Hollywood studios owed millions by China
In a row over tax with Chinese film distributors, US studios including Warner Bros, Sony and Paramount remain unpaid Hollywood studios have not been paid by the organisation which represents Chinese cinema distributors for a number of months, a period during which blockbusters such as Skyfall, Man of Steel and Star Trek Into Darkness have pulled in hundreds of millions of dollars at the local box office, according to the Hollywood Reporter.
The China Film Group is withholding payments following disagreements over a new 2% VAT-style tax that Beijing expects US studios to pay. The American studios say the tax violates World Trade Organisation rules but so far have failed to make an official complaint or withdraw their films from cinemas. All six major US studios are reportedly involved in the impasse.
The WTO legislation that the studios are citing states that the studios receive 25 percent of Chinese box office revenue on their films, with no additional payments (including taxes) coming out of the studios’ split. The Hollywood Reporter estimates that Warner Brothers is owed at least $31m (£20m) for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer, while Sony is due $23m (£15m) for Skyfall and After Earth and Disney $35m (£22.8m) from Iron Man 3 and Oz the Great and Powerful. Paramount is owed around $30m (£19.5m) for Into Darkness, GI Joe: Retaliation and Jack Reacher, while Universal and Fox also have outstanding payments for hit films such as Oblivion and Life of Pi. MGM will be due its share of profits from co-productions The Hobbit and Skyfall.
Chris Dodd, chairman of the US film group the Motion Picture Association of America, is currently working on a solution to the disagreement. Studios hope to avoid a referral via the office of the US trade representative to the World Trade Organisation. US vice president Joe Biden signed a deal last year that studios believe is violated by the demand for payments under the “luxury” tax.
Hollywood is wary of rocking the boat because China’s film market – already the second biggest in the world – is rapidly growing to the extent that it is due to surpass that of the US by 2020. The nation is due to build 25,000 cinema screens over the next five years, many with the latest 4k digital technology to cope with demand from an increasingly wealthy population. The government’s recent decision to relax the number of foreign movies allowed to screen each year from 20 to 34 should also boost profits for US studios.