Dec 14, 2018 11:47 AM

China to Approve Release of More U.S. Films: Sources

U.S. studios have come to count on China to drive international sales of films, like those of its
U.S. studios have come to count on China to drive international sales of films, like those of its "Spider-Man" francise. Photo: IC

(Bloomberg) — China has been ramping up approvals for U.S. movies to be screened in the country’s cinemas this year to ensure a box-office revenue target is met, even as demand for Hollywood fare has been tepid, people familiar with the matter said.

The propaganda ministry granted China release dates for Hollywood movies as late as the final week of December, partly to help reach its goal of at least 60 billion yuan ($8.7 billion) in 2018 movie ticket sales, the people said, asking not to be named discussing private information. Films to screen later this month include “The Grinch,” from Comcast Corp.’s Universal Pictures, and two Sony Corp. movies, “Spider-Man: Into the Spider-Verse” and “Searching,” they said.

“They want to create the perception the cinema business is thriving,” said Albert Lee, head of the Hong Kong International Film Festival and a longtime industry executive. “Every year there is a goal, and this year it’s 60 billion yuan. One of the easiest ways to achieve that is to allow some Hollywood films.”

The added releases mean China will permit as many as 41 imported films this year, as many as seven more than the target of 34, the people said. The wider window also suggests filmed entertainment isn’t being targeted for retaliation in a U.S.-China trade war that has seen threats of duties on $60 billion in U.S. goods, from frozen meat to television components.

U.S. studios have come to count on China to drive international sales and have been asking the government to let more films in. Still, U.S.-movie ticket sales in China have dropped nearly 20% this year, according to Artisan Gateway, a consulting firm that works with film companies in both Hollywood and Asia.

Box-office sales in China are nearing the 60 billion yuan target, and have grown 10% since a year ago, Artisan Gateway Chief Executive Officer Rance Pow said. Hollywood movies are the safest way to ensure they reach the target since they gross more on average.

The target for imported films is from an agreement updated in 2012 that pertains to films in which the producer gets a share of the box-office revenue.

Hollywood boost

No U.S. movie can be released in China without the approval of the ministry, and movie studios have had some success pushing up the number of such films over the years. China also relaxed the annual limit two years ago as well, letting in a few more films, after growth in box-office sales sputtered.

The State Council Information Office, the government’s public-relations office, did not immediately respond to a fax seeking comment.

“The Grinch,” a take on the 1957 Dr. Seuss children’s book “How the Grinch Stole Christmas,” had generated ticket sales of $329 million, including $103 million outside its home market, as of Tuesday, according to the Box Office Mojo website. “Spider-Man: Into the Spider-Verse,” is set to open in the

U.S. on Friday, while “Searching” drew about $45 million in foreign revenue, almost double the $26 million it did at home.

China, which is expected to overtake the U.S. as the world’s largest movie market, remains eager to demonstrate that ticket sales can keep growing at a double-digit clip. Box-office revenue jumped 22% last year to 55.9 billion yuan, and China is intent on boosting that number to 65 billion yuan with 60 billion yuan as the minimum this year, said the people.

Hollywood, on the other hand, has needed more overseas sales to offset a stagnant market at home. While U.S. box office has grown just a couple percentage points over the past five years, sales in China have more than doubled.

Prime windows

The government has traditionally reserved some prime movie-going windows in the summer and the end of the year for local films. Chinese officials try to maintain a balance between domestic and imported products. Local films have accounted for between 50% and 60% of box-office sales in the country most years. Chinese-language films account for 64% of those grosses this year, according to Pow, thanks to hits like “Operation Red Sea” and “Detective Chinatown 2.”

“2018 has been a banner year for Chinese films,” Pow said. “The import films just didn’t do as well.”

The slump in U.S. studios’ share of China box-office sales has come despite the success of Marvel Studios’ “Avengers: Infinity War,” Warner Bros.’ “Ready Player One” and Universal’s “Jurassic World: Fallen Kingdom.” Sony’s “Venom” and Warner’s “Aquaman” have helped matters in recent months. “Venom” grossed more than $250 million in China thus far, while “Aquaman” surpassed $100 million in just four days

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