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China agrees to widen market access for US films

The US government has announced that China has agreed to widen its long-standing quota for US films, as well as allow US companies to take a greater share of box office.

The announcement, made late on Friday following a meeting between US vice president Joe Biden and China’s vice president Xi Jinping, should pave the way for increased trade and collaboration between the world’s biggest film market and the Chinese market, which is on course to become the world’s second biggest.

China has agreed to import 14 “enhanced” US films each year, in the 3D or IMAX formats, in addition to the current quota of 20 revenue-sharing foreign films, most of which are typically US releases. US companies will also be able to take a 25% share of box office, rather than the current 13-17% share.

The agreement comes one year after China missed the deadline to comply with a World Trade Organization (WTO) ruling to allow US films greater access to the Chinese market. When the March 2011 deadline passed last year, China told the US it needed more time to comply.

Following several years of double-digit growth, the Chinese box office grew by around 30% in 2011 to hit $2.06bn (RMB13bn). The top-grossing film, Transformers: Dark Of The Moon, raked in around $173m. Six of the top ten films were 3D releases, including one Chinese film, Tsui Hark’s Flying Swords Of Dragon Gate.

Commenting on the announcement, MPAA chairman and CEO Chris Dodd, said: “This landmark agreement will return a much better share of the box office revenues to US studios, revising a two-decade-old formula that kept those revenues woefully under normal commercial terms, and it will put into place a mechanism that will allow over 50% more US films into the Chinese market.”

The Independent Film & Television Alliance (IFTA) also praised the agreement: “For independents, this agreement is momentous,” said IFTA president and CEO Jean Prewitt. “Our sector has been unable to benefit fully from the existing revenue-sharing importation quotas and has had limited avenues through which to distribute. For the first time, through this agreement, there is a promise of creating a commercial foundation that will allow independent producers to participate more fully in the Chinese marketplace.”

Prewitt also gave more details of the agreement: “In addition to improving the existing revenue-sharing regime, under the terms of the agreement, China has committed to allowing new local companies to engage in local distribution, to introducing transparency into censorship and importation decisions, and to offering terms and conditions equivalent to comparable markets such as France and Germany. Most importantly, these changes will accelerate the development of a competitive marketplace in which both the US and the Chinese independent film industries can flourish.”

Also happy about the news was IMAX CEO Richard L Gelfond who issued this statement: “We believe that the new WTO agreement with China is a milestone for the global movie consumer that will result in even more high quality film product being exported into China, one of the fastest growing markets in the world. We are pleased that the new agreement highlights IMAX and allows for even greater flexibility to bring IMAX films into China within a structure that fosters more growth and collaboration. We’ve spent the last 15 years on the ground building relationships and expanding IMAX’s presence in China and we believe this significant development will help us further our network expansion efforts and enable IMAX to continue providing Chinese consumers with great films from both Hollywood and China. We are also committed to bringing Chinese films presented in our format to the US.”

The new policy will be reviewed in five years time enabling the US to return to the WTO if China’s implementation is deemed insufficient.

It was also confirmed this week, during Xi’s US visit which also included a stop in Los Angeles, that DreamWorks Animation has teamed with Chinese state-owned media groups China Media Capital, Shanghai Media Group and Shanghai Alliance Investment to build a Shanghai-based studio.

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