Chinese Authorities Tighten Rules for Box Office Reporting

2012-10 BIZ China Tickets Illustration

When it comes to doing business with China, the devil is always in the details. The recent announcement that the Chinese government finally will comply with a World Trade Organization order to treat U.S. films more fairly is no exception.

The country's industry watchdog issues guidelines to prevent theaters from underreporting ticket sales to dodge taxes and cheat distributors.

China's entertainment industry watchdog has introduced new rules clamping down on movie theaters manipulating box office data, viewership figures and other forms of fraud related to ticket sales.

The State General Administration of Press, Publication, Radio, Film and Television (SGAPPRFT) has issued a circular with a new standard on the technicalities of managing cinema ticket sales. The rules are aimed at stopping tax avoidance by falsifying the numbers of moviegoers and reporting artificially reduced ticket sales.

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"Film distributors should conduct routine inspections of cinemas and report those that break the rules whenever and wherever they are discovered. Persistent or severe offenders may have their licenses revoked," the watchdog said, quoted by the Xinhua news agency.

"The standard of ticket management can be further improved this year," said Zhang Hongsen, head of the administration. "All areas in the industry must be positive in solving emerging film ticketing problems to keep the film industry on an even keel."

Under the new rules, ticketing software has to be upgraded to a national digital ticketing platform to stop cheating on box office sales.

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All commercial cinemas must upgrade their software or face being barred from operation.

Official box office data for last year shows sales of $3.6 billion, with domestic movies taking $2.12 billion of that, a rise of 54.3 percent for homegrown films.

However, industry experts believe that real box office sales are at least 10 percent more, Xinhua reported, and the underreporting of box office sales was hitting tax revenues and the bottom line of filmmakers.

"Box office fraud will lead to disorder in the film market and to vicious competition, which will ultimately affect Chinese people's viewing pleasure," said Yin Hong, a professor of Tsinghua University, to Xinhua.

Wang Changtian, president of Enlight Pictures, said that if film releasers did not make a profit, they would have no funds to make more movies, which is a vicious cycle for film development.