6 Key Lessons From SARFT’s Foreign Film Blackout

Article  by  Robert CAIN  •  Published 25.10.2012  •  Updated 06.11.2012
Now that the domestic film protection period is finished and foreign films are again dominating China’s movie screens, it will be instructive to look back and see what impact the blackout had, and how successful it was in achieving SARFT’s goals.

Summary

This year from late June through late August, China’s State Administration of Radio Film and Television (SARFT) imposed a “domestic film protection” period—a partial blackout of foreign-made films—to allow local Chinese films and Chinese language co-productions the opportunity to make some money without having to compete with major Hollywood blockbusters.
 
The move came in response to a devastating first half of 2012 for Chinese filmmakers, during which imported U.S. movies grabbed nearly 70 percent of all the PRC’s ticket sale revenues, while homegrown Chinese films earned barely 10 percent. American films took the top spot at the box office—and often the top three or four spots—every single week until the blackout commenced on June 25th.
 
In imposing the blackout SARFT didn’t break any international trade rules; indeed, as one of Hollywood’s chief political lobbyists, MPAA Chief Policy Officer Greg Frazier, said of the Chinese, “Are they violating WTO obligations? Probably not.” But that didn’t stop the chief executives of several major Hollywood studios from griping about ‘market manipulation’ and ‘unfair trade practices.’ Executives at Sony Pictures and Warner Bros were said to have complained that two of their respective films, The Amazing Spider-Man and The Dark Knight Rises, were deliberately pitted against each other by SARFT on the same opening day in order to ‘crush’ their revenues.
 
Now that the domestic film protection period is finished and foreign films are again dominating China’s movie screens, it will be instructive to look back and see what impact the blackout had, and how successful it was in achieving SARFT’s goals.
 
We can start by taking a look at the numbers. The following chart provides a weekly graph of China’s nationwide box office results for the periods before, during, and after the summer blackout. The red shaded areas in each column represent revenues for local Chinese films and Chinese language co-productions; the blue shaded areas represent revenue for Hollywood films; and the green areas represent revenue for non-Hollywood foreign films.
 

Looking at the numbers, and considering the context in which the blackout was implemented, one can draw the following conclusions:

1. The blackout worked—sort of—but two months was too long

By blocking most new Hollywood releases for nearly nine weeks in June, July and August, SARFT successfully cleared the way for Chinese films to perform. As can be seen in the chart above, Week 26, the blackout’s first week, was an excellent one for the Chinese film Painted Skin: Resurrection, which enjoyed the highest grossing debut ever for a Chinese language film. But as Painted Skin played itself out and its grosses dropped week by week, other Chinese films were unable to fill the gap. If it hadn’t been for Ice Age 4’s release in week 30, China’s multiplexes would have suffered their worst period in several years.

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2. Overall attendance suffered

Until the blackout took effect, China’s box office revenue was up by a sizzling 41 percent year-to-date versus the same period in 2011. The blackout dumped a lot of cold water on that growth: July was down by 9 percent, and August was down by 8 percent, even though China has thousands more screens operating now than it did a year ago. By my estimate, China’s movie theaters lost at least 30 million ticket sales and more than $200 million in revenue because of the blackout.
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3. Crushing the grosses of Hollywood films was not the main goal

If SARFT was intent on driving down the revenue of any individual Hollywood movies, it doesn’t appear to have tried very hard.In the middle of theblackout Ice Age: Continental Drift and The Lorax were allowed to open without any new Chinese movies competing against them, and at the same time The Mechanic and Abduction opened with only one new Chinese comedy competing against them. Ice Age ran on several thousand screens and grossed over $72 million, the second-highest total ever for an animated feature in China. While it’s true that the blackout caused delayed releases for Dark Knight Rises, Amazing Spider-Man, Prometheus and Expendables 2 and forced their releases into a compressed two week period in September, it’s also true that those four films enjoyed a September with very little other competition. Whatever handicaps they may have suffered, Dark Knight, Spiderman, Prometheus, Expendables, and Ice Age are all among China’s 12 top-grossing films of the year as of this writing.
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4. China still makes very few films that its domestic audiences want to see

There just aren’t that many locally made movies that Chinese audiences will pay to see, even, as it turns out, when there’s nothing else in the theaters. Whereas several of the aforementioned American releases would have undoubtedly earned $75-100 million each had they been allowed to release during the summer, only Painted Skin 2 reached that level, and no other Chinese summer release earned even $40 million. More than half the Chinese films that opened during the blackout earned less than $1 million.
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5. Blackouts create pent-up demand for Hollywood blockbusters

As the above chart illustrates, attendance at Chinese language films dried up as soon as Spider-Man and Dark Knight hit the multiplexes. Week 35, when those two films opened, became the second-highest grossing week in China’s history as audiences rushed back to the theaters, with attendance nearly doubling from the week before.
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6. Expect more blackouts

China’s films czars are determined to protect the market for local Chinese films, largely for political reasons. It’s extremely irksome to the Communist Party propagandists that Chinese moviegoers strongly prefer Hollywood movies with their “corrupt” western values over censored and ‘politically correct’ Chinese films. Blackouts seem to be the most effective method for the party to ensure that they retain some cultural influence without breaking their WTO commitments. Expect more blackouts during the October Golden Week holidays and at year’s end.


Blackouts are an unhappy reality for foreign distributors and for Chinese moviegoers alike, but they appear to be the best way for China’s film regulators to balance their desire for a successful local film industry with their international obligations. Even though the blackout was costly for China’s distributors, exhibitors and mall operators, I expect we’ll see more such “protection” periods in the future. If SARFT learns its lessons from the experience of the summer, it will make future blackouts shorter and less punitive to international imports.


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photo credit : dcmaster / Flickr

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