Transforming the box office

How Chinese cinemas could be siphoning off US film’s takings

Transforming the box office

Who reads reviews anyway? Michael Bay's robotic cast

“Shaky camera, bad acting and an incoherent plot” was the verdict but it does not seem to have dampened Chinese moviegoers’ enthusiasm for the movie-of-the-moment in China: Transformers: Dark of the Moon.

Despite that less-than-glowing review (in China Daily), the third instalment of the Transformers franchise pulled in more than $40 million in the first weekend after opening, the biggest three-day take of all time for an American film in China. Industry observers think it might beat Avatar’s record of Rmb1.3 billion ($190 million) in 2010.

If so, Avatar’s producers might want to ask for a recount. Two weeks ago netizens posted comments on weibo (China’s Twitter-equivalent) saying that large cinema chains in Shanghai had been “stealing tickets” by bundling Transformers 3 with Yang Shanzhou, a propaganda film about the life of a late Communist Party of China (CPC) member.

Zhang Ming (a pseudonym) told the 21CN Business Herald that when he was buying a ticket for the Transformers film in Shanghai’s Cao Yang cinema, the sale was stapled to tickets for Yang Shanzhou.

“I spent Rmb80 for the 3D version of Transformers 3 at the cinema, and received two tickets,” says Zhang. “They said that I was free to watch the second film or not. The complementary ticket sells for Rmb60, while the Transformers 3 ticket only sells for Rmb20.”

As it turns out, the same situation seems to have been encountered in various cities around the country, where cinemas have bundled the Hollywood hit film with a domestic movie, says 21CN.

An employee at one Shanghai cinema admitted to the newspaper that they were under pressure to boost ticket sales for Yang Shanzhou after receiving instructions from “senior authority to promote the film”. Wu Hehu, manager of the Shanghai Lianhe Cinema, also told Beijing News that staff were being encouraged to promote local films because Transformers 3 was accounting for 90% of all box-office collections.

Domestic films have had much more limited opportunity for popular acclaim. “They are good works, and the cinemas have the duty and obligation to promote them,” says Wu.

Even so, his endorsement was a qualified one. “As for the price, I think it might be an error on the side of the cinema: Transformers 3 should sell for Rmb60 and Yang Shanzhou for Rmb20,” Wu queried.

It’s not the first time Chinese cinemas have been accused of “stealing tickets”. WiC reported in issue 115 that cinemas were told to sell Beginning of the Great Revival – a propaganda flick celebrating the founding of the Chinese Communist Party – aggressively ahead of the Party’s ninetieth anniversary on July 1.

Thus, if someone asked to see Wu Xia – a Hong Kong kung-fu film – they’d be given a ticket booked in the system as being Great Revival, but with the name crossed out in pen and replaced by Wu Xia.

It was a neat solution. Party bosses were pleased because the records implied millions were watching their big budget epic on Mao. But moviegoers were happy too, as they didn’t have to sit through it.

The problem? Film producers and distributors had much less visibility on their earnings, some of which will have taken a hit from the ticket-bundling scheme.

“No matter how the ticket sales are split, the amount of money that goes to cinema operators stays the same. The only difference is which film distributor gets to take more and which one gets less,” an insider told Beijing News. “Essentially, the cinema operator has the final say on who gets how much.”

Ultimately, the bigger challenge facing China’s movie industry in general is that domestic films still find it tough to compete with the foreign blockbusters. The Chinese government has provided significant financial support to promote domestic films and spending at the cinema is booming (box office receipts rose nearly 64% to Rmb10.1 billion last year from 2009). But almost 90% of Chinese films lose money.

Investors also want to change that. BOC International, a subsidiary of the Bank of China, recently set up a Rmb20 billion private equity fund focused on the media industry, says the Wall Street Journal. Similarly, venture capital funds IDG Capital and SAIF Partners have jointly invested in film production company Sky Land, which produces, distributes and finances China-themed films aimed at audiences in both the US and China.

This also explains why Chinese authorities remain reluctant to allow too many offerings from Hollywood on local screens. With their economies of scale and commensurately bigger budgets, films from Titanic through to Transformers have continuously topped the box office takings.

In WiC70 we pointed out that China had dropped its quota on foreign films, previously fixed at 20 per year. But that was less significant than it seemed. Films still have to pass the censor, meaning that, in practice, the state can still limit their number.

And that power lurks consistently off-stage. For example, cinemas were instructed that Transformers 3, the final Harry Potter film and the latest chapter of Pirates of the Caribbean franchise could not be shown in June, so as to give Great Revival a clearer run at putting audiences to sleep.

In short: the number of screens in China is rising rapidly, but foreign access is still an issue.

That’s why, for the foreseeable future, Hollywood studio execs will feel excited and frustrated by the China opportunity in equal measure.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.