Echoes of Hollywood

"Unexpected?" Murphy asked, leaning back in his high-backed chair, watching Carla Faith with keen interest. "Could it be that China Film Group is once again delaying the revenue share?"

To be frank, China Film Group's reputation in Hollywood wasn't great. The company had delayed revenue shares multiple times. However, for Hollywood films to truly succeed in that market, China Film Group was an unavoidable hurdle.

Given the market's reality and the millions of potential consumers there, Hollywood companies couldn't afford to give up. At times, they had to make certain compromises.

Of course, the second round of WTO negotiations between China and the U.S. was imminent, with the film industry being a significant part of the talks.

Murphy assumed China Film Group was preparing to default on payments again. They had done so more than once. But Carla Faith shook her head. "No, it's more serious than that."

"Huh?" Murphy was puzzled. "More serious?"

He had a vague idea but wasn't sure.

"City of Chaos grossed about 121 million RMB there, achieving the best box office performance for any of your films released there."

Carla Faith took another sip of water, sighed, and said, "However, according to our investigation, that figure should be higher by about 10 to 15 million RMB."

"Wow, City of Chaos did better there than I expected," Murphy said, having not held out much hope initially. "That's much better than I anticipated."

Carla Faith shrugged. "It would have been even better if some of the revenue hadn't been stolen."

Hearing this, Murphy's vague thoughts became clear. "Are you saying City of Chaos had its box office revenue stolen there?"

Murphy was no stranger to box office theft. Even in North America, where regulations were strict, it couldn't be entirely eradicated. However, it was less common. In the emerging market across the Pacific, he vaguely remembered numerous reports of box office theft, with victimized production and distribution companies denouncing 'black-hearted' theaters.

Murphy frowned slightly. "Do we have solid evidence?"

Such matters would anger anyone.

"No..." Carla Faith shook her head. "They were quite sophisticated. It wasn't just a simple ticket swap. We've found some clues but can't obtain solid evidence. We're outsiders here. Without strong action from China Film Group, there's not much we can do."

Murphy nodded, recalling that many Hollywood films had suffered similar fates. China Film Group hadn't taken strong measures against such practices.

Carla Faith continued, "I've instructed our Far East division to engage with China Film Group. James is also contacting the U.S. trade negotiators to apply pressure."

She stood up. "We have to think about the future."

20th Century Fox wasn't planning to make a one-time deal there. They couldn't allow such issues to persist.

After Carla Faith left, Murphy sat back and pondered the situation. The stolen box office revenue would affect his director's share, but it seemed there wasn't much he could do.

The best approach would be for the major Hollywood studios to unite and pressure the U.S. trade negotiators.

However, he recalled that box office theft remained rampant across the Pacific for years to come.

Box office theft involves cinemas underreporting audience numbers, a common "bait-and-switch" phenomenon in the film industry driven by various reasons, such as differing profit-sharing ratios. Cinemas can steal box office revenue for personal gain, harming the film's production and distribution partners.

Murphy's former professor had given a straightforward example:

A typical box office theft involves giving a person a ticket for Movie A while they watch Movie B, so Movie B's revenue counts towards Movie A. Another method is handwritten tickets. As long as the tickets aren't machine-printed, they won't be logged in the ticketing system. Once the person leaves with the ticket, the theater secretly issues a ticket for Movie A. More advanced methods involve altering ticketing system data, although his professor had only heard about it, and the technical difficulty made it less likely.

Nowadays, audiences are savvy, and box office theft isn't as easy. Everyone knows that giving a person a ticket for Movie A to watch Movie B is theft. The remaining issue is whether or not to report it, which carries high risk.

These are the most basic methods of box office theft.

Like mold thriving in the shadows, "box office theft" severely damages films and film companies and, more insidiously, corrodes the industry.

Overall, the industry across the Pacific can be divided into three parts: producers, distributors, and theaters, each with clear profit-sharing agreements. However, business always boils down to profit, and box office theft arises from the strong profit motives of these three parties.

Theaters adopt various means to reduce reported revenue, and the hidden, unreported box office income can be entirely pocketed by the theater without sharing with the film producers.

Talking about the means to reduce actual box office revenue, theaters are quite ingenious. Basic methods include handwritten tickets, admission without tickets, and admission with discarded tickets. These types of tickets aren't included in the actual box office revenue, but the theater collects the ticket money from the audience.

This simple method of pocketing revenue remains popular among theaters, although the risk is high because film producers' on-site inspections aren't easily avoided.

With increased supervision by film producers, theaters have innovated, introducing "bundled packages."

For instance, if theaters and producers agree on a minimum ticket price of 30 RMB, and a single movie ticket is priced at 40 RMB, the 40 RMB must be shared with the producers. However, if the movie ticket is bundled with popcorn and a drink for 50 RMB, with 20 RMB attributed to the popcorn and drink and the remaining 30 RMB to the movie ticket, only the 30 RMB would be shared with the producers, while the 20 RMB for the popcorn and drink would go directly to the theater's revenue.

Theaters' methods go beyond bundled packages. The dual-system for accounting and reporting is another level of box office theft. The reporting system is connected to the national box office monitoring system, the primary source for public and producer knowledge of box office information.

The other system, the accounting system, is privately set up by the theater. This system is powerful because it can also print machine-issued tickets, but the box office revenue is pocketed by the theater.

In this way, producers seem like innocent lambs exploited by theaters. But it's never that simple. Film producers and theaters often collaborate to steal the box office revenue of another film released simultaneously.

Producers + theaters, as they say across the Pacific, "Unity is strength."

Indeed, cooperation means mutual benefit! Suppose two films, one popular (A) and one less popular (B), are released simultaneously. Film A offers theaters 10% of the revenue, while Film B offers 20%. The theater would prefer Film B for the higher share. To attract more viewers to Film B, theaters might increase Film A's ticket price while reducing Film B's price.

If this strategy fails, theaters might collaborate with Film B's producers to steal Film A's box office revenue. They might sell tickets for Film B at a lower price but show Film A, benefiting the audience, the theater, and Film B's producers, while Film A's producers sense something amiss...

Beyond these methods, there's another form of "box office theft" known to all yet impossible to eradicate: mandatory quotas and targets imposed from the top down.

Murphy once read about a typical ideological film that, during its release, remarkably outperformed many high-profile commercial films, achieving nearly 25% of the national box office with only 10% of the screenings...

Murphy recalled a rumor he read that this film had a directive from seven top departments requiring "maximum concession from distributors."

On its second night in theaters, a task list surfaced online, detailing the box office quotas for various theater chains, with China Film Group's quota being the highest at 40 million RMB. Wanda Cinemas' quota was 38 million RMB, and Southern Cinemas' was 30 million RMB...

Some even claimed that certain theaters issued tickets for this ideological film for all screenings to meet the quota.

Of course, no one would admit this, nor would anyone pursue it. The workings were too deep.

For any market, box office theft is a significant obstacle to progress.

A nascent film market always has puzzling aspects. Box office theft isn't uncommon, and Murphy had seen far stranger things.

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