China's Film Industry Hopes for Bailouts as Coronavirus Crisis Worsens

Total ticket revenue in China over the past 20 days has totaled just $3.9 million, compared to $1.52 billion during the same stretch last year. Local film players now believe drastic government action could be necessary to save many companies.

With nearly all of China's 70,000 movie theaters still weeks — if not months — away from reopening, many in the Beijing film industry have begun to hope for government bailouts as the only means of keeping their businesses afloat.

The cinema sector, to be sure, is just one of many areas of the enormous Chinese economy that has been hard hit by the novel coronavirus pneumonia, now officially known as COVID-19. But Beijing is starting to send signals that it understands that the film sector has been particularly exposed.

On Feb. 5, different departments of the Chinese government, or organizations affiliated with it, began discretely disseminating online questionnaires to senior local film figures. The surveys came from bodies ranging from the Commerce Department to the Film Bureau and National Art House Alliance, several of the recipients told The Hollywood Reporter. The documents asked the film professionals to assess in detail how much damage the coronavirus crisis has done to areas of the film industry, and to suggest ideas for actions the government could take to help.

The arrival of the surveys came as cold comfort to many in the industry — at least the government appeared sympathetic to their plight — but it also deepened the sense of alarm over just how destructive the public health crisis has already become for the entertainment and services sectors.

China's movie theaters began shutting their doors en masse around Jan. 24, on the eve of Chinese New Year, which typically makes for the most lucrative week of moviegoing anywhere in the world.

Many executives contacted by THR were unsure how to quantify how much Beijing may need to inject into the local industry — in the form of tax cuts, cheap loans or outright cash injections — to stabilize exhibition, distribution and production companies. But the huge scale of opportunity costs already endured offers some hints.

In 2019, during the 20-day period starting on the eve of Chinese New Year, ticket revenue totaled RMB 10.6 billion ($1.52 billion). During the comparable period this year (Jan. 24-Feb. 12), sales have amounted to just $3.9 million, data from leading regional box office tracker Artisan Gateway shows.

As of Wednesday, the toll from COVID-19 had climbed to 1,113 dead and 44,653 infected, well surpassing the 813 people killed by the SARS epidemic that swept Asia in 2002-2003. Chinese officials have noted a slowdown in the rise of new infections, but vast swaths of the country remain under lockdown, with much of the Chinese population still hiding away in their homes. Even if the virus begins to be contained in the coming weeks, film exhibitors worry it could take much longer before the public regains sufficient confidence to begin packing movie theaters again.

Meanwhile, film companies in all areas of the business continue shouldering their usual overhead of salaries, benefits, rents and so on.

"The government will need to do something big to help many cinema companies stay alive," says Jimmy Wu, CEO of Lumiere Pavilions, an upscale cinema circuit with outlets in over two dozen Chinese cities.

A welcome first step for cinema operators, according to Wu, would be for the government to slash all taxes and fees on movie tickets — the standard 3.3 percent business tax, as well as the 5 percent "film fund fee" that is taken out of all ticket revenue (the funds go into state coffers and are ostensibly used for activities related to the development of the Chinese film industry). But Wu worries even the most generous tax break may not be enough. "The government will probably need to offer them some emergency funds," he says. One possibility would be for the Film Bureau to refund to cinemas the money it collected for the film fund fee over recent months.

Many major production and distribution companies are also hurting badly. Seven big-budget Lunar New Year tentpoles — usually China's most expensive but lucrative productions of the year — were pulled from release shortly before cinemas shut down in January, and it's unclear how regulators will go about rescheduling the large backlog of unreleased movies once theaters reopen.

Hollywood product also has begun to pile up. High-profile U.S. films including Universal's Dolittle, Searchlight's Jojo Rabbit and Sam Mendes' 1917 all saw their February releases scrapped and are now awaiting rescheduling.

One informal proposal gaining traction among local industry players calls for the government to extend China's Labor Day holiday on May 1 by several days, creating a longer holiday release window to serve as a new launch pad for the delayed Chinese New Year tentpoles — assuming, that is, that the health crisis has abated by then.

As the epidemic was gathering momentum in late January, one studio, Huanxi Media, responded quickly by inking a deal to release its holiday comedy blockbuster Lost in Russia online instead of in theaters. The move proved a coup and netted Huanxi about $90 million for the rights and hundreds of millions of views for the movie online. Since then, however, Beijing insiders say China's Film Bureau has forbidden other companies from following suit by taking their unreleased theatrical product off the shelf to cash in on streaming deals instead. Sources say regulators are worried that losing projects to streaming will only further decimate exhibitors once they are finally able to reopen their doors.

But in the meantime, distributors and production studios are hurting. "Many companies are saying that this is the most difficult time for them since they were founded," says the president of one influential Chinese distributor. "If they won't allow us to find ways to save ourselves, they need to bail us out — otherwise, a lot of companies are going bankrupt."