“Grandmaster” Flashes to Top of China Chart

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By Robert Cain for China Film Biz

January 15, 2012

Wong Kar-Wai’s Grandmaster, starring Tony Leung and Zhang Ziyi, opened with $25.8 million in its first six days in China, extending a record-smashing 7-week run during which at least one film every week has grossed $25 million or more at the Chinese box office. The film, an action-biopic about Bruce Lee’s legendary trainer and kung fu master Ip Man, beat out long-running hits CZ12 and Lost in Thailand last week to top the charts.

Director Wong, notorious for his budget and schedule overruns, out-did his tardiness record this time with a film that he first publicly announced all the way back in 2002. He released the picture’s first teaser trailer in summer, 2010, and pushed back several release dates as he tinkered with the film in post production. After missing his December 18th release date, he was reportedly still putting finishing touches on the film just hours before its eventual world premiere on January 6th. The first-week grosses would have been higher except that the film arrived at least a day late at many theaters.

Still, the wait was apparently worth it, as Grandmasters drew more than 4.5 million admissions and was critically well received, with reviewer James Marsh calling it “the best-looking martial arts film since Zhang Yimou’s Hero, and the most successful marriage of kung fu and classic romance since Crouching Tiger, Hidden Dragon.”

Box office week ending 1-13-13

In second place for the week, Jackie Chan’s action-comedy hit CZ12 added $13 million to solidifiy its standing as the mainland’s second-highest grossing Chinese language film ever after Lost in Thailand, with a 25-day cume of $127.1 million.

In its fifth week of release, Lost in Thailand fell 72 percent to $8.9 million, a surprisingly sharp drop that raises the question as to whether it can beat Avatar for China’s all-time box office record. Lost already holds the admissions record with over 38 million tickets sold, but Grandmaster’s dominant opening last week may just have ruined Lost in Thailand‘s chance to become the first Chinese film in the modern multiplex era to take the mainland’s all-time box office revenue crown. Lost needs another $17 million to achieve that distinction, and with Grandmaster stealing its thunder last week and with the James Bond pic Skyfall entering the picture next week, Lost in Thailand, the little ($4 million budgeted) picture that could, may not have enough steam left to push it over the top.

Skyfall‘s release on January 21 will bring an end to the nearly two month long SARFT blackout on major Hollywood releases. The Bond pic can be expected to perform well, though it will undoubtedly be hurt by SARFT’s two-and-a-half month delay in releasing the film, a lag which has allowed massive illicit pirating and online viewing that will cut into the film’s theatrical potential. Still, at least Skyfall won’t be subject to the simultaneous release with The Hobbit that many had feared; that picture has been held back in the PRC until late February.

There are numerous American film releases ahead with strong market potential, but don’t expect a repeat of 2012’s first half, when Hollywood seized a 63 percent share of the market. SARFT won’t be caught off guard this time, and will be doing everything it can to maintain the respectable appearance of a 50 percent or better market share for Chinese language movies.

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.

China’s Wild and Wooly December

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By Robert Cain for China Film Biz

December 25, 2012

Back in the fall, most everyone who follows China’s film industry predicted a record-breaking December. Three films by three iconoclastic Chinese directors—Feng Xiaogang, Wong Kar-wai and Jackie Chan—would sweep audiences into the multiplexes, with each picture grossing around US $100 million or more. Confidence was high that 2011’s December box office record of $218 million would be shattered and that a $350 million record-setting month was in store.

Now, as December draws to a close, the prognosticators can congratulate themselves at least on the latter point: China’s box office is running a scorching 70 percent ahead of last December, and the $350 million record should be in the bag before New Year’s Eve. But the path that China took to get there was one that no one could have foreseen.

Box office week ending 12-23-12

The first step in December’s long march to glory was the surprising performance of Taiwanese-American director Ang Lee’s film, Life of PiPi enraptured Chinese audiences with its lush 3D images and its weighty philosophical themes, becoming only the third non-Chinese film to achieve a higher gross in the PRC than in North America (the other two films are the American re-release, Titanic 3D, and the Australian shark attack thriller Bait). Pi would have likely reached $100 million in China if SARFT hadn’t clipped its run at 30 days on Sunday, so it finished with an $89 million final gross.

The next surprise was that Wong Kar-wai’s star-studded action pic The Grandmasters was pushed from its December 18th slot to January 8th, 2013.  At first this appeared a blow for Grandmasters, as it will completely miss out on the December box office bonanza, but the pushed date may actually be a blessing. Grandmasters would probably have gotten buried in the fierce pre-New Year’s competition, and January tends to be a strong month in China, as was proven by the early 2012 successes of  Flowers of War, Flying Swords of Dragon Gate and Mission Impossible 4, which launched last January and became the year’s first $100 million grosser.

