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The number one obstacle facing foreigners in the movie industry in China is that, by law, they are not allowed to operate independently. Several sections of this report will delve further into the particular challenges that arise from this ground rule.
Film-making activities within China are subject to laws that restrict foreign entities from setting up their own companies or joint ventures with Chinese partners, and content is subject to approval and censorship.
Distribution of content is also severely limited. All imported films must be pre-approved by the State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT) and are subject to censorship. As detailed below in the section on quotas, foreign studios can only distribute their films for theatrical release through a Chinese company, with a limited number of major revenue-sharing releases—those whose copyright holders will recoup a percentage of the gross box office—distributed through one of the state-run giants, the China Film Group Corp. or its sister company, Huaxia Film Distribution.
Similar restrictions apply to the distribution of content through other channels. In order to release film or television content for broadcast or online streaming, it is necessary to license the content through an authorized Chinese company and obtain the appropriate approvals. Of course, just because content is licensed to a Chinese entity does not mean it can play freely. Both SAPPRFT and the Ministry of Culture have been known to pull popular programs, both foreign and domestic, off of television and the Internet if they attract the wrong sort of attention. Sometimes foreign programs are pulled from the air or the web if they become too popular and pose a potential “threat,” in the form of stiff competition, to domestically produced content. Quotas limit the amount of foreign programming that can be made available.
This restrictive state of affairs is bound to continue under new rules that went into effect on March 10, 2016, which formally bar foreign companies and foreign-invested joint ventures from publishing content online. It’s not yet clear, however, exactly what that might mean in practice.
One way for foreign filmmakers to increase their involvement in the Chinese movie industry is through working with a Chinese studio. A number of countries have formalized co-production treaties with China, although the United States is not one of them. Under the Chinese regulations that govern film productions, foreign filmmakers have three options: co-productions, in which both parties contribute funding, talent, and production assets; assisted productions, where the foreign party provides funding and the Chinese party is paid to provide support such as production equipment, facilities, and labor for a film shot in China; and commissioned productions, in which the foreign party commissions a Chinese company to produce a film in China.
Non-Chinese individuals may work in China on specific projects subject to securing the proper approvals, work permits, and visas.
Because China lacks a film ratings system to put the power of choice into consumers’ hands, the power lies instead with a group of censors—numbering between 19 and 36 people at any given time—whose job it is to grant or deny each film entry into the market.
It is key to know their current rules. That’s right: their current rules. Although various quasi-official sources outline what is and is not acceptable for the big screen, China and its one-party government currently lack a film law (though as Part 5 of this guide outlines, one is coming) that would set clear guidelines and standards. As such, it’s difficult to know whether or not a proposed project may fall afoul of the censors, whose whimsy seems to be determined in large part by the higher ranks of the Chinese Communist Party (CCP)—an organization for which projecting the image of a stable society is considered paramount to preserving its hold on power.
Although you can never be exactly sure what will pass the censors, save time and money by following some basic principles when submitting a film project or a finished film for distribution in China:
Check yourself. Watch everything that has made it to the screen in China the last 18 months to gauge what is currently resisting the ever-shifting political winds. Even if your film bears a passing resemblance to other films in a popular genre, it is subject to rejection. The early 2016 Marvel hit Deadpool, for instance, was rejected in China for being too violent—this after a string of Marvel films, and films with comparable levels of violence outside the comic-book genre, made a lot of money there.
Work with the censors. Submit your film’s name and plot outline to the State Administration of Press, Publications, Radio, Film, and Television (SAPPRFT), both in Beijing and—if you want the film to air on provincial satellite television—at each provincial-level SAPPRFT office. Listen to their feedback and be prepared to make their suggested cuts. The list of deletions from popular imported films is long, ranging from the seemingly innocuous scenes of laundry hanging out of Shanghai apartment building windows removed from Mission Impossible III, to the evisceration of the crucial sex scenes in Lust, Caution. Sex makes the censors squeamish, especially, as in Brokeback Mountain, when it involves homosexuality. Although beloved as a Chinese director Ang Lee’s film about gay cowboys was banned from China outright.
