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Forbes list of big stars stirs controversy
By Raymond Zhou (China Daily)
Updated: 2004-02-24 08:42
As a group, entertainment and sports stars rank among the richest in China.
But their money-making capability has never been systematically gauged until
Forbes came out with a bare-all list this month.
The Forbes Celebrity 100 list, compiled and published by the Chinese edition
of the US-headquartered business magazine, for the first time probed into the
murky waters of those who make their fortunes by being in the spotlight. And
just like its ranking of the country's top 100 richest people, this one has
caused an immediate controversy.
Actress delighted
Zhang Ziyi, of "Crouching Tiger, Hidden Dragon" fame, was the only one on the
list who was publicly delighted. The actress reportedly made 26 million yuan
(US$3.1 million) last year and was No 2 on the overall power list. "It's a
recognition and an encouragement," she was quoted as saying.
 Others have interpreted it more as an insult or slander.
They showed either dignified or bemused indignation. Those who have talked to
reporters all emphasize that their earnings have been greatly exaggerated, yet
none of them was willing to go on record and correct the "errors" by providing
more accurate figures.
Han Hong, a pop singer, felt that the gap between 20 million yuan and her
real income was so wide that she immediately contacted her attorney. She wanted
to know whether she could take legal action against Forbes for possible negative
consequences that the revelation would have on her career. "Was it legal to make
up numbers and publicize it?" Han reportedly asked.
Yu Quan, a pop duo that also raked in 20 million yuan (US$2.4 million)
according to Forbes, was a little amused. It could be that high if there were no
bootleggers out there, they said. "The magazine wants to have fun, and we'll let
them. It doesn't matter if they say we made 1 billion a year."
The overall ranking is made up of two parts: money earned and media exposure
achieved. The calculation method is borrowed from its New York headquarters,
where similar lists are compiled each year. For example, celebrity earnings are
estimates based on figures culled from interviews with agents, executives and
entertainment insiders.
While most listees complained that they had never received any inquiry from
the magazine, Forbes China claims that they had talked to 70 per cent of the
stars, including their legal or business representatives.
Forbes explained that the figures are pre-tax gross income when it is earned,
not when it is paid. "It is a concept of sales revenue, not profit," says Hao
Bing, who headed the project for the magazine.
That may explain some of the discrepancies. For example, Sun Nan, a pop
singer, earned 24 million yuan last year according to Forbes, but his agent
disputed it, adding that would mean Sun appeared in one performance every three
days, and inadvertently implying that his average take from each performance is
over 200,000 yuan (US$24,000). Forbes, on its part, has clarified that they did
find Sun had an annual total of 100 performances. Therefore, the difference may
lie between his fees and his personal take.
Promotional gimmick
Most insiders question or rationalize the numbers from several different
angles. They seem to agree that this is a promotional gimmick that the magazine
is doing for itself in the China market. It knows what kind of topic can create
the biggest buzz. Celebrities have always been a useful resource, says one
entertainment executive, and can be used to promote its own products such as
publications and conferences.
 The most serious attack comes from those who feel that
Forbes has not come to grasp with the unique nature of China's entertainment
industry. Some of the figures are so ludicrous, they charge, that they could
only be calculated by someone totally unfamiliar with the industry. For example,
Forbes may have learned a singer's stated fee and the number of appearances in a
year, but the actual fee may vary widely from show to show.
A well-known singer illustrated it to China Daily from her own experience:
She regularly adjusts her fee by the nature of the performance and the size of
the venue. Income from television appearances is nominal, but she could charge a
six-digit fee for a single song performed in an outdoor stadium for a
trade-sponsored event, such as a garment festival.
Income from record sales is even more elusive. China's record industry is in
such a bad shape that singers tend to treat it merely as a promotional tool.
Whatever figures of CD sales you see in the newspaper are probably made up to
make the singer and the record company look good, she said, on the condition of
anonymity.
There are whispers to the effect that the Forbes figures actually
underestimated Chinese celebrities' earning power. True, you cannot calculate
one set of appearance fee against all shows, but stars regularly have two sets
of books, one for the tax authority and one for themselves. Actual fees are
usually double the stated figures so that tax liabilities on parts of both the
performer and the performing company can be sharply reduced.
Cash transactions
China Daily's source revealed that almost every deal is a cash transaction.
They have to carry trunks of 100-yuan bills to my home before I'll sign a
contract, she says.
It used to be that neither side would pay much tax for the fee, but the
performing company, usually a makeshift operation by someone who was in it for
the quick money, would issue the star a hand-written note showing tax paid. But
authorities started cracking down in the 1990s, and this kind of scheme could no
longer work. And now many stars would pay tax based on a fee that is lower than
the actual figure but still acceptable to authorities, resulting in lower
official earnings.
In November 2002, the Beijing tax department set up a database for
"high-priority" individuals, mostly celebrities. Government monitoring has been
raised as public attention on the issue intensified. On the Forbes list,
authorities were not willing to comment.
The celebrities do not pay tax in one place, sometimes not in one country, as
is the case with basketball star Yao Ming and martial-arts film hero Jet Li,
both generating significant income in the United States. And we have the
obligation to keep everything confidential for tax-payers, they say.
Secrecy good or bad?
Investigations unveil hat some stars act as spokespersons for local tax
bureaux, such as Zhao Benshan in Liaoning and Xu Fan in Beijing, says Hao Bing,
the Forbes list compiler.
But is secrecy good or bad for the industry? Celebrities claim they need it
not only because it is their right to privacy, but their personal and family
security depends on it. Now that the "cat" is out of the bag, they claim they'll
have to fear about crimes like abductions that may be committed against them.
The bodyguard business will get a boost, some quip.
Some commentators herald the list, imperfect as it is, as a step out of the
shroud of secrecy into the sunshine of transparency. As Zhou Peng,
editor-in-chief for Forbes China, says, this list is intended to chronicle as
well as push these industries towards maturity.
Behind the Forbes ranking is Chinese people's intensifying gaze into the
black hole of wealth creation, and accompanying it, a latent sense of envy and
curiosity and an awakening to the huge potential of the most glamourous
businesses.
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