MPAA chairman and CEO Christopher Dodd announced late on Tuesday that the China Film Group will pay Hollywood studios in full for money owed to them for more than a year.
The China Film Group had withheld payment because of a new 2 percent tax that it wanted studios to cover. Film companies haven’t been paid since October or November and are collectively owed more than $150 million, if not closer to $200 million. As it is, Hollywood only receives 25 percent of box office receipts (before a landmark trade agreement was reached in 2012, studios only received 13 percent to 17 percent).
“The MPAA understands that the China Film Group stopped payments owed to MPAA studios in China pending resolution of the application of a new value-added tax due to be implemented nationwide as of Aug. 1. We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full. It is our understanding that the payment process has recommenced,” Dodd said in a statement.
“The U.S. and Chinese film industries enjoy a close and productive relationship, and the MPAA is grateful to our counterpart, the State Administration of Press, Publication, Radio, Film and Television for their commitment in resolving this matter favorably. We look forward to further strengthening our ties with SAPPRFT as the Chinese screen community continues its path to becoming a global powerhouse in the international entertainment market,” he continued.
Dodd and his team have been furiously working to end the standoff, with Dodd traveling to China earlier this summer.
Going by the 25 percent rule, Warner Bros. would be owed north of $31 million for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer (Pacific Rim hasn’t yet ended its run in China, earning a stellar $76.5 million to date); Sony would be due $23 million for Skyfall and After Earth (White House Down is still in the midst of its China run); Paramount would be owed roughly $30 million for Into Darkness, G.I. Joe: Retaliation and Jack Reacher; Disney’s Iron Man 3 made more than $121 million in China, which would mean a return of more than $30 million for the studio, while Oz the Great and Powerful would mean about $5 million in payments (Monsters University is headed to China later this month).
Universal’s Fast & Furious 6 has grossed north of $55 million to date in China. Universal also would be owed for Oblivion and Les Miserables, which took in $23.9 million and $10 million, respectively.
Some studios say they are due money from 2012 titles, as well. Fox hasn’t received payment for Ang Lee‘s Life of Pi, a check that’s expected to come in at $23 million.
The Hollywood Reporter reported on Aug. 8 that a resolution was pending, and that the China Film Group was examining ways to make some payments to the tax bureau, which will then allow them to make some back payments to the studios. A source said the conflict has always been about bureaucratic issues and expected any deal to have a strong bureaucratic element.
At the same time, SAPPRFT is in talks with the country’s tax bureau to waive the 2 percent luxury tax on theater tickets, and the issue is due to be tabled at the next meeting of the State Council, which is chaired by Premier Li Keqiang. The tax had previously been waived in a bid to boost the film business, but under changes in China’s corporate tax law, the tax bureau insisted on a 2 percent withholding tax for all imported movies, similar to a 2 percent withholding tax that other foreign companies in China have to pay.
China trails the U.S. in terms of the size of the market, but with box-office grosses of roughly $2.75 billion last year, it is widely expected to assume the No. 1 spot within the next couple of years.
Clifford Coonan contributed to this report.