Translated from 21st Century Business Herald By Li Yang
More than 30 major theatre chains in China on Nov 25 reached an agreement to split revenues between the film companies and the theatre chains.
Under the new agreement, 43 percent of the revenues go to the film producers and 57 percent to the theatres if revenues are lower than 300 million yuan ($48 million).
If revenues are from 300 to 800 million yuan, producers get 45 percent and theatres get 55 percent.
If revenues are above 800 million yuan, producers get 47 percent and theatres get 53 percent.
However, before theatres and producers split the revenues, 5 percent must be handed over to the State film fund and 3.3 percent go to taxes.
The State film fund uses the money to sponsor film industries in less-affluent regions and to support non-commercial films.
In 2009, the State film authority stated that the share for film companies should not be lower than 43 percent and the share for theatre chains should not be higher than 50 percent. The new agreement means that theatre chains achieved a breakthrough in terms of their share of the revenue and successfully established a model similar to the one used by their counterparts in the United States.
Chinese film companies and filmmakers should not lay all their hopes on box office revenues. They should also develop more commercial opportunities in areas such as TV distribution deals, and in the audio and video market.
Some theatres in other countries generate more than 30 percent of their profits from the sales of products in the theatres. But that figure stands only at about 10 percent for Chinese theatres. So Chinese theatres should improve their management levels and not rely only on a higher share of box office revenues.
Both filmmakers and theatres should realize that viewers in theatres are only one part of the value-added chain of a successful film.