Another shocker was the dismal under-performance of Feng Xiaogang’s war drama Back to 1942. The film’s grim and depressing themes, underwhelming marketing, and poor critical reception (my favorite quotes called it a “daisy-licking drama,” “a sledgehammer epic” and “an emotional strip-mine”) combined to diminish turnout. 1942’s $60 million gross would be heroic for most Chinese pictures, but with its reported $40+ million cost and $100 million expectation, 1942 caused the stock of distributor Huayi Bros to tank by 20 percent in the first few days after its release. Huayi’s stock regained some of its losses after it released CZ12 a few weeks later, but the stock of director Feng Xiaogang may not recover so quickly.Huayi Bros stock price

The biggest surprise of all was the emergence of sleeper hit Lost in Thailand, the low-budget comedy that has smashed dozens of Chinese box office records on its way to becoming the highest-grossing domestic Chinese film of all time. Only two weeks into its run, Lost in Thailand is now certain to surpass Titanic 3D and become the highest grosser of 2012. The little comedy that could has propelled the stock of its distributor, Beijing Enlight Media, to a 40 percent gain this month.Enlight Stock Price

The only detail that Chinese box office watchers predicted correctly was the success of Jackie Chan’s CZ12. The action-comedy opened to a $35 million first-week gross and, with little serious new competition this week, has a good chance of crossing the $100 million threshold by early January.

All told, December’s box office result will beat April’s prior monthly record by more than 35 percent. With the PRC’s box office record books being re-written on a weekly basis these days, film distributors can look forward to a very happy new year in 2013.

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.

Sleeper Hits Put China Box Office Growth Back On the Fast Track

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Lost in Thailand poster

By Robert Cain for China Film Biz

December 18, 2012

China’s December box office rally is shaping up to be the biggest story of the year in the global movie biz. After the fall’s SARFT-induced coma threatened to dampen theatrical revenues for the rest of the year, a pair of films that barely anyone saw coming has electrified PRC audiences and kept theaters filled and queues brimming for over a month.

Back in the summer and fall SARFT crushed Chinese exhibitors’ hopes for a $3 billion aggregate 2012 box office when it set extended “domestic film protection periods” that kept Hollywood movies out of local theaters. Audiences mostly stayed away from the bland domestic product that was on view, and I revised my estimate of total year box office revenue down to $2.5 billion.

Hopes were raised in December, when many box office watchers anticipated that a trio of Chinese language films—Feng Xiaogang’s Back to 1942, Wong Kar Wai’s The Grandmasters, and Jackie Chan’s Chinese Zodiac 12 (now known as CZ12)—would dominate theaters. December did in fact bring good tidings, but not exactly as expected.

Firstly, Ang Lee’s Life of Pi confounded almost everyone’s expectations by taking the Chinese box office by storm, so to speak. What many had projected would be at most a $20 million or $25 million run instead became a blockbuster hit, with $86 million to date, making it the fourth biggest grosser in China this so far year. Not only did Life of Pi spank down Back to 1942 in China, it also handily beat its own $70 million (so far) tally in the U.S., only the third time in history that a foreign film has grossed more in China than in North America.

While Grandmasters was pushed to next year and CZ12 will open this week, it was a tiny, low-budget comedy that solidified December as one of China’s best months ever. The Hangover 2 knock-off Lost in Thailand, a sequel to the 2010 film Lost on Journey, charmed audiences out of a massive $48 million in its first 5 days, setting scads of records along the way, including:

• Best all-time Wednesday opening for any film

• Best opening day in December

• Biggest single day in December

• Biggest opening week in December

• Best opening week for a locally made film

• Best opening week for any 2D movie

The reportedly $4 million budgeted Lost in Thailand looks likely at this point to surpass Painted Skin 2 to become China’s biggest local language film ever, and the PRC’s 2nd highest grossing film overall in 2012.

Lost in Thailand and Life of Pi paced China’s overall box office to its best-ever week as measured by admissions, with over 15 million tickets sold.

Box office week ending December 16, 2012

These recent events have given me the confidence to raise my year-end estimate to $2.65 billion for 2012, which would make for China’s 9th year in a row of 30% or greater theatrical revenue growth and an aggregate 2,200% increase since 2004. To put that figure into perspective, had the North American box office grown by an equivalent amount, it would now be a $200 billion movie industry, rather than the $11 billion business that it is.

For several years now I’ve been predicting that China will surpass North America to become the world’s biggest box office territory by 2020. I’m now going on record and moving the date up by a year to 2019.

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.

