Ip Man 3’s massive debut accompanied by serious signs of blatant and widespread ticketing manipulation

‘Ghost screenings’: One theater saw nearly 2,000% jump in revenues from Friday to Saturday

P2P investment craze fueled “crowdfunding” for film, with 8%-11% returns promised

Zootopia on track to become first animation ever to gross RMB 1 billion in China

New releases Ip Man 3 and Zootopia both helped start the typically slow box-office month of March with a bang last weekend, grossing RMB 467 million ($71.8 million) and RMB 155 million ($23.8 million) respectively from Friday to Sunday, according to Shanghai entertainment research firm Artisan Gateway.

Behind Ip Man 3’s massive debut, however, lie serious signs of blatant and widespread box-office fraud that fly in the face of the government’s repeated vows to crack down on illegal ticketing practices.

Observant Chinese netizens began noticing strange behavior on real-time box-office data mobile apps such as Maoyan and Mtime sometime on Saturday, when theaters way outside of the usual top performing territories of Beijing, Shanghai, and Guangzhou suddenly became among the highest-grossing cinemas in the country. A theater in the Yancheng district of Jiangsu Province, for example, saw a nearly 2,000% jump in its Saturday box-office revenue, sparking an outcry among industry watchers.

So who was buying all those tickets?

While ghosts may be banned from Chinese screens due to censorship regulations , it appears they have no problem getting in to watch the latest releases.

Ip Man 3’s distributor Dayinmu Film, under its parent company Shanghai Kuailu Investment Group, stands accused of bulk-buying tickets to its own film through sketchy agreements with over 200 cinemas.

Screen grabs from Maoyan indicate sold-out “ghost” screenings were being scheduled every 10-15 minutes in the middle of the night, with average ticket prices set at RMB 200 ($30) — more than 5 times the average ticket price — which would have significantly padded Ip Man 3’s opening weekend tally. Some industry analysts believe RMB 100 million – 150 million ($15 million – $23 million) could have been added through these dubious tactics, representing a large share of the total box-office gross.

This isn’t the first time a Chinese distributor has attempted to fudge box office numbers. Edko Films ran so-called “public welfare screenings” for its blockbuster Monster Hunt last summer and admitted to giving away 40 million free tickets — many through “ghost” screenings at its own Broadway Cinema circuit — which helped it successfully unseat Hollywood import Furious 7 as the highest-grossing film of all-time in China.

In an announcement Sunday night, China’s Film Bureau sternly condemned the use of illicit ticketing practices and said it would investigate the allegations and mete out appropriate punishment.

“In order to uphold proper market order and build an environment of fair market competition, producers, distributors, exhibitors, and ticketing platforms must immediately stop their acts of unfair marketing practices or they will be dealt with in accordance to regulations,” the notice read, without explicitly naming parties.

Chinese media reported that the parties involved were interviewed by the Film Bureau on Monday.

Funding for Ip Man 3’s reported $30 million budget came in part from peer-to-peer (P2P) lending firm JLFEX (易联天下), run by Shi Jianxiang, the billionaire boss of Kuailu Investment Group and executive producer on the film. The fund — like many others in China’s huge and unregulated P2P market — reportedly offered up to 8%-11% yearly returns on investment, which may have provided an incentive for Shi and Kuailu to maximize Ip Man 3’s box office returns by any means possible. This method of “crowdfunding” for the film may have also been a factor in the decision to delay the mainland release for more than two months past the originally scheduled Christmas Eve date, as it allowed more money to be raised.

After the ticketing scandal broke, one Kuailu employee was quoted as saying, “Now I’m not entirely sure if I was making a film or helping a group of loan sharks launder money.”

In sunnier news, Disney Animation’s Zootopia opened to glowing reviews on the mainland and saw increased daily grosses throughout the weekend behind its positive word of mouth. The film continues Disney Animation’s string of successful films in China following Frozen and Big Hero 6, and it’s now on track to become the first ever animated film to gross RMB 1 billion in the country, possibly beating out the much-lauded Kung Fu Panda 3, which fell just short of the mark earlier this year.

Speaking with China Film Insider, Dave Hollis, executive vice president of distribution and sales at Walt Disney Pictures, downplayed the huge difference in reception between Pixar and Disney Animation films in China.

“[Chief creative officer] John Lasseter and [president] Ed Catmull have brought a culture of high-quality, filmmaker-driven storytelling to both Disney Animation and Pixar that has resulted in films that transcend border and language,” Hollis said. “Animation continues to be a smaller-but-growing part of the Chinese landscape and both Pixar and Disney Animation will continue to focus on relatable, original characters, the creation of imaginative worlds and the delivery of amazing stories like the ones in Zootopia for years to come.”

—Follow Jonathan Papish on Twitter @ChinaBoxOffice