Manipulating China’s Box Office – Trick or Treat?

(Originally written in Chinese by Luckystar on zhihu.com, translated by Ding Yonghong, the rights of this article solely belongs to the author and translator. Featured photo source: yahoo.com)

China has seen a rapidly growing film market in 2015 with an annual box office of 44 billion RMB (US $ 6.7 billion), highest among recent years. Everything seems to work perfectly fine but there are different kinds of “insider dealings” under the table. Movie fans know little about box office fraud, though we have heard about tricks, such as  “stealing box office”, “purchasing box office”, etc.

To understand these terms, we need some firsthand knowledge about how films are distributed and the profit sharing mechanism of ticket sales revenues. The film business in China involves three main parties: filmmakers/studios, distributors and theatre chains. Studio produces films while distributors provide film prints, set screen sessions, negotiate and sign contracts with cinemas, etc. Cinema chains are easy to understand – a well-known example is Wanda cinemas, which can be found in many big cities. Wanda leads in  Chinese cinema chains, followed by Xingmei theatres, Shanghai film cooperation, Guangdong Dadi cinemas. The screenings of movies are scheduled by managers of cinemas.

(Wanda’s Imax Cinema chains, source: Wanda official website)

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So how do they divide box office revenues? Assume that you buy a 80-yuan-ticket: 5% out of the¥80 will go to the national film industry development fund; 3.3% (¥2.64) will be collected as sales tax. Except for the¥4+2.64=¥6.64 paid to the government, the remaining ¥73.36 will be divided by the producers (producer and distributor) and cinema chains, according to the stipulated revenue ratio of 43:57 (orthodox ratio). That is to say, for an ¥80 movie ticket, distributors and filmmakers will receive¥31.54 and cinema¥41.82.  Therefore, aside from what is collected by the government, the remainders will be shared by the producers and cinema chains according to the mutually-agreed revenue ratio. That said, this is rarely the case when it comes to profit sharing. To maximize their cut, cinemas always find ways to manipulate sales figure and “steal” box office.

State administration of radio film and television (SARFT) promised to launch actions against box office fraud. News headlines citing industry experts said that at least ¥4.5 billion out of¥44 billion ticket sales was underreported by cinemas, which meansthe producer side might not get what they deserve. Cinemas falsified box office receipts and stole profits from them. As mentioned previously, filmmakers and distributors should take 394 million out of of¥1 billion box office. By artificially reducing the box office numbers to 800 million, cinemas alone pocket the 200 million and deprive the producers’ share.

Here are some typical box office cheat methods:

  1. The most obvious trick is to allow use of handwritten tickets, invalidated tickets or not to issue tickets at all. To sum up, an invalidated ticket refers to tickets bought by previous audiences but re-used by the cinemas.

We do not rule out the possibility that cinemas, from time to time, were not able to issue tickets due to technical bugs, in which case hand-written tickets can be used. But this seldom happens. If the cinema does so on a regular basis, it is quite certain that they intend to steal box office.

(A typical Chinese handwritten ticket)

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  1. A less-recognized cheating: as stated previously, the use of hand-written tickets are too easy to be caught and can be prevented by close inspection of distributors. A less noticed tactics thus comes into play— the use of “Bundle ticket”. What does it mean? For instance, distributors will make deals with cinemas on the minimum price of a movie ticket, say¥30. Themovie chains will sell it at a market price, usually higher than the minimum. Let’s assume that the ticket is in the end sold at ¥70, which will then be split with distributors. By doing so cinemas can get no extra profits. Hence, they come up with the idea to bundle tickets with pop corns and beverage. For a combo (ticket + pop corn + drinks) that costs ¥80, cinemas will set the price of ticket to the minimum (¥30) and the rest as popcorn and beverage sales, whereby the¥50 will not be split and goes straight to pocket of cinema operators.
  1. The wicked wisdom of Chinese has no end. They always find their own way to maximise self-interest. The most hidden trick is to employ “dual ticketing system”, one for counting issued tickets and the other for reporting. The reported numbers are connected with national box office supervision system, from which we could have information about ticket sales of a certain movie. The other system that cinemas set up secretly can also issue tickets, but more importantly serves to manipulate box office receipts.

“Box office transfer”: The above tricks are conducted by the cinemas themselves. Is it possible that the producer side and cinemas conspire to steal box office of other films? The answer is positives, and it’s not a minority event. The cinema is supposed to get 57% of the box office, which is what producers can also work on. Suppose that there are two movies, A and B, screening during the same period. Movie A is a foreign blockbuster, whereas B is a domestic teen inspirational romance film. Local filmmakers are aware that A would be more attractive to audiences. Hence the producer side makes secret deals with cinemas that they will receive larger revenue share if box office of A can be partially transferred to B. Some producers could intentionally give up revenue percentage points to the cinema, incentivizing them to manually enhance box office of their own films.

Plus, for movies with the same box office numbers, cinemas transfer some ticket sales of one to the other, which gives them higher percentage profit share and they would earn more in the end. Although filmmakers got less than before, their film achieves higher box office. Higher box office may in turn attract more audience in the following screenings and future investments. It is hard to sum up the benefits.

Another wrongdoing of the producers were to offer higher percentages to cinemas in exchange for advantageous screening schedule for their film, also known as here as “buying box office”.

“Stealing box office” indicates the battle between cinema chains and filmmakers. There are also competitions between moviemakers. If your film cannot win others in terms of box office, no sweat. Try the following tricks and you will beat them eventually.

Offering higher revenue percentage to cinemas is a commonly used to this end. Given the fact that movie choice of the majority depends mainly on screening schedule, movie producers then decide to offer higher revenue share to cinemas, in return of increased screenings for their movies or screening them at prime times.

Again, if movie A and B are screened at the same window, filmmakers would battle for optimal screening time, for example during afternoons of weekends. Whomever get their movies screened at these sessions will win more visits. Therefore filmmaker B strikes deal with cinemas that they will buy half of the seats for several screens of their movies. Such a lure for the cinema since they will have more tickets sold. It is also beneficial for the movie B, as it grosses higher box office and receive more spotlights by being ahead in the competition with other films, although it may cost a lot to buy box office.

Will these fraud eventually cost the market? Who knows. But under the curtain of a booming market, the dark side can never be estimated.

 

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