‘Pi’ Slices Up the Chinese Competition Again

Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn.Ang Lee and TigerBy Robert Cain for China Film Biz

December 10, 2012

Screenwriting and producing assignments have kept me from posting here on China Film Biz during the past few weeks, but I’ll aim to catch up in the coming days. Much has happened since I last put virtual pen to paper.

First things first: the extraordinary box office performance of Life of Pi. The Ang Lee fantasy adventure is remarkable not only for its gravity-defying theatrical run in China, but also for what it reveals about the contemporary Chinese moviegoing audience. Not since Avatar has a film so captured the imaginations of China’s movie literati as Life of Pi, which has inspired more than 5 million tweet messages on Sina Weibo, the PRC’s leading Twitter-like site. The picture is well on its way to becoming only the second U.S. film this year to earn more in China than in North America, and its success underscores a broadening trend of the PRC’s mainstream audience beyond popcorn spectacles to include more thoughtful fare.

Widely expected before its launch to earn only middling numbers, Life of Pi has caught fire with multiple audience segments, including Ang Lee fans, 3D movie fans and, perhaps most importantly, sophisticated moviegoers who appreciate Pi’s symbolism and its exploration of weighty topics like faith and religion. China’s social media sphere has positively lit up with speculation about such topics as the metaphorical significance of the film’s carnivorous island, and its philosophical musings about the subjective nature of storytelling.

Three weeks after its debut Life of Pi has grossed nearly $70 million in China—$9 million more than it has earned in North America. It should wind up at around $95 million when SARFT’s regulators pull it from theaters after its sanctioned 30 day run. If—and this seems unlikely—SARFT allows the picture a 2-week extension, it could surpass Painted Skin: Resurrection to become the mainland’s second highest grosser this year after Titanic 3D.Box office week ending December 2, 2012

Pi’s success has not only dealt a serious blow to director Feng Xiaogang’s film Back to 1942 (not to mention his stature in China’s film industry), but it has also thrown a wrench in SARFT’s hard fought schemes to keep the market share of foreign films below 50 percent in 2012. Pi will outgross SARFT’s initial estimates by about $70 million, thus tipping the market share balance in favor of imports, much to the dismay of China’s bureaucrats who are responsible for market share manipulation .

If Back to 1942 manages a decent hold and if Jackie Chan’s Chinese Zodiac performs at or near expectations, the mainland’s total 2012 gross could approach $2.6 billion.  That would represent a 29 percent increase over last year’s total, another record year for the PRC and another step closer to catching up with the $10+ billion North American market.

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.

Big Trouble in Movie China

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By Robert Cain for China Film Biz

November 26, 2012

Crisis in China’s movie business was narrowly averted on Friday when the country’s film authorities announced that they will award performance-based box office bonuses to domestic film distributors and to theaters, ending a weeks-long dispute that had each side threatening to boycott the other over revenue splits. Thanks to the feds’ intervention, the eagerly awaited release of Feng Xiaogang’s Back to 1942 will proceed as planned on Thursday, and Chinese moviegoers will enjoy a normal December movie season,

Tensions were high in mid-November when five of China’s biggest film distributors banded together to demand an increase in their shares of box office revenues from 43 percent to 45 percent. The five companies—China Film Group, Huayi Brothers Media Group, Bona Film Group, Stellar Mega Films, and Enlight Pictures—told theaters that if they didn’t get their way they would immediately start withholding the releases of their blockbuster movies, including Back to 1942 and Jackie Chan’s China Zodiac, both of which are expected to be major holiday season hits.

In a notice issued to theater chains, the five film distributors said that China’s domestically-made blockbusters have contributed significantly to the nation’s film market. Yet, they complained, as they continue to produce films using state-of-the-art technology, production costs will continue to rise. “Therefore,” the distributors asserted, “In order to boost the creation and production of domestic movies, improve their quality and gradually smooth over the economic relationships between the stages of producing, distributing and screening, we five companies have reached the consensus that the profit share proportion for distributors should not be lower than 45 percent.”

Theater operators responded by holding an emergency meeting of their industry organization, the China Film Circulation and Projection Association, on November 17th in Guangzhou. They published a combative response (copied below) to the distributors’ demands and offered some choice words to reporters, with veteran Wanda Cinema salesman Liang Liang telling a reporter, “I have only three words [for the distributors]: Go to hell!”

