Hollywood to Audit China Box Office for First Time

As the Middle Kingdom becomes more important to studios’ bottom line, they are taking a closer look at its books, reports say

The Motion Picture Association of America has hired an accounting firm to conduct an audit of the increasingly important — and often manipulated — Chinese box office, Bloomberg reported Tuesday, along with other outlets.

China’s box office flatlined in 2016, finishing at about $6.6 billion, but came after years of double-digit growth that made it increasingly important territory for Hollywood blockbusters. And with just 34 films allowed into the country on a revenue-sharing basis, getting a Chinese release — or not, as the country’s regulators have the ultimate say — can singlehandedly tip the scales on whether a movie will be a financial success.

However, multiple cases of ticketing fraud and empty “ghost screenings” in the world’s second-biggest movie market have Hollywood wanting to take a closer look at the numbers. The audit is allowed as part of a 2012 memorandum of understanding between the U.S. and China regarding the film industry.

The MPAA declined to comment to TheWrap on the matter.

Studios get just 25 percent of the box office take in China on those films allowed in on a revenue-sharing basis — a lower split than almost any other country — but the size of the Chinese moviegoing audience makes it a lucrative market, with some blockbusters like “Fast and Furious 7” clearing the $300 million mark in that country alone. And for films like “Warcraft” and “xXx: Return of Xander Cage,” the Chinese box office effectively made them worth doing, as they each grossed about four times as much in the Middle Kingdom compared with North America.

But getting accurate figures to take that 25 percent split has been a challenge, as China has had to deal with several instances of box office irregularities and fraud. Regulators banned the distributor of last year’s “Ip Man 3,” a martial arts film starring “Rogue One’s” Donnie Yen and boxer Mike Tyson, from releasing movies for a month after the company acknowledged manipulating the box office by purchasing millions of dollars in tickets and faking more than 7,600 “ghost screenings,” according to Chinese government-owned news outlet Xinhua. And in November, China passed a new film industry law increasing punishments for companies that “fabricate box office earnings, data or information.”