Know the red flags. Be especially mindful if your film addresses any aspect of Chinese history, especially the modern topics of the Chinese Communist Revolution, the Cultural Revolution, and the famines of 1959-1961, or if it is in some way related to the leaders of the CCP and their families. If your project touches on any of these areas, expect that the CCP history research center and the Party 5 leaders and their living family members will be a part of the censorship process.
SAPPRFT does not work alone; it will also seek advice from other government organizations that oversee content related to the topics of submitted film projects. If yours is a spy thriller, expect the censors to consult the Ministry of State Security; if it has minority characters in it, the State Ethnic Affairs Commission will be taking a look. Health-themed dramas will be censored by the National Health and Family Planning Commission, and cop movies will be reviewed by the Ministry of Public Security. Films addressing spirituality will be censored by the State Bureau of Religious Affairs, and the Ministry of Education will pore over any films with students and schools in their plots.
Law- and justice-themed dramas will go to the Ministry of Justice for review, and the Ministry of Foreign Affairs will check films touching on international relations. Films depicting historical wars that occurred after October 1, 1949 (the date of the establishment of the PRC) are banned outright to preserve China’s stable foreign relations. Even a China-friendly drama about the Korean War, for example, would be denied under this regulation.
Listen to Chinese filmmakers. In the last decade, with the rise of a viable movie marketplace where real money can be made and lost, Chinese filmmakers have experienced the brunt of their government’s censorship and have valuable experience to share, both positive and negative. Director Feng Xiaogang is among the most outspoken critics of the opacity of the censorship process. “Every time I want to shoot something, I have to consider: ‘Can this pass (the censorship review)?’” Feng told the Legal Daily newspaper in November 2015.
In the run-up to China’s joining the World Trade Organization (WTO) in 2001, negotiators did not get stuck on the sale of military hardware or grain purchases, nor on high-technology transfers or heavy machinery imports. Rather, they hit a wall over the number of international motion pictures China would allow inside its borders each year. Master propagandists, the leaders of the Chinese Communist Party must have known they had met their match in the Hollywood studio moguls. After all, James Cameron’s classic Titanic grossed an unheard of US$43 million in China in 1997, and proceeded to hold the crown of highest-grossing film for the next 12 years, a strong reminder to everybody that Hollywood was way ahead of the pack in an ability to tell stories that could sell a whole lifestyle to regular human beings wanting to be entertained, from Afghanistan to Argentina, from Africa to East Asia. Hollywood films have long served as the greatest calling card for the American Dream.
So, in 2001, China, the newest member of the WTO, set an import cap on movies: only 60 would be allowed in each year, and of those, only 20 would be so-called “revenue sharing imports” — films whose copyright holders (predominantly the Hollywood studios) would be entitled to between 13 and 17 percent of the gross box office as declared by their sole licensed importer, the state-run China Film Group Corporation (CFGC). The remaining 40 films could be imported, again by CFGC, its sister company Huaxia Film Distribution, or via the dedicated China Movie Channel of state-run broadcaster China Central Television, on a “flat fee” basis. Those flat fees often were so low that the cost of subtitling the films and making prints ensured they’d be loss-leaders—which was especially true since the Chinese business in pirated video discs costing $1 or less was rampant and unchecked.
As Chinese levels of disposable income grew, so did demand for a variety of filmed entertainment experiences—and the Hollywood studios, the Motion Picture Association of America and the U.S. Trade Representative’s office (USTR), were there. Or, rather, they were at the WTO, pushing China for greater market access, year after year.