In their declaration, the theater operators deemed the distributors’ demands unacceptable, for the following reasons:

  1. The five film distribution companies failed to follow the rules; without any attempt at consultation, they simply went ahead and gave the theaters an ultiimatum.
  2. The five film companies failed to consider that the industry’s current revenue split has been formed over an extensive period of trial and error and therefore any change in pattern would require adequate preparation.
  3. The five film distribution companies only took into consideration their own interests, without considering the challenges faced by theater operators. Most theaters are unprofitable due to the exorbitant rents they must pay their landlords.
  4. The distributors failed to use the correct method to address their grievance. They could have easily taken their request for a raise in revenue shares to China’s Movie Special Funds and apply for the increase in rates there.
  5. The distributors exchanged friendship for profit. China’s movie industry has always supported these five major players in film distribution. However, their actions showed how they have seemingly left behind their integrity when the temptation of personal gain showed its face.

Note that most of these objections are moral and ethical ones, not legal arguments. It’s an interesting example of how business operates in a country like China, where contractual obligations are usually less important than relational ones.

Civil war was ultimately prevented when the National Film Development Funds Management Committee (NFDFMC) stepped in and offered a solution in the form of bonus compensation to both sides, as follows:

For distributors of domestically made 3D and IMAX films 

If a film grosses RMB 50mm to 100mm , a RMB 1mm bonus

If a film grosses RMB 100mm to 300mm, a RMB 2mm bonus

If a film grosses RMB 300mm to 500mm, a RMB 5mm bonus

If a film’s box office gross surpasses 500mm, a RMB 10mm bonus

For theater operators

If at least 50 percent of a theater chain’s total annual box office gross is earned from domestic films, 100 percent of fees paid during the year by the theater chain to the NFDFMC (a straight 5 percent of every RMB of ticket sales) will be reimbursed to the theater chain.

If the percentage of box office earned from domestic films is between 45 percent and 50 percent, the NFDFMC will reimburse 80 percent of the fees a theater has paid to it.

If the percentage is below 45 percent, but the domestic film revenue is still more than last year’s, the NFDFMC will reimbursed 50 percent of the fees.

Both sides were apparently satisfied with this solution, and the show will go on. China’s theaters will continue to run films from the five distributors, and Back to 1942 will unspool on the 29th.

Having witnessed an endless string of financial shenanigans in China’s movie business, I can’t help feeling that this whole dispute was staged as a ploy to justify an end result that undeniably favors domestic films over imported ones. After all, China’s film regulators have for years twisted and strained to get around the WTO rules, and have often simply reneged on their legal obligations, in order to keep foreign films’ revenues below a 50 percent aggregate share of the box office.

With the attractive NFDFMC bonuses to tempt them, it’s hard to imagine that any theater chain in China will ever again submit an annual report with a domestic film box office share of less than 50 percent. The new rules give them powerful incentive to under-report the grosses of the foreign films they exhibit (if they aren’t already doing so) in order to maintain the desired balance and win their juicy year-end spoils.

As if this shift against the interests of foreign distributors wasn’t injury enough, I’m also hearing rumors that SARFT is planning to find ways to roll back the 25 percent share it pays foreign films to a somewhat lower rate. If you’ve heard anything about this please write me at the email address below.

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.

How China’s Movie Distribution System Works, Part 2

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By Firedeep and Robert Cain for China Film Biz

November 9, 2012

This is the second part of a two-part article. Part 1 can be found here.

Movie Theaters in China
Despite having the second largest number of movie screens in the world, with well over 12,000 as of this writing, China remains one of the world’s most under-screened major territories in terms of movie screens per capita. Whereas the United States has one screen for about every 7,800 people, China only has one for every 112,000. There are numerous cities in China of 500,000 and even 1 million people that have no modern movie screens. For China to be on par with the U.S. on a per capita basis, it would have to open 160,000 more screens.

Because the vast majority of China’s multiplexes were built in the past five years, its cinema infrastructure is highly modern and technologically advanced. Of the country’s roughly 12,000 screens, more than 10,000 have digital projection and about 7,000 are equipped for 3D. There are about 3,300 theater locations operated by 45 commercial cinema chains in China, about 2,200 of which can report box office daily.

In total, in the first six months of 2012, 1286 theaters each managed to exceed ticket sales of more than 1 million RMB (about US $160,000) at the box office. And about 100 theaters sold over 1 million dollars box office in the first half of the year. Between January and August, 423 new theaters with over 2,500 new screens had opened their doors. 

Revenue Sharing
Until the new WTO MOU was agreed early this year, imported films entitled to revenue sharing would receive from 13% to about 17.5% of the total box office receipts of their films, depending on how much the movie actually made.  “Total box office receipts” is defined as the amount reported by the Office of China Film Special Funds. This figure is almost certainly always under-stated, for reasons we will see below, and because there is a material amount of skimming that takes place at China’s theaters. Before the WTO MOU, if a revenue-shared Hollywood movie earned less than 45 million yuan at the box office then it would only get 13% of the reported gross. Those films grossing more than 45 million yuan would receive as much as 17.5%. After the WTO MOU was agreed, revenue sharing films now receive a straight 25 percent of all box office receipts. Much simpler, and better for the foreign producers.

