Handicapping China’s 2012 Import Quota Slot Derby


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn

by Robert Cain for China Film Biz

October 22, 2012

One of the big questions of the moment in China’s film distribution community is which movie has been or will be awarded the final valuable import quota slot for theatrical distribution. Depending on whose information you believe, the number of remaining slots is either one or none.

As you’ll recall, earlier this year Xi Jinping agreed under great duress from Vice President Biden and the U.S. Trade Representative to increase the number of foreign films that can be distributed in China’s theaters via revenue-sharing arrangements from the previous 20 films per year to 34 this year and beyond. As a face-saving compromise, China decreed that the additional 14 films must all be “enhanced” films in either 3D or IMAX formats.

Quota allocation is a big deal because China’s rev-share slots have become extremely valuable. China is now the world’s second biggest movie market, and even though the share that goes to the foreign distributor only tops out at 25 percent of box office receipts, that 25 percent can amount to 5, 10, or in some cases more than 20 million dollars going to a picture’s bottom line. The Jason Statham action pic The Mechanic earned nearly half its international gross in China, and it appears that the Australian horror flick Bait 3D will do the same.

Because SARFT and the Film Bureau tend to be close to the vest with information, and because they have a tendency to change their minds, it’s a thorny problem to determine where quota allocations stand at any given time. Official decisions get reversed, permissions get revoked, and in some cases, as with the U.S.-Chinese co-production Looper and the French-Chinese co-pro Mystery, co-production status gets yanked at the last minute. Bait 3D has caused a great deal of head-scratching, as some sources have designated it an Australian-Chinese co-production, although I’m fairly certain that it was a flat-fee buyout film of Australian-Singaporean provenance.

With the preceding caveat out of the way, I’ve detailed below my best knowledge regarding the films that have been released through quota slots so far this year. I show 16 of the 20 regular format film slots having been used already, with 3 of the remaining 4 spoken for, and 11 of the 14 enhanced film slots used, with the remaining 3 also taken. This leaves one regular format slot open.

That one last slot is sure to be hotly contested, with studios lobbying heavily to secure it for themselves (studio execs, if you missed it, see my recent column on how to get ahead in China). MGM’s Skyfall and Warners’ The Hobbit were both likely candidates, but those two films have apparently been pushed to next year by China’s decision makers. I had heard a rumor that the Alfonso Cuaron sci-fi thriller Gravity was awarded the last slot, but since that film hasn’t been dated yet for a U.S. release, this seems unlikely.

If you think I’ve gotten any of the above information wrong, or if you have knowledge regarding the 34th film, please write me so that I can update the chart.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com

Advertisements

Huh? You Say That China Has Loosened Its Film Import Quota?


By Robert Cain for China Film Biz

February 19, 2012 from Shanghai, China

I would have liked to put the headline for this story in giant, screaming, 48-point font. To be the first to inform you of ground-breaking news.

I would have liked to present you with the scoop that China has increased its movie import quota from the previous 20 films to the new level of 34 each year, and that it has raised the revenue share it will remit to foreign producers from 13-17 percent of box office takings to a more generous 25 percent in future.

But you already knew all that.

Here in Beijing, there’s been scant mention of any of this in the media. The government has been keeping a tight lid on a story that it apparently prefers to keep quiet in the PRC. In a day full of meetings on Saturday with film distributors, producers, and even the powerful head of China Film Group’s production division, not one person I spoke with was even remotely aware of the news. I only found out about it because a handful of friends back home in the USA were kind enough to email me stories from Variety, the Los Angeles Times, and other publications.

In fact, the front page headlines in Sunday’s China Daily (and all the pages that followed) have nothing to do with movies. Instead, the lead story reports—somewhat ironically—about Vice President Xi’s insistence that Washington loosen up its own trade restrictions that limit exports of American technology to China. China badly wants to access American innovations in such areas as civil aviation, integrated circuits, machine tools and other products. American movies and TV, not so much.

In fact the timing of the film quota announcement was rather awkward for the Chinese Communist Party, given that it came on the heels of a week of tough talk in Beijing about eliminating foreign TV programs from Chinese prime time broadcasts, and a general mood of xenophobic aversion to western cultural imports. The silence here about the shift in film import policy is deafening.

The policy shift was not exactly what Hollywood and the MPAA were asking for, but it is nevertheless big news, and I expect my producer and distributor friends back home are in a jubilant mood today. As Vice President Biden put it, “The agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast growing Chinese audience, supporting thousands of American jobs in and around the film industry.”

Specifically, the new agreement will allow, in addition to the previously authorized 20 foreign films per year, another 14 “enhanced” films, such as those made in 3D or IMAX formats. This last point is interesting, as it allows the Chinese government a bit of face-saving. The loosening of the quota might appear to folks in the PRC as capitulation by Beijing to US pressure, but the “enhanced” film requirement allows the Chinese to characterize the agreement as a ‘technological advance.’

After some investigation with studio and government connections in Beijing I’ve learned that there are important additional elements to the agreement which would smooth the process for mounting China-US co-productions, and also make it easier for US companies to set up joint ventures in China. But there are undoubtedly countless details to sort out before the new agreement can be implemented, and China could well drag its feet in putting the new policies in place. None of the U.S. press articles I saw mentioned any implementation timetable.

Of course, if you’re an attentive reader of this blog you know that film-related announcements from China are often overblown, exaggerative, and sometimes just plain false. Everyone got it wrong—myself included—in speculating that Jeffrey Katzenberg had arranged for Vice President Xi Jinping to announce a $2 billion joint venture between Shanghai Media, China Media Capital and Dreamworks Animation. Instead Jeffrey made the announcement himself regarding a far more modest $330 million deal.

Even former MPAA chief Jack Valenti got egg on his face back in 1994 when he proclaimed that he had negotiated a contract to lift all Chinese quotas and completely open up the Chinese entertainment market to Hollywood content. He later learned to his disappointment that he had negotiated the deal with a CCP apparatchik who lacked any decision-making authority.

If and when the new quota rules do get implemented, the biggest winners won’t be American studios, independents, or filmmakers. The biggest winners will be China Film Group and the PRC’s theater operators. With 14 additional Hollywood films to release each year, they’ll collectively rake in some $600 million or $700 million in incremental box office during the first year alone, with much more in subsequent years. 75 percent of that amount will stay in their pockets, making them the real beneficiaries of China’s ‘conciliatory’ moves.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.