In April 2022, a major U.S.-based film production company approached us to help secure distribution rights for several of its blockbuster films in China. As the world’s second-largest movie market, China presented a lucrative opportunity for the client to expand its global reach. However, the company needed assistance navigating China’s complex media regulations, censorship policies, and securing agreements with local distribution partners.

The client faced several challenges in gaining entry into China’s highly regulated media and entertainment market:

Censorship and Content Approval: All foreign films require approval from China’s National Radio and Television Administration (NRTA) to ensure they meet local content standards, including adherence to censorship guidelines.

Distribution Agreements with Local Partners: Securing partnerships with Chinese distribution companies while ensuring the client retained control over intellectual property (IP) and revenue-sharing.

Compliance with Media Regulations: Understanding and complying with Chinese laws governing the import and distribution of foreign films, particularly with regard to content restrictions and release quotas.

Digital and Theatrical Distribution: Managing both digital streaming rights and theatrical releases, which required separate negotiations and approvals.

Revenue Repatriation: Ensuring the client could efficiently repatriate profits from Chinese box office sales and digital distribution revenues while complying with China’s foreign exchange and tax regulations.

In May 2022, we worked with the client to submit their films to China’s National Radio and Television Administration (NRTA) for approval. This required making sure that the films adhered to China’s strict censorship guidelines, which prohibit content related to politically sensitive topics, violence, and other restricted themes. We provided guidance on making minor edits to certain scenes in the films to ensure compliance with Chinese standards without compromising the creative integrity of the work. By June 2022, all the films were approved by the NRTA, clearing the way for distribution in Chinese theaters and on streaming platforms.

The client needed to partner with local distributors for both theatrical and digital releases. In June 2022, we began negotiations with several major Chinese film distribution companies. We secured favorable revenue-sharing agreements for the client, ensuring they retained a higher percentage of box office and streaming revenue compared to standard industry rates. We also ensured that the client maintained full control over their intellectual property rights, including merchandising and promotional rights. By August 2022, we had finalized agreements with both theatrical distributors and digital streaming platforms, securing comprehensive distribution across China’s major cities and online platforms.

In July 2022, we advised the client on compliance with China’s Film Industry Promotion Law and other relevant regulations that govern the import and distribution of foreign films. This included ensuring the client adhered to China’s strict release quotas, which limit the number of foreign films allowed to be shown in theaters each year. We also guided the client on co-production agreements, which allow foreign studios to bypass some of the foreign film restrictions by partnering with Chinese production companies. This strategy increased the number of films the client could release annually in China.

We assisted the client in navigating the separate approval processes for digital and theatrical distribution. For digital releases, we worked with streaming platforms like iQIYI and Tencent Video to ensure compliance with local content regulations and secure favorable streaming terms. For theatrical releases, we helped the client manage relationships with cinema chains across China, ensuring timely release dates and promotional support for their films.

In September 2022, we developed a tax-efficient structure to help the client manage the repatriation of profits from Chinese box office sales and digital streaming revenues. This involved working within China’s foreign exchange regulations and leveraging tax treaties between China and the U.S. to avoid double taxation. We also provided advice on VAT compliance for digital and theatrical revenues, ensuring that the client could maximize their earnings while minimizing tax liabilities.

NRTA Approval Secured: By June 2022, the client’s films received content approval from China’s NRTA, allowing them to be distributed in China’s cinemas and on streaming platforms.

Favorable Distribution Agreements: By August 2022, we had secured revenue-sharing agreements with local distributors and streaming platforms, allowing the client to retain significant control over their IP and maximize their revenue in China.

Comprehensive Compliance with Regulations: The client’s films adhered to all Chinese media regulations, including censorship guidelines and release quotas, ensuring smooth and compliant market entry.

Successful Theatrical and Digital Releases: The client’s films were released in Chinese theaters and on major streaming platforms, reaching millions of Chinese viewers and contributing to a significant increase in global box office revenue.

Tax-Efficient Profit Repatriation: By October 2022, the client had repatriated profits from China using a tax-efficient structure that minimized tax liabilities and ensured compliance with Chinese foreign exchange regulations.