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The Golden Rock - November 23, 2011 Edition




Zhang Yimou’s FLOWERS OF WAR is not just another World War II film. Budgeted at US$90 million (or roughly 600 million yuan), it is the most expensive film ever produced in China. From its casting of Hollywood star Christian Bale to the grueling 165-day shoot, THE FLOWERS OF WAR is an important film for the Chinese film industry as major commercial industry on the world stage.

Considering that the highest-grossing Chinese-language film in China grossed 700 million yuan, producer Zhang Weiping and New Pictures will have to figure a way to make as much money as possible to earn its investment back. As I have written before, since the cinemas take over half of a film’s theatrical gross, a typical Chinese film will have to take in over double its budget to make its money back. That means if FLOWERS OF WAR were to rely on domestic box office to make its entire production budget back (excluding marketing), it’ll have to make at least 1.2 billion yuan. So you can see what kind of pressure Zhang Weiping is under.

To ensure that Zhang makes his money back, he has requested two things of Chinese cinemas: Raise the minimum ticket price of the film to 40 yuan in first-tier cities (35 in second-tier, and 30 in third-tier), and change the distributor-cinema revenue share ratio from 43%-57% to 45%-55%. While the second condition is pretty easy to understand, the first one might need some explaining:

Distributors in China always set a minimum ticket price for their films to ensure that cinemas at least share a certain revenue with the distributor per ticket sold. The highest minimum ticket price ever mandated by a distributor before FLOWERS was Feng Xiaogang’s AFTERSHOCK, which had a minimum ticket price of 35 yuan.

When Zhang unilaterally decides to raise the minimum ticket price, it creates several problems for Chinese cinemas: 1) Cinemas have already started selling group screenings for the film, and they had set each ticket at 35 yuan, which is what they had expected the minimum ticket price to be. With Zhang raising the price by 5 yuan a month ahead of the film’s release, cinemas will have to go back and get those five yuan per ticket back. 2) Many cinemas offer premium discounts for members, and they’re often up to 60% off the normal ticket price. At 40 yuan minimum, theaters will have to set full-price tickets at a significantly higher price than usual, which will obviously drive away everyday movie-goers who simply cannot afford to watch the film. Also, smaller multiplexes who can’t fit in many screenings may be forced to drive the price even higher, with price figures like 100 yuan being thrown around the rumor mill. That figure is unheard of for a 2D film.

In response to concerns about the price inflation, this is what Zhang Weiping told Sina:

“首先,我们只是将影片的最低票价提高了5元,哪来百元天价?其次,在票房分成比例上,去除税金,片方分45%,影院分55%,利润他们占大头,投资风险都 在我这儿,不明白影院有什么不满。另外,电影的最高票价是影院各自按照自己的实际情况制定的,到底是70还是80,这和片方没有关系。《十 三钗》是有史以来投资最大的国产片,片长达2小时25分钟,比一般国产片长出4、50分钟,等于是加料的产品,加料产品,当然加价。”

“First of all, we only raised the minimum ticket price by five yuan, so where is the 100-yuan price coming from? Second, in terms of revenue sharing ratio, the distributor is taking 45% and the cinemas are taking 55% after taxes. They’re taking the majority, and the risk lies with me, so I don’t understand what the cinemas are so dissatisfied about. Also, the film’s maximum ticket price is determined by the cinemas based on their circumstance, so the distributor has nothing to do with whether the ticket price is 70 or 80 yuan. THE FLOWERS OF WAR is the most expensive film in Chinese history. It’s 145 minutes long, 40, 50 minutes longer than a typical local film. That means this is an enhanced product. An enhanced product naturally means a higher ticket price.”

It’s true that ticket prices are entirely decided by cinemas based on a distributor’s ticket price. For example, I had to pay 70 yuan for a ticket to LOVE IS NOT BLIND, but my ticket for KORA - also for a showing on a Sunday afternoon - was only 60 yuan. This means that Chinese audiences actually can pay a lower ticket price for a so-called “cheaper” product.

On the other hand, Zhang is a little arrogant in pretending to not know anything about cinema’s ticket pricing strategies and assuming that the consumers must bear the cost of his inflated budget. Film is not a public utilities project.

With FLYING SWORDS OF DRAGON GATE setting their minimum ticket price at 35 yuan (even with 3D) and opening on the same day, it’ll be interesting to see whether there’s any audience backlash and what cinemas will do to make sure they can earn back the 2% they lost.

Then came the big twist yesterday:  A media professional in Beijing reported on Weibo that representatives of China’s top eight cinema chains were holding negotiations with Zhang and New Pictures, threatening that if Zhang does not lower the minimum ticket price (and I assume change the ratio back to 43-57), the eight cinema chains will boycott the film. While one report said New Pictures caved into the cinemas’ demands, there hasn’t been any additional reports indicating that Zhang and the cinemas have come to an agreement.

If Zhang indeed did cave, then it reinforces the power of cinemas in the commercial Chinese film industry. China Film Group, in an effort to boost box office revenue for BEGINNING OF THE GREAT REVIVAL, eventually had to convince cinemas to keep the film playing by allowing cinemas to keep 100% of box office revenue in its final month of release. The cinemas also had a large role during the Great Box Office Gouging of 2011, offering “group tickets” to boost box office revenue of certain propaganda films. Major cinema chains, with their polished multiplexes, also played a huge role in the emergence of Chinese commercial cinema because their state-of-the-art features helped attract audiences to the movies. As defiant Zhang seemed to be, he likely knows that he will have to please cinema owners because of the role they play in exhibiting his film.

On the other hand, if the cinemas can’t beat Zhang, I doubt they would really boycott what is likely to be one of the highest-grossing films in Chinese cinema history. However, they will likely change the way they work in the future to ensure that they will not face this situation again. I have no idea what that will be, but I will surely be keeping an eye on all the gossip happening.

Either way, it looks like the tug-of-war between distributors and cinemas in China will be continuing for a while. It’s just a little sad that no one seems to be caring about the rights of consumers at all. Such is capitalism.

UPDATE: After Cinema manager Zhao Jun confirmed that negotiations were indeed going on and that most cinema chains are behind the top eight chains, Sina news reported that an agreement has been reached. The terms are as follows:

1) The 43-57 ratio will be the subject of further negotiations, but between New Pictures and individual cinema chains. “Mild adjustments” can be made according to the circumstance of each chain. That part has apparently not been discussed in detail, nor has “circumstances” or “mild adjustments” been clearly defined yet.

2) The 40/35/30 minimum ticket price will remain the same. However, cinemas can apply for a lower minimum ticket price in certain circumstances (group sales, discount day, etc.).

This means we will still likely see 100 yuan tickets for FLOWERS OF WAR, which means now FLYING SWORDS OF DRAGON GATE - whose minimum ticket price remains at 35/30/25 - may have a slight advantage.

For your information, as I reported back in August, the minimum ticket price for TRANSFORMERS: DARK OF THE MOON was 20 yuan. It ended up making 1.1 billion yuan (even after its grosses were gouged). However, its first-week average ticket price was 42 yuan due to the 3D.


Sina News 1
Sina News 2

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