China Film and Huaxia Film receive about 22 percent of the gross from foreign releases. The rest, after taxes, goes to the exhibitors, and amounts to roughly 45 percent of the gross.

By way of comparison, local movie producers can distribute their products almost limitlessly and usually they, the producers and distributors combined receive about 43% from the gross. Generally, theaters operators receive slightly more share from Hollywood movies than from local movies.

Release Dating
The release date for each and every film is decided by the Distribution and Exhibition Association (DEA), a government office that is a subsidiary of SARFT. Before any film can receive a release date, the finished version of the film must first be approved by the Film Bureau. After that, the distributor submits the film to the DEA seeking a release date. Multi-party negotiations take place among distributors, exhibitors, the Association and sometimes even the Film Bureau, regarding the date of release.

The film is only officially dated after the DEA provides the corresponding release licenses and notification, which can happen as late as just a few days before the film’s opening. The bigger the movie is, the harder it is for it to get a quick approval and date, especially for imported films. Hollywood’s major studios are completely at the mercy of this dating process, with no real say of their own, since they are not the distributors. For foreign buyout movies, the local distributors can play a limited role. For local movies, the local distributors have much greater influence over their films’ dating.

The Theatrical Release
The discussion below pertains mainly to imported foreign movies.

Once approved by the Film Bureau, a film will be delivered to a certain local studio (usually Shanghai Film Studio or Beijing Film Studio) for dubbing, subtitling and printing. In the case of revenue-sharing imports, the foreign studios pay for this service; for buyout movies the local distributors usually pay. Most movies’ marketing campaigns in China begin at this point. There is no point in spending money on advertising until the movie’s release date is set. This process usually allows far less time for marketing a movie in China than in most other territories.

Before 2012, most movies still used physical release prints for distribution. But since early 2012, printed copies are becoming rare, mostly because almost all theaters now only do digital projection. Prints, which usually cost about 10,000 yuan per print, have been eliminated because they’re too expensive. Before this year, low budget buyout movies usually received only limited releases, but with the lower releasing costs of digital distribution, it is now possible for these same low budget buyout movies to enjoy wide releases.

In the heyday of physical prints, a wide release usually meant a few hundred printed copies. One of the biggest physical print releases, Transformers 2, went out on roughly 700 prints. Nowadays, a wide opening can cover more than 2,200 theaters. Fewer than 1,000 theaters, mostly single-screen older cinemas, run physical prints, typically days or weeks after the film’s initial release on digital copies, so they are unable to contribute much to a film’s total gross. Among all the imported movies in 2012, almost none used prints, except for the four non-digital IMAX copies of The Dark Knight Rises.

A digital copy of a film can only be projected if the theater has the appropriate digital key. All keys are released and managed by China Film Group. The keys expire every 15 days. Usually a big movie can have its key renewed and enjoy 30 days of initial wide release, after which a two week extended limited run usually will follow. However extended runs weren’t allowed this past September for releases like The Dark Knight Rises, The Amazing Spider-Man, Prometheus and The Expendables 2. Sometimes extensions can be authorized twice or even more for a movie with strong legs. For instance, Mission Impossible 4 managed seven weeks in the top 10. Its entire run lasted from January 28 to March 31, 64 days. Along with Inception this was the longest run for a movie since Avatar.

MI4 had very strong word of mouth that carried it to a 6X multiplier of its opening weekend after a record-breaking two-day opening. But Avatar, remains the multiplier king. Opened on January 4, 2010, many theaters were still showing the film in May. Some theaters were even showing it in November 2010. Shanghai’s Heping IMAX theater sold out every single IMAX show for Avatar for almost three months.

Marketing and Advertising
Generally, the Hollywood studios pay the marketing and advertising costs for their films that are released in Chinese theatres, while CFGC or Huaxia (or both of them) pay for prints (they also might pay for the printed posters/theater standees in cinemas). However, studios are only allowed to do limited advertising on the internet and in outdoor venues due to protections for local films. Direct advertising on TV for Hollywood films is not allowed, which is the most effective way to market a movie in China. And since TV ads are relatively too expensive for local films, TV spots for local movies are rare to see in China. The most common ways of marketing a movie in China are via internet ads (cheap, easy and sometimes very effective) and in cinemas (traditional and effective).

