A recent audit conducted for the Motion Picture Association of America (MPAA) has determined that China shortchanged Hollywood out of millions of dollars from China's box office in 2016. The news comes after more than 300 theatres were penalized in March of this year for under-reporting ticket sales, China's State Administration of Press, Publication Radio, Film & Television regulator said at the time. The biggest penalties that were handed out were 90-day suspensions of operations for theaters that fudged the revenue by more than 1 million Chinese yuan, which equates to about $150,000 dollars USD.
The Wall Street Journal reports that auditors at PriceWaterhouseCoopers, one of the big 4 auditors in the world, concluded that China has been under reporting movie ticket sales by about 9%, which equates to at least $40 million dollars USD for the 6 Hollywood studios. The box office data shows that Hollywood movies grossed around $1.8 billion dollars in 2016 alone in China. The current arrangement allows the MPAA 25% of the total tickets sold at the Chinese box office.
As the auditors dug deeper, they began to discover irregularities such as revenue categorized as concession instead of ticket sales, audience sizes that were under reported, and screenings that were flat out not reported at all. The MPAA discovered the discrepancies back in June of this year and presented China Film representatives with their findings last month. It has been reported that China was receptive to the allegations, but they have said that they need to defer to a higher government authority to handle the situation, which could enforce stricter controls on the theaters. It has also been reported that the state-backed distributor will meet the parties again later this month to discuss the matter further.
It is not clear at this time which movies the audit looked at it, but it is safe to assume that the audit looked into some of the more higher grossing movies of 2016. The Wall Street Journal reports that 29 movies were audited across a small amount of theaters with the results projected on to account for the market's more than 40,000 screens, which could account for even more revenue lost due to China fudging its numbers. The MPAA has yet to make a comment at this time.
The news of China shortchanging Hollywood comes at an interesting time, as the United States and China are preparing to negotiate future trade sanctions between the two countries. Those negotiations have apparently been shelved for the time being as China prepares for the National Congress of the Communist Party in a few weeks that will see some major changes among the top ranks in China. As previously mentioned, the box office manipulation by China is nothing new, but they have vowed in the past to crack down on the fudging of the numbers. China is not the only offender, but they are currently highlighted under the current audit. More news is expected to follow, but in the meantime, check out the full article over at The Wall Street Journal.