Meanwhile, the cap on imported films served its purpose, allowing room in the evolving market for Chinese films to try to adapt to changing tastes without too much competition from the 800-pound gorillas of Hollywood. China’s film regulators recognized the power of Hollywood. After nine decades of Mickey Mouse, in 2008, the starburst of Kung Fu Panda was yet another wake-up call, co-opting as it did, one of the national symbols of China and turning it into a global entertainment icon lining the pockets of DreamWorks Animation’s shareholders. China’s media watchers were all too aware that not far away, South Korea’s film industry had been crushed when Seoul repealed its own import cap in 1987. It had taken a decade before South Korean movies could compete head-to-head with Hollywood imports. It is notable that in that 10-year interim, South Korea’s strict censorship laws were also repealed as its liberal democracy took root. The resulting artistic freedom gave South Korean filmmakers a boost that fostered the storied Korean Wave of pop culture exports that took much of Asia, and especially China, by storm starting in the late 1990s.
A decade of lobbying by the MPAA and the USTR at the WTO finally paid off, helped by the fact that China became eager to fill the cinemas that had mushroomed in a nationwide building boom and looked to imports for a box-office draw. In 2012, on a visit to Los Angeles by China’s then-Vice President Xi Jinping, the two sides announced that the U.S.-China Film Deal would open China’s doors to an additional 14 revenue-sharing films, as well as roughly double copyright holders’ rightful share of the gross box office receipts. Declared a win-win, the deal required that the newly-permitted tranche of films had to be either large-format movies from companies such as IMAX, or the increasingly popular 3-D films. In addition to being difficult to pirate, tickets to these large-format and 3-D movies could command a premium at the box office, which in turn would help theater developers recoup the cost of the country’s cinema infrastructure boom.
Today, the Hollywood studios and, occasionally, film companies from France, Japan, and elsewhere, compete vigorously for China’s 34 revenue-sharing import slots, often referred to as “quotas.”
Increasingly, the remaining 36 film import slots, for so-called “flat fee” films, are coveted by independent film studios and mini-majors working with a small group of secondary Chinese distributors that slowly have been allowed to offer points on the back-end to international copyright holders if the imported flat-fee film they are offering achieves a certain threshold of commercial success at the Chinese box office. As this loophole is little discussed and even less legislated, its future may be determined by these independent companies’ ability to stay on the right side of the state-run import giant CFGC, to whom it is assumed they are paying a cut for the privilege of a place at the table.
Within 18 months of starting the first China bureau of The Hollywood Reporter in Beijing, CFI editor Jonathan Landreth reported in September 2006 that director Lou Ye was banned from filmmaking in China for five years. Lou was punished by authorities for sending his coming-of-age romance Summer Palace—set against the backdrop of the upheaval in Tiananmen Square in 1989—to the Cannes Film Festival that May, without government approval. Lou was a repeat offender, so his five- year ban—manifest not on paper but via word of mouth passed around in the industry—may be an extreme example. Previously, Lou had suffered a two-year blacklisting for sending his romance Suzhou River to the Rotterdam Film Festival, where it won the top prize in 2000. Censors at what was then still called just the State Administration of Radio, Film, and Television (predecessor to the State Administration of Press, Publications, Radio, Film, and Television, or SAPPRFT) refused to review Summer Palace for approval for Cannes, claiming the print submitted was of poor quality. But Lou and French co- producer Sylvain Burstejn said this was a groundless excuse used to avoid addressing the film’s content. In the years since, both Lou and Suzhou River have had the bans against them lifted. Summer Palace, however, has never screened in China.
In 2013, A Touch of Sin, director Jia Zhangke’s stark look at violence across the different socioeconomic strata of China, was denied an official release permit despite the Shanghai Film Studio behind him having worked closely with official censors from the get-go. The denial proved tantamount to a ban and, what’s worse, crushed the film’s chances of capitalizing on foreign acclaim. American critics lauded Jia’s work, but unless a subtitled film wins an Oscar, few non-English language movies ever get a substantial release in North America. Without a release in China, A Touch of Sin could not be submitted for the Best Foreign Language Film prize. By censoring Chinese works to uphold the ruling Communist party’s view of an appropriate cinematic portrayal of China, film authorities limit the country’s chances of winning an Oscar and guarantee the banned films will lose money.
