Movie ticket sales jump 48% in China, but Hollywood has reason to worry
Despite a slowing economy, China’s box-office receipts jumped nearly 50% between 2014 and 2015 — the most sizzling pace of growth in the last five years.
But Hollywood isn’t sharing equally in the bonanza: Revenue for imported films rose less than 24% this year, while homegrown Chinese movies saw almost a 69% surge.
China’s box office should close out the year with total sales of about 43.9 billion renminbi, or $6.8 billion, up 48.3% over 2014, data from film industry consulting firm Artisan Gateway showed Tuesday.
Mainland China has been the world’s second-biggest movie-going market, behind only North America since 2012, with rapid growth driven by a ballooning middle class and a theater-building spree that shows little sign of abating.
Box-office receipts for the U.S. and Canada totaled $11.1 billion this year, up 7%, but at current growth rates China is likely to become the world’s biggest movie market in 2017. China added about 9,000 screens in 2015, increasing its total by about 40% to around 32,000. But that’s still about 7,000 shy of the number of screens in the United States, which has a population one-fourth the size of China’s.
The screen growth has made China an increasingly lucrative market for major American movies. Nonetheless, in a somewhat worrisome development for Hollywood, American fare is continuing to lose market share, falling below 40%. Chinese films accounted for more than 61% of ticket sales in 2015, Artisan said, up from 54% last year.
“Under any other circumstance, a 25% year-on-year revenue growth [for foreign films] would be considered spectacular. But the local films did so well, everything else just pales by comparison,” said Rance Pow, president of Artisan Gateway. And in terms of market share, “it’s a pretty big drop for imports,” Pow added.
The balance between imported and domestic productions is closely watched and politically sensitive in China, where the government limits the number of foreign films shown in the country each year and controls their release dates. In the past the government has taken controversial actions to schedule Hollywood films head to head, thereby cutting into their box-office haul.
China allowed a total of 58 foreign films into the country in 2015, but only 34 of those were permitted in on a “revenue share” basis, allowing Hollywood studios to take home up to 25% of the box-office receipts. Foreign revenue share films sold about $2.25 billion in tickets in 2015 — meaning Hollywood pocketed a maximum of $560 million from those 34 titles.
The remaining 24 imports were allowed in on a “flat fee” basis, under which Chinese distributors pay a lump sum up front and all the box-office proceeds stay in China, no matter how well the films perform. The upsides can be huge: One such film — a Japanese animated movie based on the cat character Doraemon — earned $83 million on the mainland this year.
Blackout periods during key Chinese holidays and late summer continue to keep Hollywood fare out of Chinese cinemas for weeks or even months past their U.S. debuts; for example, Disney’s “Star Wars: The Force Awakens” won’t arrive in Chinese theaters until Jan. 9 — three weeks after it launched stateside.
Seven out of the top 10 grossing films in China last year were Chinese-made, with comedies, animated fare and adventure films doing particularly well. The No. 1 movie, “Monster Hunt,” was a combination live-action/animated adventure directed by Hong Kong native Raman Hui, who rose through the ranks at DreamWorks Animation before striking out on his own. “Monster Hunt” sold $381.1 million in tickets, according to Artisan Gateway and Chinese government figures, narrowly edging out Universal’s “Furious 7,” which took the No. 2 spot with $379 million.
Yet serious questions have been raised about how that box-office victory was achieved, with producer Edko Films acknowledging it gave away more than $6 million worth of tickets for “public welfare” screenings. “Monster Hunt” also was permitted a significantly longer run than “Furious 7” and benefited from a summer blackout period that kept Hollywood competitors at bay.
How well Chinese movies would perform without such special treatment “is the billion-dollar question,” said Pow. “It’s still a managed market, but I don’t know how to quantify that,” he added, noting that six of the 34 major Hollywood releases were crammed into November, a development he called “ridiculous.”
Universal and Disney were the big winners among Hollywood studios in China in 2015, mirroring their worldwide performance. Universal — which had a miserable 2014 in China with just one major release — came roaring back with about $690 million in ticket sales from its five major titles, led by “Furious 7” and “Jurassic World.” Disney also had a solid year in the Middle Kingdom, with six major releases and “Avengers: Age of Ultron” and “Ant-Man” proving big hits.
Sony fared the worst of the Hollywood studios, with only three major releases that sold about $100 million in tickets. Its disappointments included “Annie,” with just $468,000 in receipts.
Other American fare that fell short of expectations were Universal’s “Unbroken” with $5.8 million, Paramount’s “The SpongeBob Movie: Sponge Out of Water” ($7.5 million) and Disney’s Pixar production “Inside Out” ($15 million).
But the main story of China’s 2015 box office was the outsized performance of domestic films. Local movies benefited from some higher-quality fare, particularly animated films and comedies, and the continued protectionist policies by government authorities.
Bona Film and Enlight Pictures had banner years. Enlight’s hits included the comedy “Lost in Hong Kong” ($251 million) and the grave-robber adventure “Mojin: The Lost Legend” ($183 million and counting). Bona scored with “The Man From Macau II.”
More than 60% of ticket sales were made online in 2015, Artisan said, but average price is starting to slip — down about 2.5% to $5.36. IMAX and 3-D premiums are continuing to hold up.
“We have had 40% growth in screens but box office is up 48%, so despite this phenomenon of dropping average ticket price, box office is still growing at a steeper rate than screen growth,” Pow said. “That should be, on its face, a bullish sign for the market. It means as all these multiplex cinemas are building out into smaller and regional markets, they are performing on par with the national averages, which you have to look at as very encouraging.”
Pow predicted the Chinese box office would grow at least 30% in 2016. And as partnerships between Chinese investors and Hollywood studios continue to expand and Chinese entities invest more in U.S. productions (Alibaba, for example, invested in Paramount’s “Mission: Impossible — Rogue Nation” this year), the line between what’s Chinese and what’s American may start to blur.
“A significant number of Chinese players want to be global players,” Pow said. “By investing directly into Hollywood, it’s smart business.... Chinese are at the stage where they are seeing China as one more market in the global scheme of things.”
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