Two years ago, many trailers for both Hollywood and local movies could be seen before a movie but now Hollywood trailers have disappeared in most China theatres. What happened? Hollywood trailers were replaced by ads for cars, real estate, shopping, and local films. Why? Because most (80%+) screens in China are now digital and trailers and ads are now easily removed. Hollywood studios have weak control on distributing their films in China despite the fact that they pay for the majority of the advertising.

The biggest marketing campaigns so far belong to Avatar, Transformers 3, and Titanic 3D.

Outdoor banners and billboards for Hollywood tent-pole movies can often be seen in crowded places and heavily-trafficked urban areas. Though they can’t air spots on cable TV, studios like Sony often show movie spots on advertising screens in the Shanghai subways. It was reported that about 800,000 yuan was spent for doing such ads for two weeks to promote Men in Black 3.

 Box Office Reporting
There are only three regular box office report outlets that currently exist in China, but their numbers are very limited, they are not quite accurate and not quite official. The big movie sites in China have been reporting weekly top 10 numbers since 2008, claiming to receive their numbers from an organization which is part of SARFT/ Film Bureau. Box office numbers can also be found on Weibo.com, the most popular Chinese social media site, every Tuesday.

The numbers from the various reporting outlets usually differ slightly from each other. So which one to quote? Any one can be quoted since all reporting is just estimates after all. The raw data they are reporting comes from the Office of China Film Group Special Funds because only the Special Funds have the raw daily/weekly box office numbers.

The Special Funds have a nationwide theater-based computer ticket counting system which covers most commercial theaters in China. Currently only 674 top selling theaters can be tracked by the system in real time. This part usually accounts for 70% of a movie’s total box office. Over one thousand other theaters can do day-end (usually around 02:00am when theaters close) or next-day (usually around 10:00am when daily business begins) ticket sales reports. And by next late morning, usually about 1,900 to 2,200 theaters have reported box office for the day before, and by that time, as much as 95%-97% of a movie’s (daily) box office has been reported. The rest comes from hundreds of other theaters that report on a weekly or even monthly basis.

Unfortunately the Special Funds don’t do any weekly/daily report themselves, though they do offer paid subscriptions to certain media outlets.

Weekly box office reports are all based on the Special Funds numbers. And since the movie website reports seem to be the most accurate, we use their numbers here, sometimes augmented by other sources if necessary.

The revenue-sharing figures provided to studios and distributors come from the Special Funds accounting reports even if there are still theaters that didn’t get counted by the Special Funds. For example, a film may wind up actually grossing 105 million RMB at the box office, but only 97 million of the 105 million was reported by the end of its run. The 97 million will be shared by the Special Funds, distributors, exhibitors and foreign studios. Three months later, another 5 million would be reported, so the 5 million will be shared in the same way. Another revenue share will happen if extra money is found later. By the end, if only 103 million gets reported by the Special Funds, 103 million will be the movie’s final box office number, that is, the clearing/accounting number. 2 million gets lost in the long run. Again, take Avatar for example: no one really knows how much it lost in this way. Generally conservative estimate put its loss at a whopping 200 million yuan.

In total, only a few dozen people in China can get full access to the Special Funds data system. Dozens of local film distributors can also get into the system, but only for their own distributed movies.

The China branche offices of Hollywood studios have no authority to access the Special Funds reports. The only way for them to confirm the numbers reported to them by China Film or Huaxia Film is to do local checking with every theater and theater chain.

Apart from the Special Funds, there is another national wide box office statistics agency: China Film Distribution and Exhibition Association (the DEA).

The DEA box office statistics are based on exhibitors’ initiative report, including theaters that don’t even have computer sale systems, though their report can take months to compile. As a result, the DEA numbers will usually be a little higher than the Special Funds. But the DEA never releases weekly numbers publicly, just monthly, quarterly, half-yearly, and yearly numbers. China’s official year-end reports tend to use the DEA numbers, not the numbers that are reported to studios, distributors, or exhibitors in Special Funds accounting reports. For example, say The Dark Knight Rises made 329 million yuan according to the Special Funds while 345M according to the DEA final number, it is the 329 million figure that matters to Warner Brothers, since that is the number from which they ultimately collect their revenue share.

Chinese theater operators, distributors and film producers widely acknowledge the flaws in China’s theatrical distribution and accounting systems, and SARFT appears to be taking these issues seriously. China has only been in the modern multiplex business for a few short years, and steay improvements are constantly being made. Whether these improvements will ultimately benefit foreign movie suppliers still remains to be seen.

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.

How China’s Movie Distribution System Works, Part 1

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

By Firedeep and Robert Cain for China Film Biz

November 7, 2012

This is the first part of a two-part article. Part 2 can be found here.

Today marks the one-year anniversary of the launch of China Film Biz, and this is the 100th China Film Biz post I’ve published.