In November 2015, a new draft of the Film Industry Promotion Law was issued for public comment. However, that’s no guarantee that the current draft will become law anytime soon, as this legislation has been in the works for more than a decade, with a series of draft versions issued over the years. But as China’s film industry continues to boom, shining as a bright spot in a largely troubled economy, the imperative for transparent governance will only grow.
The rapid pace of the industry’s development has increased the need for comprehensive legislation to provide a framework for regulating the movie business and, in practice, some previous drafts of the law have already seen their provisions take effect in an informal manner. For example, the draft issued in late 2011 emphasized that private investment in the industry would be encouraged and barriers lifted so that private companies could share a more equal footing with state-run businesses. In the years since, this has already largely come to pass as private studios and related enterprises have flourished, so it is longer necessary to “state the obvious” in the latest draft of the law.
In the years hence, this has already largely come to pass as private studios and related enterprises have flourished, so it is longer necessary to “state the obvious” in the latest draft of the law.
The 2015 draft establishes fairly broad guidelines for film production, distribution, screening, and financing, and simplifies some of the approval processes required for filmmakers. For example, qualified companies would be able to obtain general film production permits, allowing them to make films without having to secure an individual permit for each project, although individual screening permits would still be required for each release. The law also points toward the establishment of a film ratings system, which currently does not exist in China; in theory, all films released should be suitable for all audiences. (In practice, the lack of a ratings system is a blind behind which the censors hide, cutting or banning films without accountability to a set of transparent standards).
The latest draft film law delegates more responsibility to industry regulators at the provincial level and below. If the draft were to become law, provincial regulators would be in charge of most of the approvals for productions and scripts. Another addition to the latest draft reflects current concerns about box office fraud and questionable ticketing practices, with specific penalties laid out for failure to account for ticket sales accurately (see Part 7 of this report, coming on October 7.).
There are no changes foreseen to the status quo that prevents foreign companies and individuals from operating independently on film production activities in China (see Part 1 of this report), and no mention is made in the draft of revising the cap on foreign movie imports.
If the law passes, there will be a flurry of additional regulations and related policy documents issued at both the national and local levels to ensure that its provisions are implemented.
One of the biggest challenges facing filmmakers in China today is the lack of strong Chinese studios, which means there aren’t strong film slates. This, in turn, means that building a production schedule toward a hard release date it tough to do. As a result, there is turmoil in the casting world, which spells trouble if filmmaking is centered around getting actors to perform in a controlled environment created by an often huge team. In China, it’s very difficult for films to have start dates and for producers to have confidence that those start dates will be kept when, for instance, a film with a modest US$5 million budget sees its lead actress drop out because she got a better offer. Hundreds of people on the crew are left short of work. Managers, agents, and financiers—the people working in support of the talent—are scrambling to get their clients ahead in a market that’s still very much in the laboratory stage. It’s all an experiment. Veterans observe that in China, there are very few producers who are able to hold together all of the different moving parts of a film with much confidence.
Furthermore, talent is under pressure to lead by example in modern China and be model citizens upholding what the government calls core Chinese values. And yet, actors are— surprise!—human, so occasionally they make mistakes. In the making of Monster Hunt, for instance, an actor was removed three months prior to delivery for having been embroiled publicly in a drug scandal, causing the movie to be re-shot at great expense to all involved. Producers regularly find themselves unable to lock in their cast members for a feature film because cinema stars are highly in demand for reality television programs that typically pay five times more. Further limiting their availability for film work, many lead actors book lucrative commercials, and because a number of them are also singers, they have concerts to schedule. In an economy in which many industries are slowing down, the media business is picking up; it’s growing up to 50 percent a year in some areas. There’s a gold-rush mentality that complicates planning around talent.
Chinese regulators impose unofficial blackout periods of varying lengths on imported films, preserving the market for domestic productions during peak moviegoing periods: a week at the Lunar New Year (late January-early February), four to six weeks during summer vacation (July and August), the first week in October for National Day (October 1), and a week around Christmas and the New Year by the Western calendar. The blackouts ensure that domestics films’ gross account for more than imported films’ take at the end of the year. (Box office revenue from co- productions counts toward the domestic side.)
