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Hollywood Studios hit Plot Twist in talks with China



Last year, many Hollywood executives worried as they prepared to renegotiate the agreement that sets conditions for showing their films in China. Would President

Donald Trumps

hard trading rhetoric torpedo talks?

It turned out they were worried about the wrong leader.

Chinese President

Xi Jinping

The recent consolidation of power has put China's film department under the Communist Party propaganda ministry – blocking talks on a new China-US. Film Trade Agreement, which would involve finding better conditions for the sale of box office in China.

The relocation of party surveillance has given US studios few answers as to how they should act in the world's second largest film market, say Hollywood executives in the US and Asia.

By March, China's film bureau had been a state-independent state agency, the State Press, Publication, Radio, Film and Television Authority, whose job it was to regulate content, including censorship of films and the Commencement Planning

President Xi's decision to place film stores under party control, just ahead of the important summer movie season, adds a new level of uncertainty to studios already struggling with China's complicated, fast-changing rules.1

659004 In Its Rise To Power has made President Xi understand the power of cinema, whether he encourages citizens to move to cities with shiny new theaters or to block American films with offensive topics. The reorganization seems to officially recognize the role of the film as a tool that needs to be managed by the party.

Now that the two countries are struggling with trade disputes, Hollywood is in a frustrating hold on its most important overseas market, waiting for a 2012 update of its distribution conditions. Negotiations have been postponed since February 2017. 19659004] In previous negotiations, the US delegation had proposed to increase the US's stake in theater groups to at least 28%, according to a studio manager. But the executive said the US was still waiting for China to react as the larger US-China trade talks put everything on hold.

Another person familiar with the negotiations said that higher numbers were also discussed. Studio managers say that a substantial increase will be difficult as China Film Distribution company, China Film Group, needs its share to cover sales and marketing costs.

"We've been waiting for more than a year," said a Hollywood executive. "And this last change does not help things."

Last week brought some progress, as a longtime bureaucrat of the Propaganda Department

Wang Xiaohui

In New York, he was appointed head of the new film bureau, which has been vacant since the reorganization last year. It remains unclear how much power Mr. Wang will have, or how the policy of his office will differ from that under the previous structure.

The Ministry of Propaganda did not respond immediately to a request for comment.

Hollywood once treated China as an addendum, but now it is an indispensable source of income. In the first quarter of 2018, Chinese big-business driven by the country's New Year holidays surpassed that of the US for the first time. It is not expected that China's annual big ones will stay in the US for at least a few more years, but recent releases such as "Ready Player One" by

Time Warner
Inc.

Warner Bros., and

Walt Disney
Co.

"Avengers: Infinity War" collected more than $ 200 million each.

Most major Hollywood films were released in China as part of a February 2012 agreement negotiated by the then Vice President

Joe Biden

and President Xi, who was China's vice president at the time. It should be checked every five years.

Both the US and Chinese delegations had hoped to announce a new contract in February, but there were delays on both sides. The office of the US Trade Representative was slow to occupy, said Hollywood executives. People who were familiar with the matter said Chinese officials were wrapped in the country's significant national people's congress, which gave President Xi a second term and abolished term limits.

According to the 2012 agreement, which continues to be in force, China allows 34 foreign films a year on its revenue-generating cinemas and gives the studios a 25% cut on theatrical releases – far less than the 40% of the total foreign markets are seen in most cinemas

Hollywood managers want to increase this share. Their films sell millions of tickets a year, and China can no longer see itself as a developing market. The increase in the quota of 34 titles is less worrying, say Studio Manager, as the number of major publications of the studios is covered.

There seemed to be some movement last month after Chinese negotiators offered to ease annual quotas on imported films as part of wider trade talks with US officials. These talks are expected to continue when the US Secretary of Commerce

Wilbur Ross

According to people who are familiar with the matter, he is leading a trade delegation to Beijing at the end of this week.

No result should weaken Chinese control over Hollywood releases. China says when a Hollywood movie is released in the country, sometimes studios announce just two weeks in advance.

Studio managers say that China still has many opportunities to protect domestic films. Chinese regulators could increase the number of foreign titles it allows, and then authorize more French or Bollywood films. Any increase in Hollywood revenue could be offset by additional Chinese taxes that are not paid by the studios.

Last year, an audit commissioned by the Motion Picture Association of America reported a 9% revenue shortfall for Chinese cinemas in 2016, which translates into at least $ 40 million lost revenue in the six major studios.

After the audit, Hollywood executives wanted changes, and talks were in progress last year. Then, Mr. Xi began the far-reaching consolidation of power, including the introduction of the "Xi Jinping Thought" into the Chinese Constitution, an award reserved for iconic leaders such as Mao Zedong.

The US delegation was relegated to the Ministry of Propaganda for weeks without any negotiating partners, although this could change with Mr. Wang's appointment.

"At this point, nobody knows what the next step is," said another Hollywood executive.

Forward, censors to The Propaganda Ministry will review film editors, request cuts for the Chinese market, and set release dates. It's a change in the protocol that comes when Hollywood submits its big budget spending for June and July.

Any Hollywood movie that wants to come to China soon must do so before mid-July when China begins its next unofficial "blackout" period (19659004) Such blackout periods have frustrated long Hollywood executives who believe that they exist to ensure that Chinese titles dominate the market. But it is difficult for the US trade delegation to negotiate: Chinese officials do not recognize the blackouts.

Contact Erich Schwartzel at [email protected] and Wayne Ma at [email protected]


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