China and the U.S. reached a deal that would make it easier and more profitable for Hollywood studios to show their films in China, a development that Vice President Joe Biden said would "significantly increase" access for American-made films.
The agreement represents an effort to resolve a standoff that dates to 2009, when the World Trade Organization ruled that China's policy of allowing 20 foreign films a year to be shown there violated international trade rules.
Getting more films into the rapidly growing Chinese market has long been a top priority of American movie companies, which have had little leverage to persuade Beijing to allow more foreign films to be shown. The limits help China protect its own nascent film industry.
As part of the agreement announced late Friday night, China will allow in an additional 14 movies a year, as long as they are exhibited in 3-D or the jumbo-sized Imax format, according to a spokesman for the Motion Picture Association of America, the major studios' trade group. Normal-format prints of those additional movies can be shown without counting toward the 20-film cap, the spokesman added. The new agreement leaves the quota itself unchanged.
Additionally, the spokesman said, studios whose movies play in China will collect roughly 25% of the box-office proceeds, after costs, up from the current 13.5% to 17.5%. Chinese distributors retain the rest of the proceeds. In the U.S., box proceeds are split roughly evenly between exhibitors and studios.
Until now, film distribution in China has been controlled by a single, state-backed entity. Under the new terms, independent companies may be licensed to distribute movies, too. That component of the deal was welcomed by a trade group representing independent American studios, which said in a statement that it would benefit smaller foreign studios.
Jean Prewitt, chief executive of the Independent Film & Television Alliance, praised the agreement for offering "a promise of creating a commercial foundation that will allow independent producers to participate more fully in the Chinese marketplace."
IFTA General Counsel Susan Cleary said in a telephone interview that the group believes the new agreement also will make China's strict censorship process more transparent.
MPAA Chairman Chris Dodd said that the group hopes the deal will also help curb China's rampant pirating of American-made movies, something studios have blamed partly on the limited ability of audiences to see those movies in theaters.
"By promoting the growth of a legitimate marketplace for U.S. movies in China, this agreement will also complement efforts to fight movie piracy and help protect the jobs of workers in both countries," Mr. Dodd said in a statement.
Walt Disney Co. CEO Robert Iger issued a statement praising the deal as "a significant opportunity to provide Chinese audiences increased access to our films." Disney recently broke ground on a massive resort near Shanghai that is to include a new Disneyland theme park. The resort is being developed in a joint venture with a government-backed entity.
The deal comes at the tail end of Chinese Vice President Xi Jinping's tour of the U.S., including Los Angeles, home of the film industry. The U.S. and the movie industry had hoped to use Mr. Xi's visit as leverage to strike a deal. China lost a case in the World Trade Organization in 2009 on restrictions on foreign films and the U.S. and China have been seeking an accord since then.
Chinese box office revenue last year reached $2.1 billion, up 28.8% from 2010. Much of that revenue came from 3D and Imax titles, which are both growing rapidly in China.
The deal announced today would be reviewed after five years, Mr. Biden's office said.
"This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry," said Mr. Biden, in the statement.
The United States and China also issued a joint statement saying they had " reached agreement on the terms of a Memorandum of Understanding resolving the WTO film-related issues. Both sides applaud the efforts made to resolve their differences with respect to these important issues."