Under-regulation of accounting systems has allowed for prevalent ticketing fraud. Exhibitors and distributors sometimes work together to skim revenue off the top by under-reporting grosses. Several films in the past year have been accused of tampering with box office figures.
In August 2015, propaganda war film The Hundred Regiments Offensive was released to commemorate the 70th anniversary of the Allied victory over Japan in World War II. Netizens quickly leaked a State Administration of Press, Publications, Radio, Film, and Television (SAPPRFT) directive ordering movie theater chains to use “any means necessary” to bring in a fixed amount of box office revenue for Hundred Regiments in order to “extend societal influence” and build “feelings of patriotism and national sentiment.” To motivate them to complete their “mission,” theater chains could keep 100 percent of the box-office revenue instead of giving the usual 43 percent to the distribution company.
Following the directive, posts on social media showed printed tickets for Hundred Regiments with names and times for rival films—including Hollywood’s Terminator: Genisys—scribbled hastily over them. One Beijing cinema chain manager claimed nearly US$11 million could have been siphoned out of Terminator’s final box office tally.
That same week, Monster Hunt—then trying to overtake Furious 7 as the highest-grossing film of all time in China—was caught fudging its own box office numbers. Images began to circulate on social media showing Broadway Cinema, the theater circuit owned by Monster Hunt’s distribution company Edko, selling out multiple late-night “ghost” screenings. Even stranger, screenings were scheduled just 15 minutes apart in the same exact movie hall. Edko issued a statement later in the weekend claiming the sold-out shows were legitimate and just part of a public charity screening drive, but that it had failed to supervise the handling of the activity.
SAPPRFT continually claims it is trying to crack down on illegal box office activity, even releasing its own real-time box office website. But ticketing fraud was in the headlines once again in March 2016 when the 12 producers of Ip Man 3 were accused of bulk ticket buying and setting up “ghost” screenings on its opening weekend.
Distribution revenue in China comes predominantly from the box office (90 percent). There’s a very small ancillary market in the country, though that is changing with more official merchandising outlets and subscription-based streaming sites becoming widely accepted by the burgeoning middle class.
Online ticketing plays a huge role in the Chinese box office, as 75 percent of tickets will be sold online in 2016. Every major release will partner with one of the big apps for access to their big data since that data can help launch targeted marketing campaigns. Subsidized tickets—some as low as $1.50—flood the market on opening weekend for major films.
China has had a poor reputation for rampant piracy and disregard of intellectual property (IP) rights for a long time, but both Chinese authorities and private actors have been showing an increased awareness of the need to protect and enforce copyrights. Film piracy is a concern around the world, but cultural attitudes towards intellectual property rights and poor enforcement allowed the problem to mushroom in China, where pirate DVD shops have operated openly for decades and today’s major online video sites got their start as sources for unauthorized viewing of foreign movies and TV shows not readily available. But attitudes have been changing as the realization that there’s money to be made from content has dawned on the industry’s gatekeepers. Piracy is no longer a problem that mostly affects foreign copyright holders, and as Chinese studios develop homegrown content that has proven a success at the box office, the industry wants to ensure that audiences pay for content.
There are three kinds of enforcement available for copyright infringement: administrative, civil, and criminal, with a variety of penalties available under each, including fines, monetary damages, warnings, apologies, loss of business licenses, and prison sentences for the most severe cases. Lawyers in the field see the most success among Chinese companies seeking administrative relief, rather than civil or criminal, against piracy.
The development of higher-quality domestic content by Chinese rights owners has led to greater enforcement of copyright protection for movies, with the China Film Copyright Association leading the charge. It regularly uncovers and reports unauthorized screenings and illegal streams of new films, files administrative actions, and joins studios in taking pirates to court.
In the online realm, there are also clear procedures in place for rights holders to give internet companies notice of copyright infringements in order to get the illegally posted content taken off the internet. Websites and internet storage services must process notices and complaints in a timely manner and remove infringing content or links to it.
