Hollywood has long been suspicious that the box office receipts they receive from the movies they release in China have been underreported, and now they are taking action.
The Motion Picture Association of America, which represents the six major movie studios in the US, have hired an accounting firm to audit the box office sales of select titles that have been released in China, according to Bloomberg News.
The audit comes on the heels of ticket sales growth slowing last year to less than 3.7% in China after a 35% average growth the previous five years.
China is one of the fastest growing movie markets in the world and has been the saviour of numerous big budget releases that flopped in the US, including recent releases like “The Mummy” and “Transformers: The Last Knight.” So studios have recently been giving more attention to what returns they are getting out of the region.
And the studios have reason for concern.
In March, China’s State Administration of Press, Publication Radio, Film and Television penalised more than 300 theatres in March for under-reporting ticket sales, Bloomberg reports. The biggest penalties were 90-day suspensions for exhibitors that understated revenue by more than 1 million yuan ($US146,000). And this is after China approved new fines for falsifying box-office sales in November. Some are five times the illegal gains.
The results of the audit may come as soon as the third quarter of this year, according to Bloomberg. That’s ahead of the deadline for the US to renegotiate its film-trade deal with China. Under the current deal, US studios receive 25% of box office sales. The studios export the movies to the county on a flat fee.
A representative for the MPAA did not immediately respond to Business Insider’s request for comment.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.