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Over the weekend, China’s Vice-President Xi Jinping and his American counterpart, Joe Biden, agreed on a deal that allows an additional 14 foreign-made movies into China every year. While that’s a 70 percent increase from the current quota of 20 films, it won’t likely make much difference to Hollywood’s bottom line. The Weinsteins alone released 15 movies last year, according to industry website The Numbers, and the Big Six studios had a total of 146.
Moreover, the increase comes with a catch: To qualify for the new list, the movies have to be in 3D or Imax’s (IMAX) widescreen technology. That restriction, of course, rules out the vast majority of what Hollywood produces each year.
Dig a bit deeper, though, and the deal starts to look more interesting. First, the studios will be able to keep a greater share (25 percent, vs. the current 13 percent) of the box-office receipts for those movies that make it to Chinese cinemas.
And the 3D restriction may pay in other ways. China, you’ll recall, is counterfeiting central. Even with the government trying to crack down on piracy, it’s easy to buy counterfeit DVDs in just about any Chinese city, or go online and find unauthorized downloads of U.S. movies. While China is a growing film market, with total box-office receipts of $2.1 billion last year, according to the Motion Picture Association of America, those numbers would be much bigger if not for the widespread availability of pirated flicks.
So for the studios, it makes sense to focus on special formats such as 3D that offer Chinese moviegoers a strong incentive to get off the couch and schlep to the cinema. China does have some 3D televisions and the country’s state-owned China Central Television began a trial 3D TV channel on Jan. 1. But for the foreseeable future, the best way to enjoy a 3D film is in a movie theater.
By opening up China a little further for 3D movies, the pact could provide a much-needed boost to American companies that specialize in the format. Before this deal, investors in the U.S. had soured on 3D. As of Friday, the last trading day before the two sides announced the agreement, the stock price of RealD (RLD), which licenses 3D technologies, closed at 12.40, down 65 percent since its high last May. At midday Monday, RealD was up by nearly 4 percent. The company is well-positioned to benefit from a Chinese 3D boom: The company says its technology is on 460 screens in China and that it has “future commitments totaling 1,200 screens.” On Sept. 8, RealD announced a partnership with Chinese theater operator Shimao Cinema Investment to install RealD 3D technology in 100 of Shimao’s screens. RealD followed that on Dec. 4 by announcing another 100 screens with Mei Ah Entertainment Group.