By some projections, China will be the leading marketplace for films within 5 years, after having grossed $2.75 billion in box office gross last year in comparison to the United States and Canada’s $10.83 billion. Yeah, well it ain’t 5 years from now yet. Right now, there is the little matter of a delicious role reversal those in America, i.e., China’s debt-bitch, will be delighted to hear: China has apparently agreed to pay Hollywood studios the over $150 million in box office gross it has owed them since last year.
That’s right, China was actually in debt to us for a change.
Well, not really. Here’s the deal: all international films seeking to be distributed in China have to go through the China Film Group. As a result of recent changes to China’s corporate tax laws, the China Film Group was insisting that Hollywood Studios pay a 2% withholding tax whereby the grosses owed to them would only be delivered once the tax had been paid. The Studios, ever mindful of our future lords and masters in China, respectively declined to play ball, arguing this luxury tax was in violation of a World Trade Organization agreement reached between Joe Biden and Chinese President Xi Jinping last year.
So, as of October or November of last year the China Film Group just stopped giving the studios any of the money their films had earned once released in China. Here’s how important China’s box office is to the Hollywood bottom line: the Studios had the China Film Group assuring them they were not going to see one dime of the profits from their films in the country anytime soon, and rather than pull their product to force the Film Group to budge the Studios just kept releasing their films in China in the hopes that it would all work itself out eventually.
This was kept secret until The Hollywood Reporter first broke the story 3 weeks ago. Keep in mind, that means THR’s story came before Pacific Rim needed a mere 2 weeks to gross $76.5 million in China, becoming the distributor’s (Warner Bros.) highest ever grossing film in that territory.
So, how much has been owed to the studios, and for which films exactly? It’s actually difficult to know for sure, but if you assume the Studios will receive a quarter of the foreign gross (as is often the way) by their accounting THR estimates:
“Warner Bros. would be owed north of $31 million for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer (not counting Pacific Rim yet); Sony would be due $23 million for Skyfall and After Earth (not counting White House Down); Paramount would be owed roughly $30 million for Into Darkness, G.I. Joe: Retaliation and Jack Reacher; Disney’s Iron Man 3 made north of $121 million in China, which would mean a return of more than $30 million for the studio, while Oz the Great and Powerful would mean about $5 million in payments (Monsters University is headed to China later this month). Universal’s Fast & Furious 6 has grossed north of $55 million to date in China. Universal also would be owed for Oblivion and Les Miserables, which took in $23.9 million and $10 million, respectively. Some studios say they are due money from 2012 titles as well. Fox hasn’t received payment for AngLee‘s Life of Pi, a check that’s expected to come in at $23 million.”
MPAA CEO and Chairman Christopher Dodd has been working to settle the dispute, and yesterday afternoon he announced that the China Film Group had caved and agreed to pay the Studios everything they’re owed in full:
“The MPAA understands that the China Film Group stopped payments owed to MPAA studios in China pending resolution of the application of a new value-added tax due to be implemented nationwide as of Aug. 1. We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full. It is our understanding that the payment process has recommenced. The U.S. and Chinese film industries enjoy a close and productive relationship and the MPAA is grateful to our counterpart, the State Administration of Press, Publication, Radio, Film and Television for their commitment in resolving this matter favorably. We look forward to further strengthening our ties withSAPPRFT as the Chinese screen community continues its path to becoming a global powerhouse in the international entertainment market.”
The luxury tax which started all of this is reportedly still being discussed by China at the moment. However, for now it seems like Hollywood’s about to get paid, y’all, with the China Film Group presumably plucking the $150+ million plus owed from the ridiculous money trees reportedly growing in most areas of China.
The recent performances of films such as Pacific Rim in China have verified just how huge an impact it can have as a country on an international film’s total gross. This nearly year-long stand-off between the country’s Film Group and the MPAA-represented Hollywood Studios indicates just how much Hollywood would rather not piss them off.
Wow, right? Any thoughts on it? Too intimidated to say anything for fear that China might find out and destroy you? Then leave a comment (well, probably not if that last part about being intimidated was true).