In honor of these events, I’m publishing a comprehensive set of articles about China’s film distribution ecosystem, which I think you’ll find useful. I’ll publish the article in two parts, with today’s post offering a glossary of concepts and definitions and an overview of the industry’s major players; a subsequent article will discuss such topics as release dating, releasing, marketing and advertising, box office reporting and revenue sharing.

In part 1 we’ll begin with a few concepts and definitions.

SARFT and the Film Bureau
The State Administration of Radio Film and Television, referred to as SARFT, is the executive branch under the State Council that oversees all Radio, Film and Television content within China. More on Wiki

Sarft is a giant government institution. It has a Film Bureau that specifically focuses on motion pictures.
China Film Group Corporation (CFGC or CFG)

China Film Group Corporation, often referred to as CFG, is a stated-owned conglomerate that has the exclusive right to import foreign movies to China. CFG is also the biggest producer of local and co-production films and the biggest distributor of local and foreign movies in the country.

Huaxia Film Distribution Co.,Ltd
Launched in March 2003, Huaxia is the second and only other distributor of foreign movies aside from CFGC. Huaxia Film cannot import movies, and its distribution strength is not as great as China Film Group’s.

Revenue-shared movies
Imported by China Film Group and distributed by CFG or Huaxia Film or both, a revenue-shared movie is a film imported from abroad under terms that allow the foreign supplier to receive a defined share of the film’s Chinese theatrical gross. Usually only major Hollywood movies can be imported as revenue-shared movies. The first revenue-shared movie, Harrison Ford’s The Fugitive, was released on November 12th, 1994. After that there were 10 revenue-shared movies allowed to reach Chinese theaters every year. In 2002, this annual quota was raised to 20 revenue-shared movies. In 2012, the quota expanded to 34, 14 of which must be 3D or IMAX films.

Buyout movies
A buyout is a foreign movie acquired by a Chinese local distributor at a fixed price to be released in China. The buyout prices usually range from tens of thousands to hundreds of thousands dollars.

The first movie buyout occurred in the mid-1980s when China Film Group bought the theatrical release rights for Superman (1978) from Warner Brothers at a price of $50,000. Most buyout movies are handled by Chinese local film distributors. China Film and Huaxia Film also do a few buyout deals each year. Usually local distributors seek foreign films via film festivals and markets like Cannes and AFM, or oversea producers offer their films to local distributors seeking cooperation, and the local distributors submit the film to China Film for import licenses. After receiving the import license, the local distributor hands the movie over to China Film or Huaxia Film for the distribution. That being said, it is the local distributors who who do the actual distribution work. China Film or Huaxia Film do little more than to provide the distribution authorization, for which they receive about a quarter of the movie’s gross.

There are two kinds of buyout movies: 1) one-time buyout ones (as introduced above); most buyouts belong to this category; 2) revenue-shared buyout movies, which are handled the same way as above but the foreign producers can receive revenue share in addition to the buyout price when the films’ Chinese theatrical gross reaches a certain level. This September’s hit, The Expendables 2, and Relativity Media’s Immortals and Mirror Mirror were all revenue-shared buyouts.

Buyout movies weren’t common until 2005 when the buyout quota expanded to 30. Only 4 or 5 of the buyout quota films can be Hollywood/American films; the rest must come from Europe, Hong Kong and Taiwan, South Korea, Japan, Australia, India, Latin America, etc, or from multinational co-productions.

A subsidiary body of SARFT referred to herein as the ASSOCIATION, made up of over 3,000 local distributors and exhibitors, is in charge of dating all films and overseeing the entire run of all films.

Hollywood Majors in China
Disney, Paramount, Sony, Twentieth Century Fox, and Universal all have branches in Mainland China, while Warner Bros does business in Mainland through its Hong Kong based branch. Among the majors Universal is the weakest in China.

Disney is building a $16 billion theme park in Shanghai while DreamWorks Animation is planning a $3B studio in Shanghai too.

Currently, Disney, Paramount, Sony and Fox all are doing strong business in China. In the long run, it appears that Disney might be the biggest player here. 

The Office of China Film Special Funds
This subsidiary body of the Film Bureau, referred to as China Film Special Funds, is responsible for box office statistics in China. It collects 5% from every film’s theatrical gross as special funds for supporting local film production and theater construction. One thing to note is that the 5% they collect is not counted as part of theaters’ business tax.

More to come in Part 2.

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.

Horror Claws Its Way Into China’s Movie Theaters

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By Robert Cain for China Film Biz

November 6, 2012

In what is assuredly an all-time first, two horror films ranked among the 5 top grossers at the Chinese box office last week. Although the horror genre has been rather a rarity at PRC multiplexes, due in large part to SARFT censorship strictures, the tide may now be turning for them. Chinese censors have been noticeably friendlier of late to violent and even gory low-budget horror flicks, and audiences have been showing up for them in increasing numbers.