Individuals with claims to copyrights have been enforcing their rights as well, most visibly in the series of copyright cases brought by writers against companies and individuals alleged to have plagiarized their work. As the demand for content for movies, television, and the internet has skyrocketed, some writers have taken shortcuts by relying a little too much on the work of others—a trend that has not gone unnoticed by the writers whose work is copied. The recent landmark case in this area involved a Taiwan romance novelist, who successfully sued both the writer and television station behind a China series that bore very close parallels to one of her books. That case resulted in compensation of RMB 5 million ($760,000) and an apology, and, perhaps more importantly, set an example for other writers to go to court to enforce their rights.
Both on paper and in practice, however, the monetary compensation for infringement remains fairly small compared to a country with very strong IP protection such as the United States.
In China, damages awarded do not come close to covering actual losses incurred as a result of piracy. As a result, the threat of having to pay damages for piracy in China is less likely to have the intended deterrent effect.
Awareness and enforcement of copyright rules have become the norm in China, so too has the rush to invest in original intellectual property (IP). Dominating much of the industry discussion on China at the moment is the concept of “IP movies.” IP movies are predicated on intellectual property in the form of characters and stories that audiences already know from comics, games, TV series, or web series. Go Away, Mr. Tumor, China’s submission to the 88th Academy Awards, and Rock Dog, which hit screens later in 2016, are both based on popular online comics. The Tiny Times franchise originally came from a series of popular novels, and the 2015 coming-of-age film Forever Young was directed by talk-show host He Jiong and based on a hit song of his from 2004. Tech giant Tencent launched a program in 2014 to transition its own IP in the form of games, books, and anime titles into films in partnership with other companies.
While still not a guarantee of success, IP movies are an easier sell for local producers, as they carry with them a built-in fanbase that increases their chance of box office success. Ideally, the film becomes such a hit that it spawns further iterations and develops into a bankable franchise. Original IP will also be crucial for success in the industry’s nascent ancillaries and downstream market, which increasingly take a bigger part of the overall revenue pie.
The makeup of China’s film industry has been transformed since the country’s ascension to the WTO at the turn of the century, a move that saw the beginning of the privatization of a segment of a film industry long controlled by a one-party state. That epochal event in 2001 was to upend the industry, as the increased entry of foreign films broadened choices for cinema-goers and put pressure on local players to raise their game.
This followed an earlier, more limited round of disjunction and reorganization, prompted by China’s move from a planned to market economy. In 1993, the state-owned studios (then 16 in number) had been forced to figure out how to market and sell their films without the guaranteed support of the government.
Fast-forward to today and state, private, and foreign investors not only compete but cooperate as never before. Nonetheless, the state still maintains a commanding power in the industry. China Film Group and Huaxia Film Distribution share a monopoly on the lucrative import and distribution of international films. And most of the industry’s private players, including the Bona Film Group, Huayi Bros. Media Corp., Stellar Megamedia Group, Beijing New Picture Film Co., Orange Sky Entertainment Group, Alibaba Pictures, Wanda Pictures, LeVision Pictures, and Enlight Pictures, understand it makes sense for them to be based as close as possible to the political decision-makers in Beijing.
Bona, which had its roots in China’s military, listed on the NASDAQ in 2010 and Huayi Brothers Media on the Shenzhen Stock Exchange in 2009. Bona recently privatized, bringing its business home to China’s markets as the political winds have shifted in the country and Beijing has indicated its displeasure at Western influence in media.
The picture has become even more complicated with the arrival of China’s big three tech companies — Baidu, Alibaba, and Tencent (collectively known as BAT) — in the content-making business. Just how disruptive their influence will be is still unknown; mega-media giants, they merge content production with a range of business lines that include ticketing, merchandise sales, gaming, social media, and online video streaming.
CFI’s Ten Things to Know about Working in Film in China is for writers, producers, directors, actors, and members of the film marketing and distribution chain who believe that working with China is a part of their future. This article first appeared at http://chinafilminsider.com/.
Copyright © 2016 China Film Insider. All rights reserved. Reproduced with permission.
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