Is China’s cinema market larger than official figures suggest, due to box office fraud siphoning off 10% or more of its total value? Having looked last week at how micro-channel subsidies are inflating box office takings, it is time to look at box office spend that is collected but never reported.
Last year’s box office in China was reported to be CNY ¥29.64 billion (USD $4.82 billion), but the actual figure is now thought to be at least CNY ¥33 billion (USD $5.30 billion), according to reports in mainstream media. The difference between the two figures is accounted for by shrinkage that occurs when a ticket is sold to a film, but the cinema or employee does not log the sale or report it to the distributor or the relevant tax collecting authorities. The cinema or employee effectively takes 100% of the proceeds in violation of the rental terms of the film.
China Film Distribution and Exhibition Association and the China Film Producers Association have jointly been issuing bulletins that highlight cinema found out and fined for using ticketing software that allows them to divert takings. In 2014 this amounted to 15 cinemas in February, 11 in May and 17 in December. Yet media commentators in China said that it may have only been the tip of the proverbial iceberg.
The then government media body SARFT [now SAPPRFT] began cracking down in ernest on the practice of fraudulent box office in 2005 with the issuing of a “Cinema Ticketing Management System Computer Software Technical Specifications,” that was aimed at ensuring accurate reporting of box office takings. This was followed in 2013 with both a ”Cinema Ticketing Management System Technical Requirements and Methods of Measurement” specification, which was then followed by an “On The Strengthening of Management Practices Movie Ticket Movie Market System Usage Notification.” Yet new cases of fraud continue to be discovered.
The central government has a strong interest in ensuring accurate box office reporting in order to collect tax on tickets sold, thus the effort to stamp out box office fraud. Yet even the introduction of multiple specifications, requirements and notifications has not eliminated the problem.