
Movie madness: Why Chinese cinemas are empty but full - nicolas_t
https://www.bbc.com/news/blogs-china-blog-45318316
======
OliverJones
Back in when CDs ruled the music world, artists worked out the Soundscan scam.
All CDs came out on Tuesdays. Artists recruited street teams in multiple
cities to go to a handful of record stores and buy a few copies of their CD on
its debut Tuesday.

The music sales metric vendor called Soundscan would pick up these sales
numbers and deliver them overnight to the labels.

On Wednesday the labels' marketing teams would take a look at the numbers and
interpret them as widespread interest. So they would back the CD with
marketing programs, giving the CD a better chance to find an audience.

Similar things happen with book sales.

But, the point here is to find an audience, not to manipulate the stock
market.

------
dagi3d
Similar situation happened in Spain. Here the film industry is heavily
subsidized for local movies, not only in form of tax benefits but grants. The
thing is that in order to get that cash a minimum of sold tickets are
required, so a bunch of producers have systematically bought those tickets in
cinemas located in small cities or towns

~~~
liftbigweights
In the US, we used to have NFL blackout games. If the football game wasn't
soldout, the NFL wouldn't broadcast it on TV. So local businesses or the
wealthy would buy the unsold tickets so that us poor peasants could get to see
the game on TV. I don't know any games that were actually blacked out since
football is so popular and most games get soldout before the season starts.
But once in a while news of the potential of a black out game spreads and the
unsold tickets get bought up and the game is televised.

~~~
jhfdbkofdcho
Happened to the Raiders in Oakland all the time. Here’s a piece from a couple
years ago about how they had to remove seats from sale so they could qualify
because nearly every game was blacked out.

[https://deadspin.com/5982547/raiders-will-reduce-seating-
cap...](https://deadspin.com/5982547/raiders-will-reduce-seating-capacity-to-
the-nfls-smallest-in-attempt-to-avoid-tv-blackouts)

------
sct202
This reminds me of the Handbook for Mortals scandal
([https://www.theguardian.com/books/2017/aug/25/handbook-
for-m...](https://www.theguardian.com/books/2017/aug/25/handbook-for-mortals-
by-lani-sarem-pulled-from-nyt-bestsellers-list)) where a publisher was
strategically buying books from specific stores that send sales data to the NY
Times Best Sellers rankings. They were trying to game the system so that their
book would be so 'successful' to drive real sales and create a movie on the
book.

------
lordnacho
> Yet the authorities have now worked out that if a showing is somewhat empty
> in the middle and for some reason all the seats around the walls have been
> purchased something must be amiss.

Sounds like you'd have to investigate very thoroughly to know this? You'd have
to have the numbered layout of every cinema, along with the ticket sales data.
I mean it's not like you couldn't do it, but if you had a data scientist is
that what you'd make him work on?

------
mabbo
One begins to wonder how many such scams like this the Chinese economy can
support before the whole house of cards collapses.

~~~
ksec
Quite a while. As long as there are money pouring in China and letting little
money escaping China, all they need is just keep the capital flowing.

------
seanmcdirmid
I thought the Chinese government put a stop to mass phantom ticketing a couple
of years ago? Either the party didn’t do a good job or western news sources
are incredibly late in reporting on scandals in China.

~~~
paradite
Likely they are late to the party. The article itself doesn't have any
concrete examples or references to timelines. It just describes the general
problem, which has been done by Chinese media since 2016:

[http://www.chinanews.com/m/yl/2016/08-29/7987022.shtml](http://www.chinanews.com/m/yl/2016/08-29/7987022.shtml)

This article has a summary of timeline (as an image in Chinese), notice the
last update was around Apr 2018, which is the latest news that I could find
related to phantom bookings:

[https://m.huxiu.com/article/242292.html](https://m.huxiu.com/article/242292.html)

Nevertheless, it is also true that the problem hasn't been solved as of Apr
2018.

------
oh_sigh
This sounds like the exact kind of thing a hedge fund might investigate and
short stocks on.

~~~
seanmcdirmid
Shorting still isn’t allowed in the Chinese stock market, I think. Anyways, it
isn’t a very patriotic thing to do.

~~~
cm2187
> _Anyways, it isn’t a very patriotic thing to do._

Why? There is a national pride in irrational stock market bubbles?

~~~
9712263
A patriotic Chinese should support their countries' stock when they are going
to drop. Well, at least the propaganda said. Because most large firm in China
are either state-owned, or having large portion of stock owned by state.

Anyway, Chinese government banned some large stock holder to sell their stock
in previous nearly happened financial crisis. It's a terrorism against Chinese
government if you do that.

------
cs702
China's stock market is down over 50% since its peak.[a]

Maybe this kind of chicanery has something to do with it?

Are fake ticket sales at empty cinemas just the tip of the iceberg?

[a] [https://money.cnn.com/investing/china-stock-market-
meltdown/](https://money.cnn.com/investing/china-stock-market-meltdown/)

