China Punishes 326 Cinemas for Box-Office Fraud

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Beijing

After years of suspected impropriety, the crackdown comes as welcome news to Hollywood, which increasingly relies on the China market for growth.

China has rolled out a sweeping crackdown on box-office fraud at the multiplex this week, outing some 326 local cinemas for cooking the books. The action marks the first major enforcement of the country's new film law, which went into effect March 1. 

China's media regulator released a public list of offenders on Tuesday, with one official calling box-office fraud a "chronic disease" holding back the healthy development of the film industry.

The offending cinemas have been slapped with screening suspensions and steep fines, depending on the level of their crimes. They also are required to return all misappropriated funds to the film producers and distributors affected.

Sixty-three cinemas were found guilty of fraud amounting to approximately RMB 1 million (about $145,000) in 2016. As punishment, they have been ordered closed for 90 days beginning March 27.

Another 63 cinemas were ordered closed for 60 days over fraud totaling RMB 500,000 to RMB 1 million, while 110 more reported fraudulent numbers between RMB 100,000 and 500,000, resulting in a fine of RMB 200,000. The rest were let off with warnings.

Chinese cinemas have been known to employ various techniques to game the box office, such as under-reporting ticket sales, reporting profits from one film to another, or selling tickets to distributors in bulk (tickets to the distributors' own titles) to create the false appearance of a hit film for marketing gain.

The raid on legerdemain at the ticket gates will be welcome news to Hollywood, which has come to rely on China, the world's second-largest film market, as a major source of revenue.

As recently as 2013, industry experts believed that at least 10 percent of all Chinese box-office sales were lost to fraud.

In September 2015, China Film Group was caught rigging grosses in favor of a state propaganda picture, The Hundred Regiments Offensive, released to coincide with the 70th anniversary of the end of World War II. CFG issued a set of orders and incentives to Chinese theater chains designed to boost the movie's performance, which resulted in theaters reallocating revenue from competing films — notably Paramount's Terminator: Genisys, which was believed to have lost as much as $11 million due to money siphoned away from it.


 

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