Originally published for The Penn Spectrum
ARTICLE BY FREYA ZHOU
Indisputably, the United States is the world’s largest film market. With yearly revenue of $10.5 billion dollars, the country nevertheless is over-saturated and stagnant growth has been consistently observed during the last several years. Contrary to North America’s minimal growth in box office, Chinese ticket sales have increased at a breakneck pace, from $3.6 billion in 2013—a surge of 27 percent from $2.8 billion in 2012—to $4.8 billion in 2014, another climb of 36 percent (See Figure 1). Indeed, after China surpassed Japan in 2012 as the world’s second largest film market, Hollywood filmmakers have been increasingly influenced by Chinese film policies, government authorities and censorship, as appealing to such a robustly growing market is crucial for every blockbuster’s commercial success. However, the status quo was challenged this October, as China made significant changes to its film policies.
China’s current film importation policy originates from a World Trade Organization (WTO) case. In February 2007, the United States filed a case against China for its strict restrictions on importing foreign films on the grounds that China’s quota system violated its trading rights obligations. The U.S. called for a repeal of the 20 revenue-sharing films quota, equal rights for both foreign and domestic entertainment enterprises, and unlimited importation of entertainment products. After years of noncompliance and inaction, China’s Prime Minister Wen Jiabao finally agreed to a Memorandum of Understanding with the U.S. The agreement raised the limit from 20 films to 34 films each year. The box office receipts for foreign studios were also lifted from 13% to 25%. The 2012 deal was hailed by the Obama Administration and Hollywood executives: Vice President Joe Biden stated that the U.S. “share of box office revenues doubled”.
For the six major Hollywood film studios, China is a market with numerous opportunities. These companies earned over 70% of their box office revenue outside the U.S. and Canada, and as the biggest international market, China contributed a large portion of the box office. For 2015 blockbusters such as Cinderella, Jurassic World and Avengers: Age of Ultron, Chinese box office sales made up nearly a quarter of their total international gross. Furious 7 even earned a phenomenal 34% of its total international gross from China (See figure 2).
Figure 2: International Box Office of Top Grossing American Films, 2015
Lured by the Chinese market’s great potential, film studios have long exhausted every method to gain access to China. However, the companies’ intentions left the freedom of creativity at stake. To begin with, the Communist party has long viewed film as a component of social control. Chairman Xi is known for publicly reaffirming Chairman Mao Zedong’s dictate that “[Chinese] art serve politics.” The strict restrictions on film content are an obvious means of propaganda for the Chinese Communist Party (CCP). Specifically, China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) acts as the government’s major censorship authority, and presents a huge barrier for every film intended for release in China. While nudity, violence and inappropriate language are generally prohibited, contents that convey a negative image of China and the CCP are banned altogether. Even coproductions between Chinese and American studios are not exempted from the censorship. For instance, the preapproved, coproduced 2010 film The Karate Kid had been denied the release in China and had to delete 12 minutes in order to regain the opportunity, only because the film’s major antagonist is Chinese. Moreover, films that are denied release in China face broad negative consequences: Captain Philips found itself $9 million short of its anticipated revenue after losing its Chinese market because of the film’s positive portrayal of the United States and U.S. military.
Faced with the choice between losing the Chinese market and limiting the filmmakers’ creative license, Hollywood studios frequently choose the later. In fact, Chinese censorship has permeated every corner of the American film industry, forcing Hollywood to censor itself: film studios now anticipate what Chinese regulators will object to and make alterations even before the production is completed, thereby limiting creative freedom and sanitizing their portrayals to suit the interest of the CCP. In particular, Pixels underwent elimination of a scene in which the Great Wall is destroyed prior to viewings by SAPPRFT. In a sense, China has become a world film police, dictating the “appropriate” content to be presented, thus influencing film audiences all around the world.
Nonetheless, the status quo of the Chinese market seems to have reversed this year. The past three months have all shown a decrease in box office revenue compared with the data from last year, let alone maintaining the average growth of 30% typical for the past decade. As growth seems to level off, SAPPRFT surprisingly circumvented the 34-film quota this October, as five potential Hollywood blockbusters (Miss Peregrine’s Home for Peculiar Children, Keeping up with the Joneses, Moana, Sully, and Allied) were allowed to be shown in Chinese theaters this November, increasing the total number of revenue-sharing films to 36. While SAPPRFT promptly denied the increase in quota, this event did serve as a signal that China may open up its import quota in 2017, especially if one considers that the Memorandum of Understanding mandates further consultation between China and the U.S. in 2017 to provide for additional compensation and importation of foreign films in China. This dramatic turn in the situation may benefit Hollywood filmmakers: as more foreign revenue-sharing films are allowed to take advantage of the enormous market and contribute more to China’s total annual gross, China would certainly be more dependent on Hollywood studios to sustain continued growth in its film industry. Consequently, Chinese regulators may consider mitigating pressure of censorship on American firms. Nevertheless, the precise result is not scheduled to be revealed before January 1, 2018. Prior to that debate, heated debate on the future of the Chinese and American film industry will certainly continue.