~~~
ksec
Do you know all the articles inside the link are from 2015?

~~~
cs702
Yup. It's been in decline since then (with few respites along the way):
[https://www.scmp.com/business/china-
business/article/2162010...](https://www.scmp.com/business/china-
business/article/2162010/shanghais-reign-worlds-worst-performing-stock-market-
may)

------
mojomark
This is not a uniquely Chinese problem - we have the same problem right here
in the US...

In Tim Oreilly's book 'WTF? What's the future and why it's up to us' (1), he
talks quite a bit about the emergence of the idea of corporations focussing on
maximizing shareholder value over actually productivity (true
societal/economic value).

It's the same philosophy that drives the standard massively inflated corporate
'leader' comoensation packages - even when some leaders are severely
incompetant. This Wash. Post article describes it a bit (2), but Tim pinpoints
the origin to a specific conference talk (can't remember who/when exactly, but
the shift occured sometime in early 80's). It's why founders/early invvestors
can achieve massive payouts by selling a company even when they've never
achieved a profit and ultimately fail - because they're paid in 'smart money'
vice cash from profits ('dumb money' \- how the worker bee's are paid). It's
why companies will continue to opt for short-term gains by displacing
workforce with automation versus investing in the long term health of a
comoany by training their workforce to be more efficient working in
conjunction with automation.

Trust me, I believe in large compensation/payouts for talent, but I think that
the talent should be measured in true contribution to the health of the
economy - which is distinct from the percieved value of a share.

HN: Can we please start focussing on building truely productive companies
again?

1\. [https://www.oreilly.com/tim/wtf-
book.html](https://www.oreilly.com/tim/wtf-book.html) 2\.
[https://www.washingtonpost.com/business/economy/businesses-f...](https://www.washingtonpost.com/business/economy/businesses-
focus-on-maximizing-shareholder-value-has-numerous-
costs/2013/09/05/bcdc664e-045f-11e3-a07f-49ddc7417125_story.html?noredirect=on&utm_term=.996eef75e1e2)

~~~
naveen99
Companies can ultimately fail even after going public. Later investors pay
earlier investors, founders, or other shareholders by definition. There is
nothing smart or dumb about either. Employees have options for liquidating
there shares as well in the secondary markets.

~~~
mojomark
> Companies can ultimately fail even after going public. Later investors pay
> earlier investors, founders, or other shareholders by definition. There is
> nothing smart or dumb about either.

Smart Money = compensation via shares. It's "smart" because it generally grows
quickly in value based on the companies pefformance, versus the dollar which
only grows in value when the overall economy (standard of living) improves.

Dumb Money = compensation in cash.

Executive/early investor compensation via smart money really only became the
norm when the government started to crack down on massive corporate salaries
(1). i.e. massive "dumb money" payouts.

> Employees have options for liquidating there shares as well in the secondary
> markets.

Not all companies pay employees (especially those in lower tier roles/hired
after a companies founding) in smart money. For instance, my company currently
only pays in dumb money (no stock) below the VP level. About 7 years ago, we
used to be employee owned, and we recieved/could purchase shares (technically
smart money). They matched our 401K's with these shares. However, these shares
were VERY different from the shares issued to corporate leadership. We were
not allowed to liquidate until 5 years after leaving the company. When the
company started to tank, the share dropped from $20 to virtually zero and
corporate officers liquidated their shares quickly. Ultimately, the employee
stock was dissolved completely when the company was sold. I personally lost
$100K. The ex-CEO committed suicide this year - I'm assuming from guilt.

1\. [https://www.washingtonpost.com/news/on-
leadership/wp/2017/11...](https://www.washingtonpost.com/news/on-
leadership/wp/2017/11/22/this-tax-loophole-led-to-massive-ceo-pay-packages-
why-eliminating-it-isnt-likely-to-rein-them-in/)

~~~
naveen99
i am sorry for your monetary loss and your ceo's family. But, it sounds like
you would have been better off with dumb money, than smart shares... remember
you can purchase smart shares with dumb money, and you can sell smart shares
for dumb money on the secondary markets, via forward contracts if there are
some restrictions...

------
lkrubner
This is the same force that drives the price of Bitcoin. Thousands of Chinese
businesses are trying to get capital out of China, and they take advantage of
every loophole to move money out of the country.

------
jernfrost
Shows the problem of capitalism. Eventually it all ends up as a big pozi
scheme where it is all about artifically inflating bubbles and make sure you
are the not the last one out when it bursts.

Afterwards tax payers can pickup the bill.

I gues the movie executives can pick some tax payer paid bonuses like American
bankers in 2008.

~~~
Dylan16807
Even without capitalism, even without money at all, if you want your day job
to continue to be "making movies" then there is an incentive to cheat the
numbers.

And it's not really 'tax payers' that pay the bill here, it's 'stock owners'.
There's no reason to bail out a movie company.

~~~
mojomark
> Even without capitalism, even without money at all, if you want your day job
> to continue to be "making movies" then there is an incentive to cheat the
> numbers.

One probably shouldn't be 'making movies' if fake sales are necessary because
nobody wants to watch.

> And it's not really 'tax payers' that pay the bill here, it's 'stock
> owners'. There's no reason to bail out a movie company.

I don't know how it works in China, but often in the U.S., when people put
their life savings into junk bonds (or an overly risky house mortgage) that
inevitably go bust, they declare banckruptcy and ultimately tax debt is
forgiven or severely cut, or tex revenues are funneled to them in the form of
wellfare to help them stay afloat. So, yes, when a commercial entity fails for
whatever reason (even criminally bad decisions), the tax payers are the ones
left paying for the social safety net to keep the afloat.

------
joejerryronnie
I'd be more concerned about the entire cities that are empty.

~~~
azurezyq
Here's some recent update:
[https://www.forbes.com/sites/wadeshepard/2016/04/19/an-
updat...](https://www.forbes.com/sites/wadeshepard/2016/04/19/an-update-on-
chinas-largest-ghost-city-what-ordos-kangbashi-is-like-today/)

Tldr: it's fine and there are people.

~~~
Retric
_the place is now roughly one-third full_ aka still basically a ghost town.

These buildings are aginging rapidly while mostly unoccupied, which is a huge
waste of resources.

~~~
mavhc
Why are they aging more rapidly than occupied buildings?

~~~
lithos
Air conditioning, heating, airflow, controlling pests, cycling water out of
pipes/vents, and noticing problems like burst pipes.

Quality is also abysmal to start with. Looking at some buildings in decay they
seem like movie/theme park sets.

