SARFT cuts China Film off at the ankles

SYDNEY — Officials at China Film have known for months the agency is destined to lose its monopoly on releasing U.S. and other foreign films. Now, they’re starting to calculate just how much they stand to lose after the government spelled out its distribution reforms.

Last week, the Chinese film community and U.S. distribs were mulling the implications of the recently unveiled document portentously titled, “The Execution Plan of Film Distribution System Reform.”

Issued by the State Administration of Radio, Film & Television (SARFT), the new policy is a severe blow to China Film. But it’s also a setback to the Shanghai Film Group, which had hoped either to secure its own distribution license or to become the dominant player in the new distrib sanctioned by SARFT.

For Hollywood and other film suppliers, the document leaves many questions begging — but heralds the prospect of sweeping reforms that should lead to a more dynamic, less inefficient distribution and exhibition structure.

Pics divided equally

SARFT wants the new distrib to be operating no later than June. As expected (Variety, Jan. 21-27), the ministry has deemed that China Film’s stake in the new banner will be small — probably less than 20%.

But in an unexpected development, SARFT has ruled that China Film and the new distrib will each handle 10 foreign films in the latter’s first year. As the incumbent, China Film did not expect to see the number of imports divided equally between it and the upstart.

To protect the struggling domestic film industry, both entities will be required to release 20 domestic pictures each annually.

In another surprising initiative, SARFT says the split after the first year will depend on how well each does in achieving B.O. results.

Exhibs won’t escape the reforms. The policy aims to encourage the formation of at least two competing circuits in each city and provincial area. It’s envisioned that at some point, a cinema will not be able to play a revenue-sharing film unless it’s part of a chain.

One U.S. exec says the move is designed to eliminate the layer of inefficient city and provincial sub-distributors, enabling China Film and the new player to deal directly with cinemas.

That exec is also encouraged by SARFT’s plan to ensure the proposed distrib is not staffed by officials from existing studios. Instead, the new banner will be encouraged to recruit the best available people in the marketplace at large.

“That should mean hiring professional managers who will be market-oriented,” he says.

The document makes it clear that no group will be allowed to dominate the second distrib, by limiting individual stakes to 20%. It’s believed any entity — state-owned or private — will be allowed to buy stock in the company.

One source says foreigners will be permitted to take a small stake, but that’s unlikely to be an attractive proposition, as outsiders would not have a say in management.

For the majors, reforms in Chinese distribution and exhibition can’t come too soon. Although piracy continues to harm cinema attendance, the U.S. films released on the mainland this month have performed poorly.

“Planet of the Apes” has grossed a modest $786,000 in four weeks. “Shrek” made just $296,000 in 10 days after bowing on 60 screens and expanding Jan. 28 to 194, en route to an eventual 300.

B.O. figures for “Jurassic Park III” (the first pic released by the Shanghai Group in a move unrelated to the current reforms) are sketchy, but are estimated at around $300,000 in 10 days.

But hopes were high for “Harry Potter and the Sorcerer’s Stone” which launched Jan. 30.

Even so, one Beijing producer does not expect a rapid improvement in the way foreign or local films are released. “The key is the (absence of) skill in marketing, distribution and management,” the producer believes. “Making a profit was never the issue for management in China for more than 50 years. Overall, who (in China) is going to care whether films make or lose money?”

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