DECEMBER 25, 2000 - JANUARY 1, 2001 VOL. 156 NO. 25/26

Dan Groshong/Tayo Photo Group for TIME. Zhao Guo Qing, local film distributor and owner of the Huaxie Theater, in his movie house screening The Perfect Storm.

That's the Ticket
Slashing prices, a radical distributor gets Chinese fans back to the movies
By SUSAN JAKES Chengdu

Zhao Guoqing, the rebellious scion of China's first privately funded film distribution company, shaved his head on Oct. 18. It's a ritual that he engages in every time he takes on a new crusade, letting his hair grow back only when he has completed his task. So when the shaven Zhao showed up to work that morning at the sprawling Chengdu cinema that houses his offices and the small apartment he shares with his wife and son, his colleagues knew he was plotting something big. "He had the unmistakable bearing of a man with a mission," says Shen Shufeng, deputy manager of Zhao's Hua Xie theater. "We didn't know exactly what he was cooking up, but we were all a little scared." When he let them in on his plans, they were astonished. What Zhao was proposing was probably unprecedented and certainly provocative. Starting in early November, Zhao's Emei Film Distribution Co. would cut movie ticket prices at its 11 theaters from 15 yuan ($1.80) to 5 yuan (60 cents).

That may sound like small change. But in a hidebound film industry structured around strict ideological and economic principles, this was a revolutionary marketing move. State-owned studios, largely bankrupt since the government slashed subsidies in 1995, now produce only a few movies a year while providing licenses to the handful of domestic directors still able to find funding for their works. China's Film Bureau continues to brandish its mercurial censorship standards, leaving directors and screenwriters hamstrung by uncertainty about what is and is not allowed. Meanwhile, China Film Corp., the state-owned enterprise that used to serve as a de facto ministry of distribution, has built an imposing monopoly around its exclusive rights to select, import and release films from abroad. Since foreign movies are generally more profitable than domestic ones, China Film has tremendous leverage over local distributors. It can effectively set ticket prices, mandate distribution slots and even dictate such minutiae as the number of posters a local distributor can put in its theaters.

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It's no wonder Chinese movie audience numbers have been declining. Last year only 300 million tickets were sold in the entire country, and box office revenues fell to $102 million, from $330 million in 1989. For Zhao, who entered the movie business more than 20 years ago as a middle school teacher screening films for his students on a schoolyard wall, these trends were distressing. Having privately financed a theater that boasts 11 screening rooms and some of the best sound and projection equipment in the country, Zhao is frustrated by the inertia of the industry. "Employees at state enterprises don't have to care what happens. But for me it's personal. I've put everything I've got into the job. If my business fails, my heart breaks."

Early this fall, he was almost in cardiac arrest. Theaters in Chengdu in Sichuan province were struggling to draw crowds even to Hollywood blockbusters like Gladiator and Mission Impossible II. Part of the problem is bootleg competition: shops selling pirated VCDs for as little as 5 yuan are cropping up all over the city—two operate just a few meters from the entrance to Zhao's theater. According to conventional wisdom in the industry, Chinese people don't much like going to the movies, regardless of the ticket price. Many of Zhao's colleagues feared that lowering prices would not only fail to increase box office numbers but might also provoke China Film to retaliate by withholding lucrative Hollywood blockbusters.

But Zhao was willing to stake everything on his conviction that conventional wisdom was wrong. "Movie tickets in China are grossly overpriced, and that's why theaters are empty," he says, noting that the average monthly salary in Chengdu is only 600 yuan. "Who ever heard of spending a tenth of your weekly income on a movie ticket? That's just crazy." He speaks with the mixture of bluster and gravitas that is his trademark: "People need movie theaters. They need to laugh together. They need to cry together. I was sure that if we only made movies affordable, audiences would return to the theaters. I just had to find a way to prove it."

That he did. And with such force that more than a month later the impact of his gamble is still sending shockwaves through the film industry. Before Zhao's price cuts, the American hit The Perfect Storm had earned only $3,700 in two days of box office sales, but in the two days after the price cuts, it grossed $16,000. Overall the first 10 days of Zhao's experiment brought 127,000 people into Chengdu's theaters, compared with just 9,000 customers during the previous 10 days. Crowds at the Xinan Theater on Chengdu's main shopping street were so large they broke down the theater's glass doors in their rush to take their seats. "In the past, I would never go to the movies," says Cheng Ying, a college student standing in line to buy her first ticket in two years. "I'm nuts about horror films, but they're just not the same when you watch them on VCDs in your living room. As long as the prices stay down, I'll be in theater as often as I can."

The ramifications of Zhao's gambit extend far beyond theaters in Chengdu. "The real point of these price cuts," he explains, "was to prove to China Film that the industry would work much better if distributors were allowed to work on their own initiative, instead of having their decisions dictated to them by a monopolistic remnant of a planned economy." China Film initially reacted to Zhao's challenge by asserting that he had set a "dangerous precedent" and arguing it was likely to hurt the domestic film market. The agency claimed that cutting ticket prices on blockbusters like The Perfect Storm would steal audiences away from ordinarily lower-priced domestic films. But the box office doesn't lie. Discounted re-releases of domestic movies like Zhang Yimou's Not One Less and Zhang Yang's Shower are still packing theaters, and Forced Landing, a Chinese film that bombed when it was released this spring, is now a major hit. Under attack from the Chinese media (which has thrown itself behind Zhao's mission), China Film's representatives have been forced to concede that maybe the market should decide prices after all.

Still, industry insiders warn that experimenting with prices alone won't be enough to resuscitate the ailing domestic film market. "Until the entire production and distribution system is radically restructured," says Xie Fei, chairman of the National Association of Film Directors, "we'll never be able to compete with Hollywood." And it's expected that once China formally enters the World Trade Organization, the cap on foreign movies—14 were allowed in this year—will gradually disappear, making the domestic film market even more competitive.

With so much work ahead of him Zhao doesn't have plans to grow back his hair. "I'll be bald until I'm sure I've won, and right now it's too early to tell. If I fail, I'm going to open a Sichuan restaurant in Beijing," he chuckles. "I already have the name picked out: Baldy's Five Yuan. My friends tell me it will be a huge success." But in Chengdu, the masses are happy that, for now at least, he's sticking with the movies.

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