Not so fast: China box-office growing, but not yet bigger than U.S.

Not so fast: China box-office growing, but not yet bigger than U.S.
Disney's "Big Hero 6," pictured, (which finally hit theaters Feb. 27), and "Hunger Games: Mockingjay - Part 1" were the only large U.S. films shown during the month, as Chinese officials reserved screen time during the Chinese New Year holiday for local product. (Disney)

There's been some chatter in Hollywood about headlines out of China that suggest the mainland box-office haul in February for the first time surpassed that of the U.S.

A Chinese entertainment research house, EntGroup, sent tongues wagging with a report that said mainland ticket sales hit $655 million for the month, eclipsing the $640 million alone for the U.S.


It was an important metric for American studio chiefs who see China as fertile ground for new profits. But data cited in EntGroup's report might have been a bit premature.

"Even if China was bigger than the U.S. in February," said Rance Pow, president of Shanghai-based film industry consulting firm Artisan Gateway, "it's not a significant event in terms of trend analysis."

Data from multiple sources show China's market probably didn't beat the U.S.'s during the month. More important, the Chinese market has years to go before it surpasses North America's in size.

China's box-office receipts surged 36% to $4.8 billion in 2014 – impressive growth for sure, but still less than half of the North American tally. Even if that 36% growth rate continues (which is unlikely) and the North American market (i.e., U.S. and Canada, which studios routinely tally together) remains flat, it will still be at least three years before mainland China surpasses North America.

According to Rentrak, the February box office for the U.S. and Canada tallied $764 million, up 9% over the same month last year (but still shy of February 2012's $816-million haul). That would put the U.S./Canada ticket sales ahead of China.

Hollywood's major studios don't usually break down U.S. and Canada results. But Canada has about one-tenth the population of the U.S., so even discounting the $764-million figure by 10% would still keep the U.S. ahead of China.

Let there be no doubt: China saw strong box office last month, thanks in large part to Chinese New Year, which falls during January or February according to the lunar calendar. Moviegoers on vacation from school and work piled into mainland cinemas for films including Jackie Chan's "Dragon Blade" and the 3-D French-Sino coproduction "Wolf Totem."

But Hollywood was largely boxed out of the Chinese market in February. "Fifty Shades of Grey" was not imported into China. Disney's "Big Hero 6" (which finally hit theaters Feb. 27) and "Hunger Games: Mockingjay – Part 1" were the only large U.S. films shown during the month, as Chinese officials reserved screen time during the Chinese New Year holiday for local product.

Imported films made only $84 million in February in China, according to data provided by Pow. But foreign producers reap only (at best) 25% of a film's mainland earnings – known as a "revenue share" arrangement. That means Hollywood may have seen only $21 million max from China during the month.

Year-to-date, the figures look even more unbalanced. As of the end of February, Chinese films had earned $814 million, Pow said, while imported films had taken in just $261 million. That means year-to-date, Hollywood has taken in, at best, about $65 million from China.

Homegrown films are up 31.4% over 2014 levels, while imports are up 24.8%. But year-to-date, Chinese films are dominating the market with a more than 75% market share. Imported films have only a 24.2% market share in China year-to-date, Pow said. That's likely to even out as the year progresses.

"The local market gets a head start," Pow said, by keeping U.S. films under wraps during the Chinese New Year period. "But imported revenue-share films still outperform local productions on average, no matter how you look at it."

Pow said he expected the Chinese market to grow by another 30% for the next few years. China is still adding screens at a rapid pace – about 15 a day. The country, which has about four times as many people as the U.S. does, had about 23,600 screens at the start of the year, and should hit 28,000 by year's end, Pow said.

"China box office is growing at an incredible rate due to both a massive appetite for filmed product and a continued program of the building of brick-and-mortar locations and screens," added Paul Degarabedian, senior media analyst for Rentrak.


Though much recent growth has simply come from the additional number of screens, Pow noted that much of the future screen growth will come in so-called third tier, or smaller, cities where ticket prices are low and moviegoing habits not well entrenched. Ticket sale prices in those areas are quite low. "Box-office growth will be increasingly less screen-driven," Pow said.

China still limits the number of foreign films that can be imported; currently, the quota is set at 34 films, including 14 3-D or large format films; those films' makers are entitled to share in the box-office revenue, but only up to a limit of about 25%. (Another 34 or so smaller foreign films are allowed into China each year, under a "fixed fee" system.)