China Lifts Summer Blackout on Hollywood Films Amid Box-Office Slowdown

After years of blocking Hollywood movies during the peak summer blockbuster season, why is China letting a few foreign tentpoles back in?

China's film authorities appear to be taking a step back from one of Hollywood's least favorite policies.

For years, Chinese regulators have imposed a blackout on foreign-film imports during the peak summer blockbuster season. Known locally as a "domestic movie protection period," the policy was designed to boost the local industry by giving Chinese-made movies an uncontested run at cinemas during the summer school break, which lasts roughly from late June through August. Additional blackouts are instituted during Chinese New Year in February and during the Golden Week holiday in October.

Last year's summer blackout ran June 19-Aug. 23. It had the desired effect: Raman Hui's CGI-live-action fantasy Monster Hunt grossed $385.2 million to become China's then-biggest film ever, and other local pictures like Monkey King and superhero spoof Pancake Man earned over $150 million each.

But regulators have loosened their grip this summer. According to precedents set in recent years, Independence Day: Resurgence, released June 24, should have been the last Hollywood tentpole to market, but instead Paramount's Teenage Mutant Ninja Turtles: Out of the Shadows was granted a July 2 release date (it easily won the weekend against a China-Korea co-production). More surprising, Warner Bros.' The Legend of Tarzan has been scheduled for July 19 — Alexander Skarsgard and Margot Robbie were in Beijing promoting the movie Thursday night — and Universal's The Secret Life of Pets is set for Aug. 2. Chinese production companies will then get a reprieve until Jason Bourne bows on Aug. 23. Ice Age: Collision Course is also expected out sometime in August, although an official dating has yet to be revealed.

Insiders say two factors are behind the policy shift.

"There are two stats that matter to the people who make these decisions," a Beijing-based executive tells The Hollywood Reporter, asking not to be named while commenting on policy matters. "One is the market share of foreign films versus local movies, and the other is the overall growth rate at the end of the year — the second stat is probably slightly more important," the executive adds.

In the first quarter of 2016, Chinese films did historic business. Led by Stephen Chow's The Mermaid, which earned $528 million from China alone, local movies accounted for nearly 75 percent of the box office over the quarter, fueling year-over-year growth of 51 percent. This big early lead likely gave regulators confidence that Chinese movies would maintain at least more than 50 percent market share by year's end, which the central government is understood to insist upon.

But the second quarter presented an almost opposite picture. For the first time in over five years, the overall Chinese box office shrank for a full quarter, slipping nearly 5 percent compared with the same period in 2015. Spring is usually a Hollywood-designated release window, and imports indeed led the way, taking $1.1 billion (topped by Legendary Entertainment's Warcraft with $220.8 million), but this represented a year-over-year gain of just under 2 percent. Local movies, meanwhile, totaled just $374 million during the second quarter, a 21 percent fall from last year. Still, Chinese films accounted for 53.1 percent market share in the first half of the year thanks to the big hits of the first quarter. (The data was supplied by Beijing-based box office monitor Ent Group.)

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Insiders say regulators may have let a few Hollywood titles in this summer to hedge against the possible continued under-performance of local movies. "I don't see anything coming out soon that looks like it's going to light people's hair on fire," says one source.

"In the absence of very strong Chinese movies, if you put in a two-month blackout, the theaters are going to struggle and that's bad for the industry," says the Beijing executive.

In 2015, the box office grew an eye-popping 48 percent in China, leading to widespread predictions that the country would surpass North America as the world's largest theatrical territory in 2017.

"What if the trend from the second quarter continues for the next four or five months, and the year ends at less than 10 percent growth?" the exec adds. "All those people who predicted China would overtake North America as the world's biggest market by 2017 will look a little stupid — and nobody here wants that."