Share of ticket revenues may move toward intl average of 40%: expert
China is likely to allow more Hollywood films into the Chinese market as government officials and industry representatives from China and the US prepare to return to the negotiation table to discuss the quota for imported movies and sharing of box office profits.
Under the current five-year deal, which was signed on February 17, 2012, China permits 34 films to be imported from all countries per year, 14 of which should be 3D or large-format films.
That was increased from the annual quota of 20 films when China joined the WTO in December 2001. Hollywood films take the majority of the quota. Meanwhile, the share of Chinese box office earnings by the US studios also increased from 13 percent to 25 percent.
Chen Changye, a film industry analyst, predicted that a dozen more films will be added to the quota, noting that no quota will be specifically assigned to 3D movies.
"It is the right time for both nations to return to the negotiation table and open China's door wider. US film producers are currently keen on exploring China's huge box office bonanza, which has become the world's second-largest movie market. On the other hand, domestic movies have grown and claimed their stakes in the market in recent years," Chen told the Global Times on Thursday.
Signs of a relaxation in the quota have already surfaced. In 2016, 39 Hollywood films, including Walt Disney's blockbuster Zootopia, were premiered in China based on the calculation of the Global Times. The number has exceeded the usual quota of 34, raising the likelihood of a quota expansion in 2017.
Besides, the share of revenues going to US distributors is also expected to move toward the international average of 40 percent, although it might "not be as large as the previous 12 percentage points increase," Huang Guofeng, an analyst from Beijing-based consultancy Analysys International, predicted.
The negotiation for a new agreement comes amid mounting uncertainties in the wake of the Trump administration.
Trump's rhetoric on China has worried some Hollywood executives, as they don't know "how high a priority Hollywood's interests will be for the new administration," according to a Bloomberg report on Tuesday.
It is not clear whether Trump will stand up for Hollywood, as well-known Hollywood figures including Meryl Streep have offended Trump by criticizing his policies.
The Wall Street Journal talked about a scenario where China could use the Hollywood negotiations as retaliation against Trump's rhetoric on economic relationship between the two countries.
Trump's China policies may weigh on the talks. However, even if the import quota was raised, Hollywood filmmakers are likely to have a bumpy ride in the domestic market as industry chains in the two nations differ drastically, experts noted.
For example, in terms of the marketing strategy, the US film producers rely heavily on online promotions, but domestic distributors focus more on offline campaigns because of the celebrity effect, Huang told the Global Times on Thursday.
Impact on domestic films
The potential increase in the number of imported films has ramped up pressure on domestic moviemakers. China's top film regulator, the State Administration of Press, Publication, Radio, Film and Television, warned domestic film industry executives in December to "prepare themselves for greater competition from foreign movies," according to industry website chinafilminsider.com.
Huang predicted that the box office share between domestic and US players will "tilt slightly in the favor of the US" following an import quota expansion. Currently, domestic producers reap around 60 percent of box office receipts while US counterparts receive the remaining 40 percent, according to Huang.
"The concern over being squeezed out by foreign competitors is also providing an impetus to the domestic film industry, which reported a slow down in revenue growth last year," Chen said.