China’s State Administration of Press, Publication, Radio, Film and Television is getting tough with cinema operators. The authority outlined new measures this week designed to prevent movie theater managers from manipulating box office figures and defrauding the government and rights holders. According to FilmBizAsia, SAPPRFT’s memo on the matter, aka “A Notification Regarding the Strengthening of Film Ticketing System’s Management Practices,” is the first major revision of regulations in the sector since 2005. It’s widely said that theaters hide income from the government which takes a 3% value-added tax on revenues as well as a 5% film fund tax. Local distributors usually have a 42% revenue share with exhibitors, and U.S. studios are entitled to receive 25% of the share. China’s reported box office in 2013 was $3.6B, but the state-controlled Xinhua news agency says industry experts believe the real figure is at least 10% higher. FBA says that insiders have claimed as much as $826M, or 18.7%, of box office sales was not reported last year.
Xinhua says that fraud has been facilitated by using illegal ticketing software, but according to the new regs, all software will have to be upgraded before May 1. (Cinemas have also been accused of such strategies as issuing fraudulent handwritten tickets.) Any commercial cinemas that fail to upgrade to the national digital ticketing platform could be banned from operations. China Film Group and other major distributors send monitors to certain cinemas to keep tabs on the till. Distributors are now told they should conduct routine inspections with irregularities reported to the authorities. There will also be a hotline for members of the public to report violations.