Reel changes

In Beijing: Scarlett Johansson

China’s movie industry looks set for a major shakeup. Han Sanping, the boss of China Film Group Corp, has just retired from the key state-owned monopoly (for more on which, see WiC231) and Dong Ping, Han’s private-sector equivalent, sold the controlling stake in his media flagship to internet giant Alibaba last month (see WiC230).

But what has got Hollywood most excited is an announcement by another state-backed firm that it will break China Film Group Corp’s exclusive grip on movie imports, creating another distribution partner for foreign studios.

“A seismic shift is set to hit the Chinese film distribution sector,” American entertainment magazine Variety reports. “The current system is not seen as being very efficient, and there is a belief that this new set-up will improve the industry for both Hollywood and domestic players,” Hollywood Reporter agreed.

The news emerged during a conference at Hong Kong’s Four Seasons Hotel late last month. Xue Qiliang, a member of the Publicity Department of the Party’s Central Committee, announced that a new licence for the import and distribution of overseas movies is about to be granted to China National Culture and Art Corp (CNCAC). Founded in 1987, CNCAC is directly under the Ministry of Culture. Previously it helped to organise cultural events such as a concert by the late Luciano Pavarotti in Beijing.

“We’re very happy we can open a new chapter for the industry,” Xue told the gathering, according to Hollywood Reporter. It also emerged that Xue has been appointed as honorary chairman of China Railsmedia, CNCAC’s business partner in the new initiative.

That firm’s name doesn’t sound very Tinseltown, which is because historically it has had little involvement in the entertainment industry.

China Railsmedia is a Hong Kong-listed firm that started out as a refurbisher of buildings, which switching tack to railway advertising. Now it has big screen ambitions. It told investors this week that it would spend HK$2 billion ($257 million) on the exclusive rights to cooperate with CNCAC on film import and distribution. The market value of China Railsmedia – soon to be renamed China National Culture Group – surged more than 15% to HK$4 billion on the trading day following the announcement.

Taiwan media is excited too. The Commercial Times noted that China allows a maximum of 34 Hollywood releases every year. Until now, the quota line-up has been solely decided by China Film Group Corp. These imports took 41% of the country’s total Rmb22 billion box office in 2013. The extra licence for CNCAC means that “competition between two state firms would be highly anticipated”, the newspaper suggests, meaning that foreign studios could bargain for a bigger cut of ticket sales.

The response in the Chinese media was more restrained. Sina Entertainment reported that media watchdog State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has even denied that a second licence has been issued. “We have heard nothing about these companies,” a SAPPRFT official told Sina Entertainment, referring to CNCAC and its Hong Kong partner China Railsmedia.

Given the policy goals to open up the movie sector further, according to Sohu Entertainment, it would be natural for “certain central authorities” to promote an industry shake-up. But even if an additional licence is granted, the impact will be reduced if the 34-film import ceiling isn’t removed. “Early this year, foreign media was suggesting that the quota would be raised by 10. But central authorities eventually denied the report,” Sohu Entertainment notes. “The only certainty is that a new player (CNCAC) now also wants a bite of the huge cake.”

© 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.