A deal to change China’s 20-year-old quota on U.S. films and low distribution fees came at the last moments of a visit by Chinese Vice President Xi Jinping and U.S. Vice President Joe Biden on Friday.
Spending the day with the Chinese leader in Los Angeles, Biden pressed for an end to a trade dispute that had remained unresolved for a year and had Hollywood deeply frustrated.
“We’re really close,” Biden told Xi, according to an official who was present. “It would be great to get this done.”
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By the end of the day, Xi had agreed, achieving two major concessions from China that may have major implications for Hollywood in the fastest-growing movie market in the world.
The deal adds another 14 films to the 20 non-Chinese films that can currently be distributed, provided they are made in 3D or IMAX formats. (The non-3D version may also be distributed, according to the new agreement.)
And even more important, the distribution fee for non-Chinese distributors will rise from 13 percent to 25 percent. The average fees for foreign distribution is close to 30 percent.
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“This is a very big deal,” said Chris Dodd, chairman of the Motion Picture Association of America, in an interview with TheWrap. “The industry has been living with the numbers in terms of percentages and quotas for 20 years... It begged for a conclusion.”
China is the fastest-growing market in the world for exhibition, adding thousands of new theaters this year, and expected to more than double its exhibition screens to 16,000 by 2015.
China had 2,500 3D screens by the end of last year and is expected to have 48 IMAX theaters by mid-2012.
The concessions were a joint effort, resulting from two years of pressure on China from the U.S. trade representative Ron Kirk, Treasury Secretary Timothy Geithner and Hollywood leaders including Dodd, Disney CEO Bob Iger and DreamWorks Animation chief Jeffrey Katzenberg.
But it was the personal diplomacy by Biden that got the deal closed by Friday night.
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The dispute reached back several years when the United States challenged China’s limits on movie distribution fees in the World Trade Organization as a violation of international trade laws.
The matter was decided in the United States’ favor in March 2011, but China had resisted a final resolution – and risked a penalty from the WTO by doing so.
Hollywood moguls pressed their case in a two-hour meeting with Biden last summer, according to Dodd, emphasizing the importance of the issue to the movie industry.
