Offending cinemas in China punished for box-office fraud

BEIJING: China’s media regulator has taken action on some 326 local cinemas which have been cooking the book, in China’s first major enforcement of its new film law, which went into effect Mar 1.

It rolled out a sweeping crackdown on box-office fraud at the multiplex this week, outing the cinemas for various offences.

The 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 US$145,000) in 2016. As punishment, they have been ordered closed for 90 days beginning Mar 27.

Another 63 cinemas were ordered closed for 60 days over fraud totalling RMB500,000 to RMB1 million, while 110 more reported fraudulent numbers between RMB 100,000 and 500,000, resulting in a fine of RMB200,000. 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 per cent of all Chinese box-office sales were lost to fraud.

In September 2015, China Film Group was caught rigging grosses in favour 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 theatre chains designed to boost the movie’s performance, which resulted in theatres reallocating revenue from competing films — notably Paramount’s ‘Terminator: Genisys’, which was believed to have lost as much as US$11 million due to money siphoned away from it.