Fewer than a dozen horror films have unspooled in Chinese theaters in the past two years, so two such films screening at the same time feels like a veritable gore-fest. The two pictures are the Australian shark attack thriller Bait 3D, which at a $25 million cume is easily the highest-grossing horror film in China’s history (I’ve made the admittedly subjective judgment call of classifying Prometheus as a sci-fi thriller), and the new French entry Derrière les Murs, a period horror-thriller about a young female novelist who isolates herself in the countryside to write her new book. Before long the writer is haunted by visions and nightmares while the villagers grow worried as several little girls mysteriously disappear.

Derrière’s$2.2 million opening weekend tally may not seem like much, but it’s good enough to rank as China’s fifth best horror debut of the year, and among the country’s top ten horror grossers of all time. Given the encouraging signs, now may be a good time for American and other foreign horror-meisters to sharpen up their fangs and take a bite of China’s booming film business.

In other multiplex action, The Bourne Legacy held off the Chinese action movie Taichi 2 to retain the number one spot for the second week in a row.  Total Recall slipped to third, adding $4.5 million to what is now a nearly $17 million cume.

Nationwide admissions totaled 6.4 million, and aggregate box office was $33.6 million, flat compared with the same week last year. New openers this week include the star-heavy Chinese action film Cold War, which opened today, and Disney’s Wreck-It Ralph, which rolls out on Thursday.

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.

Gangnam Interregnum; plus Newly Announced China Release Dates

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by Robert Cain for China Film Biz

October 25, 2012

As I was writing the 3rd and final installment of my “Korea Conundrum” series, which explores the cultural and institutional impediments that prevent China from achieving global soft power influence, I came across a couple of music videos out of the PRC that explain the problem far better than I can.

While South Korean K-Pop star Psy of “Gangnam Style” fame was enjoying his brief reign as king of the pop culture meme, China was doing its part to say “Hey, we get it, we’re cool too” by producing Gangnam parody videos. Here’s a seemingly popular one that appeared on both Youtube and also on Tudou, China’s Youtube equivalent:

Click on image above to start playing video

Of all the bad Gangnam Style parodies you’ll find on the web, this is undoubtedly one of the worst. Where the original Psy video has irony, wit, and biting satire, “China Style” is utterly vacuous. Take a look at the opening lyrics:

Reprinted from Beijing Cream.com

The creators of this video take a song that satirizes the excesses and emptiness of consumer culture and turn it into… what? An anthem celebrating international broadcast companies? As Beijing Cream noted:

Not only are the creators ignorant about the original song’s meaning, they insult us by trying to explain Gangnam Style’s popularity. Where they lack in originality, they also lack in self-awareness. These are the type who, at a party, stand stone-faced through your jokes and then say, “So what you’re saying is…”

The only thing China Style has on Gangnam Style is more T&A. A lot more. Shockingly so, given China’s censorship strictures. There’s even some weird nipple tweaking at the 2:42 mark.

At least the video did get over 500 ‘likes’ on Youtube. But then, it also got almost 3,300 ‘dislikes,’ six times as many.

Surely there must be someone in China who gets it. Someone cool, detached, a keen observer of Chinese culture who has something meaningful to say. Someone like Ai Weiwei, China’s most famous artist and symbol of dissent…


Alas, here’s Ai Weiwei’s contribution to the cultural conversation:

Click on image above to start video.

This is just so wrong, on so many levels. Say it ain’t so, Ai…

Guess I’ll be writing that 3rd installment after all, if for no other reason than to send China a few pointers.

In other news, release dates have now been set for the import films that will grace China’s movie screens in November. Here’s an excerpt from a missive I received this morning from my friend ‘Firedeep’

Feng Xiaogang’s Back to 1942 earlier today got approved by the Film Bureau. Huayi Bros set the release date as Nov. 29. And the final runtime is about 100 mins (obviously got cut down at SARFT’s request) including end credits.
Nov. 22 seems to be the right date for Life of Pi. It will be released in IMAX 3D and 3D.
2012 3D just settled Nov. 21. Just in 3D. No IMAX. As always, its theatrical time is about one month: 11/21~12/21. Coincidentally, its close date is the “world’s end” date …
Wong Kar-wai’s Grandmasters should still make its December release (though re-editing is undergoing).
November releases are pretty much all settled. While December’s mostly local titles , remain not very clear.

That’s the report for now. Back to Youtube– I mean research, for me.

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

Handicapping China’s 2012 Import Quota Slot Derby

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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