China Ticket Sales Underreported by Up to 9%, Audit Finds

Movie ticket sales in China were underreported by up to 9% last year, according to the findings of an audit being conducted for the the Motion Picture Assn. of America, a source familiar with the study said Tuesday, confirming an earlier Wall Street Journal article.

The paper said that underreporting in 2016 accounted for $40 million or more of lost revenues for U.S. studios. The alleged fraudulent activity uncovered by auditors at PricewaterhouseCoopers includes audience numbers being recorded inaccurately and legitimate sales logged as concessions.

Variety reported earlier this year that Hollywood was adopting a tougher stance on ticketing fraud in China, having previously taken a softer approach for fear of causing friction in the huge Chinese market. The PwC report should provide ammunition for that effort.

It emerged in June that the MPAA had tapped PwC to take a closer look at the box office results of certain titles. The report is still being finalized, with an early draft version circulated among the studios, the source familiar with the audit said. 

News of the audit’s results comes at a crucial moment, with Hollywood set to renegotiate the share of local gross box-office receipts for imported titles in China. The current agreement dates back to 2012. As well as mandating that studios get 25% of ticket receipts, the agreement restricts the number of imported titles that can play in China.

Chinese authorities have taken steps to crack down on ticket fraud, but the PwC findings suggest there is still an issue. The Chinese market has assumed greater importance for Hollywood studios in recent times, in effect rescuing some titles that have registered middling or poor performances domestically and in other international markets.

Gene Maddaus contributed to this story. 

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