Government Clamps Down on China Box Office Fraud

By Patrick von Sychowski | March 24, 2016 8:00 pm PDT

China’s media authority has suspended the licence of the film distributor of “Ip Man 3” as a punishment for inflating ticket recipies through several dubious online schemes. Dayinmu Film Distribution (a.k.a. Beijing Max Screens) is said to have admitted to purchasing tickets worth CNY ¥56 million (USD $8.6 million), as well as fabricating over 7,600 screenings said to have generated in CNY ¥32 million (USD $4.9 million) in box office.

While this is not the first time that China’s State Administration of Press, Publications, Radio, Film and TV (SAPPRFT) has cracked down on instances of box office fraud, it is by far the strongest move, in response to what was widely considered the most blatant attempt at box office manipulation to come to light in China.

Dayinmu has been suspended from any movie distribution for a month, while formal warnings were also give to three ticketing platforms and 73 cinemas. These cinemas will further be ‘named and shamed’ on the website of the China Film Distribution and Exhibition Association .

“A successful cinema market is the foundation for our film industry. In China, box office is crucial to the income of film producers,” Zhang Hongsen, head of the Film Bureau is quoted as saying. Loving to stomp out corruption, Zhang notes that “film making and cinema screenings are two wings of one bird and they have to rely on each other. Only a regulated and healthy market can give birth to quality films.”

The fraud highlights the need for revising and updating the “Movie Management Regulations” that has not been changed since it was first implemented in December 2001. The scandal has been particularly severe, since foreign media such as the Wall Street Journal and the BBC have written about it, something that has in turn been re-reported in domestic Chinese media.

Some Chinese media such as Xinhua’s Securities Daily are even saying that, “many industry insiders believe that the punishment is too light.” One anonymous industry source is quoted as saying that “the industry believes that if the punishment [mechanism] is not put in place, the cost of non-compliance within the industry is either very low, or will eventually make bad money drive out good money.” Because of the lack of regulation, the film regulators cannot for example freeze assets, only issue administrative sanctions.

XinhuaNet notes that third party ticketing apps now control 80% of the cinema box office market, which gives them undue control over how films make money. “Ip Man 3” is said to have needed 60% sold out bookings in order to ge the preferential rate, but was only hitting around 40%. This lead to the distributor buying up tickets, or setting up posty-midninght “ghost screenings” at inflated rates and with the film supposedly starting in the same auditorium at 10 minute intervals.

Because of the competition for screens and audiences on the opening weekend, many distributors find it easier to buy tickets in bulk to create a buzz then to advertise and promote films through more conventional means. Such moves also have the benefit of usually inflating the share price of the companies that produced and/or distributed the film.

While the suspension of Dayinmu for a month is significant, it is clear that SAPPRFT is sending a signal rather than engaging a systematic rooting out of corruption. While open and blatant fraud cannot be tolerated, cinema remains one of the bright spots in the Chinese economy, where steel mills face closures, worries persist about a property bubble and government officials are saying that they will do whatever it takes to avoid a hard landing for the economy.

Fortunately for the Chinese cinema industry there appears to be no dark cloud over Stephen Chow’s box office sensation “The Mermaid”, which has achieved ticket sales of over CNY ¥3.3 billion (USD $500 million), without any scandal, so far.

Patrick von Sychowski
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