California movie studios haven’t been paid for movies shown in China since late last year, according to an exclusive report by The Hollywood Reporter. This situation only gained wide attention recently because because China will likely become the largest moviegoing market in the world before too long and the studios have been quiet about it because they want to preserve the relationship
The dispute apparently centers on a new two percent value-added tax that the Chinese want the studios to pay. For their part, the studios claim that the additional payment would violate a World Trade Organization agreement that was made just last year between the U.S. and Chinese goverments.
According to the Hollywood Reporter estimates: Warner Brothers is owned about $31 million for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer; Sony is due about $23 million for Skyfall and After Earth ; Paramount would be owed roughly $30 million for Into Darkness, G.I. Joe: Retaliation and Jack Reacher; Disney’s Iron Man 3 made more than $121 million in China, which would mean a return of more than $30 million for the studio, while Oz the Great and Powerful would mean about $5 million in payments.
Several other movies are in he middle of their run, and some studios are still owed money for 2012 titles as well. For example, Fox hasn’t received payment for Ang Lee’s Life of Pi, a check that’s expected to earn about $23 million.
Movies are, of course, one of California’s primary exports, and in a country where bootlegging and copyright infringement is commonplace, it is difficult to understand China’s justification for withholding payments. If the situation was reversed, and California suddenly decided to stop payments for Chinese manufactured goods, it is hard to imagine that it would be considered acceptable by the Chinese. This seems like a case where China is using its market size leverage to an unfair advantage, and it is certainly something trade officials and policy makers should keep an eye on.
