Tag Archives: film

Fan Faces Fine

FAN BINGBING, THE film star not seen in public since June, has been fined 883 million yuan ($130 million) for tax evasion and other offences, state media says. She will avoid criminal charges and prison time if she pays up by a year-end deadline.

Unconfirmed reports in Hong Kong said she has also been banned from working as an actress for three years. It would be unusually for such a ban to be announced by authorities in the absence of a conviction.

A contrite posting appeared on Fan’s Weibo account today, although there is still no indication of her whereabouts.

Her agent remains in detention as a broad investigation into entertainment celebrities’ tax affairs continues. Fan was the highest earning Chinese celebrity last year with an income of 300 million yuan, according to Forbes magazine’s reckoning.

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China’s TV And Film Industries: Unexploited Soft Power

A report crosses this Bystander’s desk from Oxford Economics, a consultancy commissioned to quantify the economic impact of China’s film and TV industries. The commission comes from the Motion Picture Association of America, Hollywood’s lobbying arm, and the China Film Distributors and Exhibitors Association. It is, no doubt, intended as an opportune prod in the direction of more opening of China’s domestic film and TV markets by emphasizing the potential for growth at a time when boosting cultural industries and “going out” is to the forefront 0f Beijing’s mind.

The reports lays out quite how significant, fast-growing, and promising the industry is — as would be expected in a country with a large population, strong economic growth and rising incomes. Oxford Economics tots up for 2011 a 100 billion yuan ($15.5 billion) contribution to GDP, 909,000 jobs and 22 billion yuan in tax revenue from the industry directly.

Taking into account the multiplier effect across the rest of the economy, the report boosts those numbers to a 272 billion yuan contribution to GDP, 4.5 million jobs and 57 billion yuan in tax revenues. That later GDP number is equivalent to 0.6% of total GDP, similar to the contributions of  the computer and telecoms equipment industries. Where the film and TV industries are much different is in their level of exports. Total exports in 2011, Oxford Economics reckons, were 2.3 billion yuan, 90% of which was accounted for by film. The telecoms equipment makers did more than 10 times as much each quarter.

Cultural exports are these days a central part of a country’s soft power — as Hollywood’s bear testament, just as much as do China’s tight quotas on foreign film imports. While the leadership in Beijing is now paying more attention to this aspect of China’s global projection of itself, China has not been able to convert its popular arts and culture into an arm of diplomacy in the way that, say, its neighbour South Korea has. Hallyu,  a mix of popular South Korean films, TV, food and K-pop music culminating in the Gangnam-style phenomenon, has proven to be an extraordinary calling card for the country. South Korea has risen to 11th on Monocle magazine’s annual ranking of soft power, a list on which China doesn’t make the top 20.

It has also made South Korea a destination for cultural tourists, particularly from the rest of the region. What little film and TV tourism there is in China is local and localized. That is a hugely untapped opportunity, the Oxford Economics report suggests, treading safe ground rather than venturing into the deeper waters of exporting cultural values and projecting soft power. In the same vein, it casts the impact of hallyu in the light of domestic tourism within South Korea.

The unsaid part highlights another difference between South Korea and China, whose state-planned cultural exports have focused on traditional high-culture aspects of China’s arts and heritage, as might be expected of programmes devised by government officials and intellectuals. South Korea’s cultural image is very much a reflection of its contemporary and popular culture, which is driven, for better or worse, by a commercial market. China, where even popular TV is sanitized for social correctness, doesn’t have such a readily accessible and identifiable non-political contemporary culture, or the rambunctious marketplace to nurture it.

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Lights! Camera! Trade Action!

Tian Jin, China’s vice-minister for film and TV, complains that the film industry trade deal struck between Washington and Beijing in February is working as intended. The deal exempted 14 U.S. 3-D and large format films from China’s annual import quota for foreign films, of 20. It also gave Hollywood a bigger cut of the takings on its films, raising it to 25% from 13%, albeit still short of the 30% American producers typically get on foreign distribution. The consequence, Tian says, is that “the past dominance of domestic firms in the Chinese market has been shaken.”

Such is the power of art, or at least the popular art form that is the Hollywood blockbuster movie. But there are serious lessons in all this for any industry that has been able to shelter cosily behind domestic walls of protection (and not just in China).

First is that more free trade increases business all round. Box office revenues at Chinese cinemas, at 13.3 billion yuan ($2.2 billion) in the first ten months of this year, have just passed 2011’s total of $2.1 billion. Domestically produced films took 41.4% of those receipts, down from 2011’s 53.6%. “A huge drop,” Tian says, but the overall pie is larger. Domestic films’ share will increase by year’s end as foreign films have evaporated from cinema’s schedules for December, just as they did mid-year for a month.

Second is that given a choice, consumers will take it. There is a well observed effect worldwide that increasingly cosmopolitan and upwardly mobile middle classes go through a phase of looking down upon local films as cheap and tawdry. That Hollywood blockbusters appeal to Chinese audiences can scarcely come as a surprise to China Film Group Corp., the state-owned film producer and distributor whose remit includes the monopoly on the import of foreign films (and their distribution schedule). The three top grossing films in the country last year were Transformers 3, Kung Fu Panda 2 and Pirates of the Caribbean: On Stranger Tides.

