SEC Investigating Hollywood Studios For Alleged Bribes To China

from the open-markets dept

When the MPAA came out with its annual report about the movie market worldwide, it showed that China was a huge growth market. However, now it appears that perhaps some of that growth was the result of Hollywood studios bribing Chinese officials. For years, China has limited how many Western movies can be released in the country. While Hollywood loves to decry all of the “piracy” in China, much of it is due to the fact that the movies can’t be released there under the law. That’s a situation where the problem is not piracy, nor the MPAA itself (even as it whines about Chinese piracy), but local laws. However, there has been a loosening of those restrictions lately — and the SEC is exploring whether or not that came about due to bribes from the studios:

The Securities and Exchange Commission has sent letters of inquiry to at least five movie studios in the past two months, including News Corp’s 20th Century Fox, Disney, and DreamWorks Animation, a person familiar with the matter said.

The letters ask for information about potential inappropriate payments and how the companies dealt with certain government officials in China, said the person, who was not authorized to speak publicly about the letters.

That said, there is an interesting tidbit in the Reuters article about all of this, that really serves to highlight how ridiculous the MPAA’s fight against “piracy” is. It shows that despite the fact that piracy is rampant for Hollywood movies — once the MPAA was able to get legit movies into the country, people flocked to the theaters. In other words, despite the cheaper pirated options — or even free options — people have no problem paying for the legit product when it’s offered in a quality fashion:

China’s booming middle class is increasingly willing to pay tickets prices for a cinema experience, forgoing cheap pirated DVDs and free internet downloads.

Once again, this seems to demonstrate why the problem is not piracy. If consumers are offered what they want in a reasonable manner, they are more than willing to pay — and the Hollywood studios seem to recognize this implicitly (which is why they may have bribed Chinese officials to release authorized versions in that market, even with “piracy” being so common).

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Companies: 20th century fox, disney, dreamworks, news corp

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Comments on “SEC Investigating Hollywood Studios For Alleged Bribes To China”

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44 Comments
pegr (profile) says:

This is because of SOPA

OK, follow me on this. Hollywood is criminally corrupt and buys legislators. That’s where SOPA came from. But since they over-played their hand, the Internet went ape sh!t. Politicians, being loyal to themselves over anyone else, decided that they needed some pressure in order to push back on Hollywood. BAM, bribery investigation. Also, way far away from Washington DC.

Of course, if Hollywood is willing to bribe China, they’re willing to bribe Congress. But Congress is too stupid to realize that obvious association. On the other hand, they don’t investigate themselves, so maybe they called it right.

Anonymous Coward says:

the problem has never been and will never be ‘piracy’. it has always been and will always be the stupidity of the studios themselves for failing to give customers what is asked for everywhere at the same time. selective releasing compounds frustration felt by customers. the control the studios have is of paramount (no pun intended) importance. catering for customers is bottom of the list, even though without them, the studios would fail anyhow

Anonymous Coward says:

Re:

Ahh! So you might be someone who would understand.

Until recently, the idea of a movie theater wasn’t much to most Chinese people. For probably 3 or 4 decades, that was a place you went to see the latest internal propaganda films, the latest boost the moral of the population opus, turned out and approved by the central government. Most people wouldn’t go because there was no reason to. They might only go if the local party officials expect them to show up on a give night for some reason.

About a decade ago, they started to allow some western movies into the country on a regular basis. It’s tightly controlled, very limited, and they faced many difficulties such as outmoded equipment, dilapidated buildings, and such. The idea of a retail movie industry was about as foreign as the movies they might show. That of course would be if they happened to live in a village or town that actually had a movie theater, and not just some guy driving around on a three wheel motorcycle showing movies in a different town each night:

http://articles.latimes.com/2011/mar/06/business/la-fi-china-cinema-20110306

“Over the last four years, the number of screens in China has doubled to more than 6,200, a figure that’s projected to double again by 2015. Box-office receipts hit a record $1.5 billion last year, according to the State Administration of Radio, Film and Television.”

So when Mike goes on about how the Chinese industry is proof that they can overcome piracy, take it with a grain of salt. The movie theater business started at effectively zero not that long ago. Increase (35% last year, if I remember correctly) are only keeping in line with growth, which is still well behind.

If Mike had any idea about things in China, he wouldn’t make such obviously silly statements.

(as a side line, if you totaled up all the time of my Chinese visas, I would have about 4 years – and another 1 year unlimited being issued this week again).

The eejit (profile) says:

Re:

Hmm, that’s definitely interesting. I know when I went (9 years ago), There were a few movie theatres dotted around the hotel we stayed at.

However, I’d be willing to argue that you both have a valid point: Mike’s is that there was a market that wasn’t being tapped properly, and you on your criticism with regards to the Chinese movie theatre industry.

(Quick aside: I actually went into the place where they filmed the flat scenes from the remake of The Karate Kid. I almost got lost on the way back to the hotel. :p)

Anonymous Coward says:

Re:

So if a country is rampant with piracy and you build nice theaters and offer a novel experience people will pay for what they could have for free? So tell me again about how you can’t compete with free and how no one will ever buy something when it is available free on-line especially when the culture has no moral qualms with piracy or infringement.

