Trump Trade War Starts to Threaten Hollywood’s Business in China (EXCLUSIVE)

China money and stock markets

China has started putting the brakes on the entry of some U.S. content in apparent retaliation against Washington’s escalation of its trade war with Beijing, multiple sources tell Variety.

Chinese film officials have told some local buyers to steer clear of U.S. movies. One Chinese distributor says he was advised by various platforms not to submit U.S. titles for consideration, while another has heard through unofficial channels that private companies can no longer import U.S. content. American actors working in the Middle Kingdom say their careers have nosedived without explanation.

Industry insiders stress that there is nothing in writing – no officially published decree – putting a freeze on U.S. content. The Chinese government tends to exercise such controls internally and unofficially, which allows it to publicly deny the existence of any restrictions and to make exceptions when it suits them. Three years ago, when China blocked South Korean films, pop bands and other cultural exports out of anger over Seoul’s decision to deploy U.S.-made missiles, it took six months before Beijing publicly acknowledged the policy.

“Our clients and industry sources are telling us there is to be a de facto ban on U.S. content in the theatrical and streaming sectors,” said Beijing-based entertainment attorney Mathew Alderson, a partner at Harris Bricken, an international law firm whose China office has several U.S. clients. “As far as I’m aware, the policy has not been written down, and we don’t expect it to be. However, it is coming to the attention of the industry now.”

U.S. studio sources point out that they are still getting movies into China. Sony’s “Spider-Man: Far From Home” was recently granted a prime June 28 debut, ahead of its U.S. release, and other films such as “The Secret Life of Pets 2” and “Toy Story 4” have received slots. But privately they acknowledge that storm clouds may be brewing.

“It’s all still very gray,” one studio insider said.

Hollywood studios have also been grousing that China is applying “phantom” taxes on the ticket revenues they collect. Under their pact, the studios get 25% of ticket sales from the movies they release in China. Given how important China has become in terms of box office, any kind of slowdown or ban could cost these companies tens of millions of dollars. China has become such an important market in recent years that major films are greenlit and cast based on their appeal to the Middle Kingdom.

Equally, Chinese exhibitors depend on Hollywood blockbusters to keep the turnstiles spinning, particularly since the Fan Bingbing tax-evasion scandal last summer, which has led to a massive local production slowdown. Foreign films were widely expected to grow their market share this year to make up the difference. “Godzilla: King of the Monsters,” “Aladdin” and “X-Men: Dark Phoenix” dominate the top spots this week at China’s box office.

One local distributor told Variety that Hollywood tentpoles are likely to still get through. “Everyone I’ve dealt with says they’re not going to mess with Hollywood movies,” a Chinese exhibitor said.

But evidence is mounting of problems in other corners of the industry. A leading U.S. sales agent said four major Chinese buyers told him they had received phone calls from China’s Film Bureau during the Cannes Film Festival informing them that no more non-revenue-sharing movies from the U.S. would get release slots after May 24. (The big-budget Hollywood productions are almost invariably revenue-sharing titles in China.)

Indie Rights, an L.A.-based sales company specializing mostly in the streaming sector, told Variety that it had received “an email from our biggest Chinese buyer saying that, due to the trade war with the U.S., the censorship office will not be reviewing any more films from the U.S.”

And a Chinese distributor, speaking on condition of anonymity, said she had heard unofficially that private firms have been forbidden from importing U.S. films since Chinese New Year, in February, and that local streaming platforms were recently made subject to the same prohibition. “Right now the information is very confusing and chaotic. We really don’t know what will happen when,” the distributor said.

“We have heard the same information” regarding the squeeze on some U.S. content, said Jean Prewitt, president of the Independent Film & Television Alliance. “It is very unfortunate as China has become an important part of the independent film financing matrix. This would be an extreme setback.”

In addition to being the world’s second-largest film market, China also accounts for 60% of the world’s SVOD subscribers, according to research published last week by Ampere Analysis.

Chinese viewers and industry professionals alike got an inkling of a possible shift in policy last month when streaming of the “Game of Thrones” finale on Tencent Video was halted. An HBO spokesman told the Wall Street Journal that there were no transmission problems and that Tencent had been ordered by the Chinese government to pull the show because of the trade dispute.

A source close to China’s censorship regime told Variety that internet TV and streaming platforms have not been ordered to remove U.S. content, but have been discouraged from promoting it online.

On another front, five American actors working in Chinese productions told Variety that the trade tensions with the U.S. have taken a toll on their careers. One says that numerous production companies told him in the past two weeks that he could not take part in their upcoming projects because of his citizenship.

“Essentially overnight, many Americans have been left with no on-screen prospects,” said the actor, who asked that he not be identified. “Some were fired, some had auditions canceled, and essentially all our phones have stopped ringing….No one imagined they could be this far away from America, but still affected by the U.S. government’s choices.”

If restrictions on U.S. content bite hard and long enough to reduce the number of U.S. films playing theatrically, China’s film regulators may turn elsewhere for film imports. But there, too, politics is likely to play a role.

Two of the most obvious alternative sources of English-language content are the U.K. and Australia . But diplomatic relations between Australia and China are near an all-time low, and the U.K. is risking Chinese anger over its policy towards tech firm Huawei, which the U.S. wants its allies to ban. Canadian filmmakers appear to have already come under fire for their country’s arrest of Huawei CEO Meng Wanzhou following U.S. charges of fraud, with a Canadian director disinvited from the Beijing Intl. Film Festival in March.

Brent Lang contributed to this report.