Provisions on the Administration of On-demand Cinemas and On-demand Cinema Chains (Mainland China)

2018.3.6
Joyce Wen

The Provisions on the Administration of On-demand Cinemas and On-demand Cinema Chains (the “Provisions”) were adopted during a working meeting of the State Administration of Press, Publication, Radio, Film and Television and went into effect on March 30, 2018.  The Provisions primarily cover the business licensing, scope of operation and supervision and administration of on-demand services and provide a legal basis for the launch of such services by cinemas and cinema chains as specifically illustrated below:

1. Criteria for setting up an on-demand cinema

Under Article 5 of the Provisions, only enterprises and individual industrial/commercial entities may set up on-demand cinema services.  When applying to the local motion picture authority of the county-level people’s government, the applicant shall meet the following qualifications:

(1). The projection equipment, projection quality and billing system shall conform to the technical specifications stipulated by the motion picture authority of the State Council.

(2). The width of the screen in a single theater shall not exceed 6 meters, and the number of effective audience seats shall not exceed 20.

(3). There is an on-demand cinema service chain which the applicant intends to join or which is currently being established.

(4). The legal representative or principal responsible person has not being prohibited from engaging in the motion picture business.

2. The required conditions for setting up an on-demand cinema chain

Under Article 6 of the Provisions, on-demand cinema chains can only be established by enterprises.  The establishment of an on-demand cinema chain in a province requires an application to the motion picture authority at province, autonomous region or municipal level people’s government under the direct jurisdiction of the State Council.  For an on-demand cinema chain spanning across multiple provinces, the application shall be filed with the motion picture authority under the State Council.  In addition, the following conditions shall be satisfied:

(1). There are suitable and appropriate sources for the motion pictures.

(2). The billing system meets the technical requirements of the motion picture authority under the State Council.

(3). The legal representative or principal responsible person has not being prohibited from engaging in the motion picture business.

(4). The number of on-demand cinemas in the on-demand cinema chain at a single province shall be no less than 30, and no less than 60 for a cinema chain that operates across provinces.

For applicants who can only meet (1) through (3) above, the relevant motion picture authorities will issue a certification document indicating permission for establishment, which shall be valid for three months.  Once (4) is met during the establishment period, the applicant may then apply to the relevant motion picture authorities for a license.

3. Types and term of license

Articles 7 through 9 of the Provisions also state that qualified on-demand cinema will be issued a license for screening movies, and qualified on-demand cinema chains will be issued a license for the distribution of movies.  Both licenses have a term of two years.  For an on-demand cinema that changes its cinema chain affiliation or for an on-demand cinema chain during its establishment period, a new application shall be filed with the original licensing authority for a license to screen movies.

4. Operating requirements

With respect to operations, Articles 10 through 24 of the Provisions impose the following requirements on on-demand cinemas:

(1). Provide the relevant licensing information to the cinema chain that the cinema has joined within 10 days after the establishment license is issued.

(2). Refrain from screening motion pictures that are outside the distribution scope of the cinema chain that cinema is affiliated.

(3). Reasonably schedule screenings motion pictures produced by domestic legal persons and other organizations for no less than two thirds of the total length of films screened annually.

(4). Movie screening activities may not be conducted within the same theater.

(5). Enhance the routine maintenance of the billing system and the projection equipment to ensure the screening quality of movies.

(6). Timely submit the relevant operating data upon the request of the on-demand cinema chain the cinema is affiliated with.

An on-demand cinema chain shall comply with the following:

(1). Assume the responsibility for registering in the national on-demand cinema management system to apply for an on-demand cinema code.

(2). Provide motion pictures to the cinemas it is in charge of.

(3). Obtain the public performance and copyright licenses for the motion pictures to be screened.

(4). If the copyright holder of a motion picture sets a restriction on the period in which the movie may be screened in on-demand cinemas, the on-demand cinema chain shall not distribute such movie during the restricted period.

(5). Enhance the routine maintenance of the billing system and the projection equipment to ensure the screening quality of movies.

(6). Assume responsibility for the implementation and management of operations activities such as establishing the internal system of the cinemas it is in charge of, managing the contents and quality of screened content, constructing technical systems and conducting maintenance, data reporting and personnel training.

(7). Upon request of the motion picture authority under the State Council, the operational statistics of the on-demand cinemas it is in charge of shall be uploaded to the national on-demand cinema management information system for inclusion in the movie sales revenue data.

5. Sino-foreign joint ventures

Under Article 36 of the Provisions, overseas capital committed to the screening and distribution of movies in on-demand cinemas and on-demand cinema chains shall comply with state provisions concerning the access of foreign investment to cinemas and cinema chains.  In addition to meeting all of the aforementioned requirements, the investor shall further satisfy the following conditions under the Interim Provisions on Foreign Investment in Cinemas:

(1). Comply with the arrangements and planning of the local cultural facilities.

(2). Fixed business (screening) premises.

(3). For Sino-foreign joint venture cinemas, the investment of the Chinese party shall be no lower than 51% of the registered capital.  In case of pilot cities nationwide in Beijing, Shanghai, Guangzhou, Chengdu, Xian, Wuhan and Nanjing, the maximum percentage of foreign investment to the registered capital shall be no more than 75%; however, service providers from Hong Kong and Macao are allowed to construct, renovate and manage cinemas in the mainland by way of joint venture, cooperation or sole proprietorship.

(4). The term of joint venture or cooperation shall not exceed 30 years.

(5). The relevant laws and regulations and rules in China are complied with.

In conclusion, when investing in on-demand cinemas and on-demand cinema chains, an enterprise should note if the invested target has obtained a screening license or distribution license, as well as the on-demand cinema code and on-demand cinema chain code.  In addition, it should be noted that a standalone on-demand cinema cannot obtain a screening license, as affiliation with a cinema chain is required.  For an on-demand cinema that concurrently screening movies, the movie screening theaters shall be separate from the on-demand screening theaters.