China Breaks Film Monopoly, Gives Second State Company Power to Import Hollywood Titles

When it comes to doing business with China, the devil is always in the details. The recent announcement that the Chinese government finally will comply with a World Trade Organization order to treat U.S. films more fairly is no exception.

Chris Lee, former head of Columbia TriStar Pictures, has been named president of a company that will help the new importer and distributer acquire Hollywood films.

A new license for the import and distribution of overseas movies in China will open "a new chapter" for the film business in the world's second largest movie industry, a senior Chinese government official told a gathering in Hong Kong.

The new import and distribution license goes to the state-backed China National Culture & Art Corporation (CNCAC), which is linked to the Ministry of Culture. Two Hong Kong firms, i-Marker and China Railsmedia, will collaborate with CNCAC in importing and distributing foreign movies, breaking China Film's monopoly on distributing revenue-sharing movies in such an enormous film market.

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Chris Lee, former head of Columbia TriStar Pictures and a producer on projects such as Superman Returns and Valkyrie, is joining China Railsmedia Group as its president, which could prove to be a significant boon in facilitating cooperation between the new importer and Hollywood.

The current system is not seen as being very efficient, and there is a belief that this new setup will improve the industry for both Hollywood and domestic players. Currently the only company with an import license is China Film Group, which also has a distribution license. The state-owned group Huaxia has a license to distribute films brought in by CFG.

Xue Qiliang, who is a senior member of the Ministry of Publicity, was in Hong Kong to attend an event.

"We're very happy we can open a new chapter for the industry. I hope in the future there will be more cultural exchanges between the United States and China," Xue told the gathering at the Four Seasons in Hong Kong. "We can enhance the position of Chinese movies in the U.S. market."

There was some confusion about whether the license had already been awarded, and there were no representatives present from CNCAC.

Luan Guozhi, deputy head of the Film Bureau, said he had "never heard of such an arrangement" when asked about CNCAC.

But the delegates attending the signing ceremony seemed to be working on the basis of a done deal.

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"The second license is finally happening," said Dong Zhenwu, a senior project consultant on the deal.

Dong said three firsts were involved -- CNCAC, a state culture body which had previously organized events such as a concert by the late, great Luciano Pavarotti; the company iMarker; and the Hong Kong-listed company China Railsmedia, which will now be renamed the China National Culture Group.

The scope of the deal is to import and distribute foreign films, expand co-productions with overseas and also increase "artwork exchange," Dong said.

Bondy Tan, executive director of Railsmedia, said with the second license there would be more transparency, and he hoped to work more closely with Hollywood on projects.

"The orders behind this are coming right from the top, as this is about getting the ministries to work together and make sure it happens," said one source close to the deal.

China raised the number of foreign films that can imported on a revenue-sharing basis to 34 in 2012, and sources recently said that there were plans afoot to raise the quota number again.

It's not clear whether the new license will see more films imported from overseas or if the quota will be divided between CFG and CNCAC.

"It is not likely to translate into an increase in the quota system immediately. The aim is to put this on a business footing and make it a success. They will probably each have 17 films, but that is unlikely to happen immediately, as CNCAC doesn't have the infrastructure," said the source.

While Hollywood studios have been invited to take part from the very beginning in consultations, they have tended to stay clear because they do not wish to jeopardize their relationship with China Film Group, said the source.