“We do think it’s a breakthrough,” said Jean Prewitt, president and chief executive of the Independent Film and Television Alliance, a trade association representing independent production, distribution and sales companies. “For the first time we really have the building blocks to begin to work competitively in that marketplace.”
The accord reached Friday increases the number of foreign movies allowed into China under its current quota system and gives foreign studios a larger slice of box-office revenue. But the biggest beneficiaries of the deal could be independent film producers and distributors.
About 40 independently produced foreign movies are distributed in China each year outside of the quota system. Instead of sharing in box-office revenue, filmmakers and sales agents negotiate through third parties to receive a license fee, 2% to 3% of the film’s budget. That’s well below the 6% to 10% fee that is standard in other countries such as France and Germany. Under the new rules, filmmakers and distributors would be able to negotiate license fees closer to what they get in other countries.
“For independents whose lifeblood is negotiation, that’s significant,” Prewitt said.
Brad Kembel, head of international distribution for Summit Entertainment, the Santa Monica-based producer of the hit “Twilight” movies, called the agreement “a really important step forward for independent studios and producers to get a fairer share of what is potentially the largest audience in the world.”
The agreement was finalized Friday in down-to-the-wire negotiations between Vice President Joe Biden and Chinese Vice President Xi Jinping, who was visiting Los Angeles on a trip to promote more trade between the countries.
The deal for now resolves a bitter trade dispute that began in 2007, when the U.S. filed a complaint with the World Trade Organization, alleging China was unfairly restricting access to its market. The WTO ruled that China had violated international trade rules, but China had disagreed with the ruling.
The agreement gives each side something it wants: China gets to import more movies and feed its expanding theater business, which is amid a multiplex boom. And for major U.S. studios, the new rules could significantly expand business in a potentially vast market while lessening the spread of widespread piracy in China by providing more legitimate access to popular American movies.
The accord doesn’t eliminate China’s film quota — a long-sought goal of the studios — but increases the number of foreign films allowed into China each year by 14 under a revenue-sharing agreement, at least for so-called enhanced films that are shown in IMAX or 3-D. Currently, China allows only about 20 foreign films to be imported each year in a revenue-sharing arrangement with the state’s film distributor. The pact, however, increases the amount of revenue foreign studios can receive under the quota from an average of 13% to 25% of ticket sales.
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