PricewaterhouseCoopers to conduct an audit as part of a US deal with China setting the terms for imports of Hollywood movies.

China has been cracking down on box-office fraud, approving fines to curb misreporting in the country's booming cinema industry.

The authorities allowed Hollywood to conduct its own audit as the two countries prepare to renegotiate a 2012 deal that gave American movie studios better access and compensation.

The audit was revealed by Bloomberg in June and had been expected to be completed in the third quarter. The results were first reported by The Wall Street Journal.

China Film Group, the state-owned giant in charge of importing and distributing Hollywood films in the country, could not be reached for comment.

Ticket revenue grew less than 3.7 per cent in China last year, slowing from more than 35 per cent average growth in the previous five years, according to researcher Artisan Gateway.

Still, the box office in the country is growing faster than that in North America, according to MPAA data.

China remains an important market for Hollywood, with US$6.6 billion (S$9 billion) in annual sales.

The number of imported US films is limited by quota to 34 a year.

The studios behind those releases get only a quarter of boxoffice revenue, rather than the more typical half in most other countries.

More than 300 cinemas were penalised in March for under-reporting ticket sales, China's State Administration of Press, Publication Radio, Film and Television said at the time.

The biggest penalties took the form of 90-day suspensions of operations for exhibitors that had understated revenue by more than US$150,000.

Cinemas and distributors face revocation of licences in "very severe" cases, according to the law, which took effect in March.

Until everyone toes the line, Hollywood studios will have to count their losses.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 05, 2017, with the headline 'Chinese cinemas under-report US films' ticket sales'. Print Edition | Subscribe