Handing the U.S. film biz a potential goldmine, the World Trade Organization ruled Wednesday that China is in clear violation of international trade rules by severely restricting the distribution of American films within that country.
The ruling also applies to the importation and distribution of DVDs, music, books and journals.
The WTO panel findings came in response to a complaint filed by the U.S. Trade Representative in April 2007.
The panel did not take up the issue of China’s quota on foreign films — China allows only 20 into the country each year. And companies must currently negotiate for inclusion in the quota with China Film Group, the state-run distributor, and the powerful State Administration of Radio, Film and Television, effectively cutting them off from other Chinese distribs.
However, Chinese officials maintained that the government doesn’t prohibit a foreign film company from approaching other distributors within China. “The Chinese system for distributing U.S. films to Chinese audiences is among the most restrictive and burdensome in the world,” Motion Picture Assn. of America chair-CEO Dan Glickman said.
“After years of pressing the Chinese to ease these burdens, it is potentially promising that the Chinese government has now, in its own words, indicated that a pathway does exist to ensure that U.S. films are treated in a more evenhanded manner and more in line with accepted commercial practice,” Glickman said.
Studios and indie producers said the ruling could go a long way toward creating competition for distribution within China for foreign films and particularly big studio pics. The more distributors there are, the more demand there will be for product.
An official with the Office of U.S. Trade Representative Ron Kirk said the Obama administration will “be keenly watching China’s adherence to their obligations.”
“We’ve created an opportunity for American companies to go and talk with other distributors within China that might be well suited to distribute those films. We are taking the Chinese government at its word, and we hope they comply,” the official said.
At present, U.S. distribs have virtually no control over a movie’s run in China and are given only a loose release date. It’s also commonplace for films to be yanked from their runs at any time.
It’s not only the restrictive and discriminatory practices that impede free trade for the film biz; piracy is a rampant in China. Some observers say if there was a thriving theatrical market, piracy might decrease.
China, with its 1.3 billion population, is a potential goliath in terms of box office revenues.
Hollywood has done well by China this summer. Paramount’s “Transformers: Revenge of the Fallen” grossed $65 million in China, the largest haul outside the U.S. Other summer tentpoles that have played in China are “Harry Potter and the Half-Blood Prince,” “Ice Age: Dawn of the Dinosaurs” and “G.I. Joe: The Rise of the Cobra,” which opened last weekend.
“The WTO ruling is a big deal. China was dragged to the table, but I think they’ll have to comply,” one international studio exec said. “What’s that ancient Chinese proverb? ‘The longest journey begins with a single step.'”
China can appeal the report before it goes to the full WTO for adoption.