Hollywood Studios Resolve Their Fight With China

By Sean O'Connell 2013-08-14 10:17:28discussion comments
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A months-log dispute between several major Hollywood studios and the Chinese government appears to have been resolved, but the squabble shines a light on what might continue to be a problem for the film industry and its increasing partnership with China.

The L.A. Times reports that the Motion Picture Association of America has settled a glaring tax dispute between the studios and China’s distribution arm China Film Group, freeing up millions of dollars in funds that should have been paid. The dispute stemmed from a 2% tax China Film Group insisted the Hollywood studios give back from their Chinese box-office revenues. According to the Times, at least four major studios were protesting the agreement, holding back funds raised by movies like Ang Lee’s Life of Pi, Paramount’s G.I. Joe sequel, and Skyfall -- the latest James Bond thriller.
"We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full,'' MPAA Chairman Chris Dodd said in a statement. "It is our understanding that the payment process has recommenced."

Though this clears only the latest hurdle, it does sound like a temporary fix – a band-aid – applied to a relationship that has been tugging back and forth over a potential pot of money for years. The 2% tax was applied in response to a 2012 negotiation between the U.S. and Chinese governments that, according to the Times, “eased restrictions on the number of foreign movies allowed into China under its quota system [and] also gave studios a larger slice of box-office revenue, increasing their take from as little as 13% to as much as 25% of ticket receipts.”

Needless to say, that didn’t sit very well with the Chinese, or China Film Group, specifically. But the dispute stretched even further, back to 2007, when the U.S. actually had to file a complaint with the Word Trade Organization claiming China was violating policy by “unfairly restricting access to its market.” Basically, studios see millions of ticket-buying patrons in China, and want to be able to flood that market with product.

The U.S.-China relationship has been strengthening over the years, and we have been covering it as blockbusters from Iron Man 3 to Michael Bay’s Transformers 4 make concessions to appease the massive global power. Recently, Pacific Rim hung its chances of generating on sequel on the potential opening the blockbuster could land in China. In fact, we did an entire podcast recently about China’s “slow, inevitable takeover of Hollywood,” and this resolution seems like another strategic move around the chess board to figure out exactly where all of the money and power should shift. But make no mistake: Hollywood and China are getting very comfortable in this bed together because they both see how much profit can be generated. Stories like this show how snippy sides can get until they figure out where the profit will go.
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