Third, if the Chinese film industry is going to hold its ground against foreign films–and remember to set against the quota of 34 foreign films a year now allowed, the U.S. alone releases 8,000-9,000 new films a year, so the market is barely opened–it will have to improve the quality of its product. It is not the first national film industry to wilt under the assault of Hollywood. Three-quarters of a century ago, France, Germany and the U.K. all had flourishing domestic film industries. Neither France nor Germany’s had the size of market to sustain French and German-language filmmaking on a global scale. Britain, too, though not hampered by language, lacked the resources to compete with Hollywood.

The most notable example of national film industry thriving regardless is India’s. Like China it has a large domestic language film industry that has also been protected. But Bollywood, and its smaller Kanada-language sibling Banglawood, is very good at what it does, and is so on industrial scale. So, too, is Hong Kong’s film industry, before 1997 the third-largest producer of films after Hollywood and Bollywood. It found an identity distinctive enough to have imposed itself on Hollywood’s action movie genre, even if its own filmmakers have become more muted over the past 15 years. China’s filmmakers will have to emulate that craft. And it is what Beijing will push them to do if it wants to emulate the soft power that Hollywood projects for Washington.

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Lights. Camera. But How Much More Action For Hollywood In China?

There may be less than meets the eye, and certainly less than the hype, to the trade concessions the U.S. has won for Hollywood from Beijing. The deal raises to 34 from 20 the number of non-Chinese films than can be distributed in China each year, by the device of adding 14 3-D or IMAX films to the base quota. As China has only 2,500 3-D movie screens and 48 IMAX theaters the significant concession is that those 14 will also be allowed in in their 2-D formats, which will be able to be seen on China’s 10,500 conventional cinema screens. The U.S. has 40,000 screens. The U.S. also releases 8,000-9,000 new films a year.

Most of the 20 foreign films a year that have been allowed into China for the past 20 years are American. The three top grossing foreign films in China last year were Transformers 3, Kung Fu Panda 2 and Pirates of the Caribbean: On Stranger Tides. They took $170 million, $98 million and $76 million at the box office respectively. Even more pleasing for Hollywood, under the new deal, its cut on box-office takings will rise to 25% from 13%. Hollywood typically expects a 30% fee on foreign distribution, but with 13% and all the other restrictions having been the rule for China for two decades, this feels like the “very big deal” it is being proclaimed to be in Hollywood, at least for the blessed 34 films.

The American movie industry has long complained about its treatment in the world’s fastest growing movie market. The WTO ruled in 2009 that China’s limits on movie distribution fees was a violation of international trade rules. Beijing has not rushed to come into compliance, and promoting China’s own cultural heritage has become a national priority. Yet even as China tightened restrictions on foreign TV imports, Xi Jinping’s visit to the U.S. allowed the logjam in negotiations over movies to be broken. It was something that China would have have to have done at some point anyway, and is far less expensive than settling the outstanding issues with the U.S. over intellectual property. It would be a brave man, though, to this Bystander’s mind, who would bet that the showing of 14 more Hollywood movies in China each year will dampen the demand for pirated DVDs, a main prop of Hollywood’s argument for increasing the distribution fees.

China is expected to double the number of movie screens it has to 16,000 by 2015. The ones it had took in $2.1 billion at the box office last year. The key question is how much of that will the U.S. movie industry actually get its hands on. Hollywood distributors may soon understand why the old saw, there’s many a slip twixt cup and lip, applies so readily to doing business as a foreign firm in China. We’ve heard of one distributor who gets the house photographed each screening to settle arguments of how many tickets have actually been bought. The right for foreign film distributors to audit box-office sales might turn out to be the most important provisions of the new agreement.

The position is even worse for foreign co-producers operating in China. Some 40 independently produced foreign movies are distributed in China each year outside of the quota system. These independent films don’t get a cut of the box office, but a licence fee based on the film’s budget. It is about a third of the standard international fee. Under the new rules, filmmakers and distributors will be able to negotiate license fees closer to international norms. But the fee is just the beginning of what seems regularly to turn into a nightmare. The China Law Blog has had a series of excellent posts on this subject last year that don’t make pretty reading if you are a would-be film producer.

Why is it so hard for foreign co-producers to get paid? There are three main reasons:

1. There are no trusted intermediaries for film in China. Collection agents, escrow account holders, trustees and the like simply do not exist here in China. The foundations of international film finance are not in place. In itself, that makes you wonder how completion guarantors can underwrite Sino-foreign co-productions.

2. You need to rely on your Chinese co-producer to collect the box office and pay your share to you outside of China. Good luck with that.

3. Even if you are lucky and your Chinese co-producer has some vague intention of paying you, they cannot pay you unless they can show the Chinese tax authorities that income tax has been paid on the gross receipts and that the withholding tax on their payment to you will be deducted. Even then, they will still need State Administration of Foreign Exchange (SAFE) approval before being able to send money overseas. The vast majority of Chinese businesses will not want to do business this way.

We hope that DreamWorks Animation, which has just signed a $300 million joint venture to make movies in China, is a reader.

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