Imax China deal will get more movies into growing market

Higher rate ‘good for our business’

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What better market is there for the world’s biggest movie screens than the country with the world’s biggest population?

Movie giant Imax is optimistic that it will be one of Hollywood’s big winners in a new trade agreement between the U.S. and China that will open up the film markets in both countries. The deal expands the number of foreign films that will be permitted in China and increases the box office share that goes to studios.

“The Imax brand is really powerful in China,” Imax Corp. CEO Richard Gelfond said in an interview. “This brings China much closer to what the U.S. business model is for us. If you can ship more movies at a higher rate, that’s a good thing for our business.”

Imax, which has 80 theaters in China and plans to increase that number to 217 in the next few years, specializes in showing supersized films with screens that are larger than in regular movie theaters. They play both traditional and 3D movies.

The White House announced the new film agreement, part of the Obama administration’s efforts to expand U.S. exports, last month in Los Angeles, after Vice President Joseph R. Biden Jr. and Chinese Vice President Xi Jinping reached a deal that is expected to boost the film industry in both countries.

“This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry,” Mr. Biden said in a statement. “At the same time, Chinese audiences will have access to more of the finest films made anywhere in the world.”

Under the deal, U.S. studios can take a 25 percent cut from box office revenues, up from the current 13 percent to 17 percent. The Chinese government will continue to cover the costs for marketing and film prints.

“This landmark agreement will return a much better share of the box office revenues to U.S. studios, revising a two-decade-old formula that kept those revenues woefully under normal commercial terms,” Motion Picture Association of America Chairman Christopher J. Dodd, a former U.S. senator, said in a statement.

That means Imax will take in about 12.5 percent of box office revenues, up from as low as 6.5 percent. Specialty companies such as Imax typically only get half the rate of traditional studios.

“For any U.S. film companies doing business in China, it’s an important development,” Mr. Gelfond said.

China currently imports only 20 foreign films per year, the bulk of them American. But under this new deal, they will accept an additional 14 films that are “enhanced,” which includes Imax’s big-screen and 3D movies. Almost all such films made worldwide are American.

“This is the first time they’ve set up a separate bucket to let Imax films into the country,” Mr. Gelfond said. “It will help us get more movies in China. I’m confident it will be more.”

Hollywood is praising the Obama administration for the new film deal.

“This agreement represents a significant opportunity to provide Chinese audiences increased access to our films,” Walt Disney President and CEO Robert Iger said.

The Independent Film & Television Alliance said the agreement would open new doors in China for small movies that have had difficulty breaking into the market.

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