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Chinese regulators smell a rat over 'Ip Man 3' ticket sales

Chinese regulators smell a rat over 'Ip Man 3' ticket sales
Donnie Yen stars in "Ip Man 3." (Well Go USA)

Not a week goes by, it seems lately, without some shocking box-office statistic from China: A mermaid movie has raked in more than $500 million in four weeks. February's ticket sales exceeded those of the United States. Total earnings jumped nearly 50% last year to $6.8 billion, and the market is on pace to become the world's largest by 2017.

But even Chinese regulators — who typically bend over backward to ensure the success of homegrown films while keeping a tight leash on Hollywood imports — seem to smell a rat in last weekend's stunning numbers for the local martial arts movie "Ip Man 3."

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Bankrolled in part by a flamboyant Shanghai mogul with an estimated net worth of $780 million, the Donnie Yen-Mike Tyson flick supposedly took in $72.3 million in its first three days in theaters, even though early March is typically a slow moviegoing period. By comparison, Disney's "Zootopia," which also opened Friday, earned about one-third as much.

Movie fans reported strange goings-on with online ticketing services, which showed unusually large numbers of "Ip Man 3" screenings sold out, and ticket prices as high as $31 (the average ticket price in China is around $5). Some cinemas indicated they were showing the movie to full houses every 10 minutes.

Officials with the State Administration of Press, Publications, Radio, Film and Television on Monday launched an investigation into four online ticket sellers to determine whether sales figures were manipulated and hyped.

"Ip Man 3," though, is hardly the only Chinese film to have come under suspicion for bogus box office figures recently. Last summer, producers of  "Monster Hunt," an animated/live-action movie, admitted handing out 40 million free tickets to push the film past Universal's "Furious 7" as the mainland's highest-grossing film ever (a record since eclipsed by "The Mermaid").

And in September, the chief executives of privately run studios Bona Film Group and Huayi Bros. took to social media to grouse obliquely about box office manipulation favoring the propaganda film "The Hundred Regiments Offensive," produced by a state-run company.

"The question some people … might be asking now is, is the $6.8-billion figure real?" said Rance Pow, president of movie industry consulting firm Artisan Gateway, referring to last year's official total Chinese box office tally. "Because it's like, there's a portion of films on the Chinese language side that's purposely inflated, that's false ticket sales."

Whereas makers of "Monster Hunt" may have been motivated primarily by pride to nab the box-office crown from an American film (and enabled by Chinese regulators), industry-watchers say the backers of "Ip Man 3" may have sought to hype the results to boost their company's stock price. Two weeks ago, "Ip Man 3"'s multimillionaire investor, Shi Jianxiang, became chairman of a Hong Kong-listed company that owns rights to theatrical earnings from the movie.

Shi did not respond to a request for comment. But shares in the Hong Kong company, Shifang — which were trading at about 5 U.S. cents back in October — began rising sharply at the end of 2015, to about 40 cents, as "Ip Man 3" was released in Hong Kong. The movie's mainland opening, however, was delayed. On Friday, when "Ip Man 3" landed in mainland cinemas, Shifang's stock price closed at a 52-week high of about 48 cents. That day, Shi posted a picture of the rising stock chart on his WeChat social media account.

On Monday, Shifang shares dropped nearly 18%, and after the probe was announced, the stock plummeted an additional 28% on Tuesday, closing at about 32 U.S. cents.

"If the producer or distributor is buying millions of dollars in tickets to create the appearance of demand … investors in this guy's company are being duped," said Robert Cain, a writer, producer and China film industry consultant. "Those are mainly the people that get hurt."

But Chinese investors aren't the only ones who may suffer from shady box-office tactics. Fraudulent moves to inflate Chinese films' box office can harm the performance of Hollywood fare if cinemas prefer to book local movies that offer extra gravy.  "Zootopia," Cain noted, initially had only about 14% of the weekend's screen times, but after the "Ip Man 3" controversy surfaced, cinemas started shifting over screens to the Disney film.

"Probably some of the exhibitors got caught with their hands in the cookie jar, or want to distance themselves from that film, and so now they've turned those screens over to 'Zootopia,'" he said.

While moves to puff up the performance of Chinese films have lately grabbed headlines, the opposite problem — exhibitors underreporting sales and pocketing the difference — has also long bedeviled the market. Zhang Hongsen, head of China's film bureau, estimated in January that 10% of box office sales, or $680 million, may have been stolen last year.

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"So much goes on that's not reported, it's hard to know anything for sure in China," said Cain.

Zhang said that inaccurate box office figures were warping the market, giving producers and directors false impressions about what kind of films were popular and how much to spend on them.

"It's very simple. If the box office is harmed, producers won't be motivated to create new films. If there's no new content, even with more theaters, audience won't go to the cinema," Zhang said.

Pow noted that overinflation could have similarly damaging effects, because producers may benchmark budgets for movies against numbers that aren't true.

"Then you can no longer make profitable films because you have a false conception of the market," he said. "In the long run, it hurts everybody."

Twitter: @JulieMakLAT

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