China Entertainment Law

Mathew Alderson, who leads our China entertainment group from Beijing, just moderated a panel at the 5th Beijing International Film Festival. The panel was about sino-foreign co-productions. Mathew’s panel was preceded by a keynote address given by Miao Xiaotian, General Manager, China Film Co-production Corporation (CFCC). The panelists were:

  • Ellen Eliasoph, President and CEO, Village Roadshow Pictures Asia
  • Alex Sangston, Senior Manager, Producer Offset and Co-Productions, Screen Australia
  • Zhou Tiedong, President, Beijing Novo United Films
  • Victoria Hang Hon, Vice President, Beijing Hairun Pictures
  • Pauline Chan, Director/Producer

Below is part of the speech Mathew gave before introducing the panelists.

For Hollywood, the international film market has become more important than the domestic US market. The emerging giant in that international market is China. Although China’s film market has grown explosively over the past five years, it remains far short of eclipsing the US market. Consider that China’s 2014 box office was 4.8 billion USD while North America’s was 10.3 billion. Now consider that China’s box office comprises the substantial majority of the film market, with ancillaries comprising a tiny minority. In the US and Australia the reverse applies: box office is the lesser piece and ancillary revenue is the greater. By rough extrapolation from last year’s box office figures you could say that the Chinese film market was worth about 6 billion USD last year and North America was worth around 50 billion USD. On that basis, China’s market would need to grow 8-9 times to eclipse the US. Still, the growth so far has been staggering, as is the fact that this growth is driven by a vibrant Chinese private sector that was unimaginable as recently as ten years ago.

Foreign access to China’s film market remains tightly restricted. Foreign producers are prohibited from independently producing in China. 44 China-foreign co-productions were made in 2014. 77 China-foreign co-productions were approved in 2014. Most of these were Hong-Kong-China co-pros because Hong Kong is regarded as a separate country in this context. There are few examples of true sino-foreign co-productions (not being Hong Kong China co-productions) that have enjoyed box office success. The only true Sino-foreign co-production that has made the top 20 most financially successful films during the last few years was the Village Roadshow Pictures Asia-invested “Journey to the West.” Official Co-productions are regarded as domestic films in China and are therefore exempt from the various quotas imposed in China, including the 34-film quota applying to imports on a revenue share basis. Copyright owners of official co-productions are also entitled to a higher share of box office — 42% as against that applicable to revenue share imports — 25%. Censorship is an ever-present factor and limits are imposed on the theatrical exhibition and online dissemination of foreign content. Theatrical windows are managed in an effort to keep foreign content at roughly 50% and foreign content available through online streaming is now to be kept at 30%. Cultural differences are often underestimated or misunderstood by Chinese and foreigner alike. They include diverging sensibilities, narrative styles, business practices and legal systems.

Despite these challenges, the allure of China is irresistible to foreign interests and China itself is seeking greater opportunities in foreign markets. China now has a middle class of roughly half a billion people. There are roughly 700 million people online in China, most of them using only handheld devices. China has an undeniable desire to consume foreign and Chinese content, to acquire foreign knowhow, to work with foreign filmmakers and to pursue opportunities presented by new technologies. I can tell you that I feel privileged to be witnessing and participating in these developments while living and working in Beijing, China’s cultural heart.