Overcast (profile) says:

So if a country is rampant with piracy and you build nice theaters and offer a novel experience people will pay for what they could have for free? So tell me again about how you can’t compete with free and how no one will ever buy something when it is available free on-line especially when the culture has no moral qualms with piracy or infringement.

Well, first off just to start my rant – since I’ve been listening to Pandora regularly, I have bought a bunch of CD’s from Amazon and have 30 more on my wish list. I am buying like this because the price is good.

I can pay 3-7 bucks for a CD. The digital downloads are pointless, they run TWICE as much as the physical disk.

Only REASON at all I bought most of these CD’s was because……

…..

I HEARD IT FOR FREE FIRST!
Like 95% of the population – they hear music somewhere FOR FREE – then they might buy the CD.

But the core problem is the whole ‘idiot’ concept to even say you can compete with free.

It’s NOT ABOUT COMPETETING with free.

You use ‘free’ to augment your sales, BUT you must offer ‘value’ in order to sell the product.

This – historcially has been proven time and damn time again, but people are too hung up on their own egos to figure this out in the media business.

Radio: FREE from the consumer’s point of view – generated more music sales than anything, easily, not to mention tons of ad revenue.

Broadcast TV: FREE from the consumer’s point of view – generated tons of ad revenue, and in turn, people bought products and VCR tapes/DVD’s.

Then add MTV, VH1 to the mix – when I used to watch those channels in the days they actually had music on them, I bought loads of Cassettes and records after hearing them for ********************FREE********************** on TV.

Any damn series on TV that was broadcast for ‘free’ but still selll DVD collections – is proof positive of this.

$15.00 for a CD worth of digital music IS NOT A DEAL. $15.00 for a CD with two good songs, IS NOT A DEAL.

Music is worth paying for – but only so much per song. Some songs, I like enough to buy the whole CD for – just because I have my own moral reasons I won’t torrent stuff I know is not public domain.

Anyone who goes on about ‘you can’t compete with free’ – should explain how Broadcast Radio and TV has generated MASSIVE sales for advertisers and media companies.

How did it? How did they compete with ‘free’?

It wasn’t because of ‘scarcity’ so much – the radio plays some songs into the ground, and usually they just so happen to be the same songs that are top 10, and go platinum/gold due to sales.

Yeah, ‘free’ hurts the media industry, LOL!!!

Free Broadcast Radio and Free Broadcast TV were the WORST things that even happened to media, right???? LOL!!!!

Anonymous Coward says:

Re:

“So tell me again about how you can’t compete with free “

Clearly, you haven’t spent any time in China.

There is a couple of things wrong with your logic. First and foremost, let’s look at what I consider the “expensive restaurant” theory. Almost every populated area in the world supports at least one restaurant where the prices are higher than most. In the US, it would often be a big steak house or seafood place, or something with a foreign type name. You know, a place where you might spend $50 to $100 per person for dinner. Not everyone eats there every day, it’s an aspirational thing. As long as there aren’t too many places like it in a given area, they tend to stay in business a long time.

You also have to look at how Chinese people generally live outside of the biggest cities (Beijing and Shanghai). Unmarried adult children often live at home with their parents, and often the oldest male child, even when married, will live with the parents. There is much more in play here, but there is a certain lack of comfort in the homes, especially in winter, and social aspects as well.

Move theaters (good ones) are still rare enough that they are “special”. This isn’t a question of competing against free, as the “new” theater product for the moment is much better that staying home watching pirated movies on your smaller home TV or your computer.

Without a true understanding of the forces at play, you have no way to understand what is really going on. It’s why I call Mike out on it a bit, because he is being very simplistic and attempting to apply American norms to the situation over there when it comes to business growth. There is a whole lot here that just doesn’t measure to our western standards.

Anonymous Coward says:

Re:

“You still haven’t explained how all that invalidates the core idea – despite piracy being ‘rampant’ people *are* choosing to spend money on legal entertainment WHEN IT BECOMES AVAILABLE.”

It’s the same reason people will pay $100 for $10 worth of food – but not every day. Basically, theaters are still a bit of a novelty and special in China, it’s not something they are use to. So there is plenty of action around the new thing, which is going out to the theater.

The real question (and one eejit refers to) is what happens when they move on to the next part of the cycle, where there are enough theaters to meet demand and they start having to compete. Further, you have to look at what happens when everyone has been to the theater a bunch of times, and it’s no longer a novelty.

The only reason you are seeing what you are seeing is because in this case, the egg came before the chicken.

that guy says:

Willing to pay...just not that much

You know I’m willing to pay, just not what they have decided cable is worth, since it’s not worth it to me. Considering that the people behind all this are the same ones behind pushing money in the hands of congress to pass laws to take away our rights, as far as I’m concerned they have declared war. I will get servers in the middle of the damn amazon jungle if I have to guarded by head hunters to tell them eat shit and die…literally die..go bankrupt…they need to not exist. You tube is usually better entertainment anyways.

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