China Vows Further Crackdown on Box Office Fraud

China Quota Wheel Illustration 2014

A report in the Chinese state press says local blockbusters gamed the system, and government regulators plan to respond.

China's film industry regulator has said it will take further action to combat fraud at the Chinese box office, the world's second-largest movie market.

Allegations that Chinese distributors have inflated box office receipts for marketing gain have been circulating within the industry for months.

In response, China's State Administration of Press, Publication, Radio, Film and Television (SARFT), which oversees the country's media and entertainment sectors, says it will introduce "more technical measures" along with stricter regulation to improve oversight of ticket sales at cinemas, according to a widely carried report from official state press agency Xinhua. Wrongdoers will be blacklisted and their names made public, Xinhua said, without further elaboration.

In an interview with China Central Television on Friday, Li Dong, deputy head of SARFT, said that distortions in ticket sales data remains a problem.

"Statistics from the national digital ticketing platform show that a few cinemas and distributors have manipulated viewing figures and sales," Li said. "For example, 300 tickets may be sold in a movie theater of 200 seats — and all tickets sold are counted at full price." Distributors inflate their films' performance to generate buzz in the marketplace, Li explained.

While bribing cinemas and mass-buying tickets to one's own films would undoubtedly make for hefty marketing expenses, the investment could pay off if the attendance figures hit the intangible tipping point that makes a movie a must-see event for China's burgeoning middle class.

The Xinhua report singles out local blockbusters Monster Hunt and Lost in Hong Kong as two of the top titles suspected of manipulation.

Monster Hunt, a CGI/live action fantasy, reportedly grossed 2.428 billion yuan (about $383 million at today's exchange rate) after an exceedingly generous 60-plus days on release over the summer, surpassing Furious 7's 2.426 billion yuan total ($382 million) to become the biggest movie ever in China. Aside from Xinhua's allegations of inflated sales for Monster Hunt, sources close to Furious 7's release have alleged that China Film Distribution under-reported the film's performance by as much as $30 million. 

THR has reached out to Monster Hunt producer and distributor Edko for comment.

Lost in Hong Kong made a spectacular $106.35 million debut in September, the biggest opening weekend ever for a local movie in China. That tally is also in question.

Chinese regulators have tried to address patterns of corruption at cinemas in the past. In 2014, SARFT issued new rules requiring cinemas to upgrade to a national digital ticketing platform to prevent theater chains from under-reporting ticket sales to embezzle revenue. China's official box office total for 2013 was $3.6 billion, but industry experts believed that the real sales were at least 10 percent more.

In October, state distributors were caught rigging the box office in a way that encouraged cinemas to boost the performance of local propaganda film The Hundred Regiments Offensive by stealing revenue from competing titles then on release, including Paramount's Terminator: Genisys.

The revelations are said to have given the Motion Picture Association of America a stronger hand in recent closed-door negotiations with China Film Group, in which the Chinese agreed to allow international parties to audit box office receipts beginning in 2016, sources close to the talks told THR.

In October, China also launched its first government-sanctioned box office reporting platform. Although the Chinese film industry has hailed the site as a positive step towards greater transparency, it has also complained that several features that could help expose wrongdoing are missing, such as real-time data and numbers for a film's total admissions and screen count.

Li's statement to Xinhua is the most public admission from SARFT that it needs to do more.