Movies are big business on the mainland, and to tap into the growing demand, Hong Kong film company Emperor Motion Pictures and UA Cinemas have announced a tie-up to invest in and operate cinemas there.
The deal has raised some eyebrows, and Gao Jun, a veteran in the film industry who was formerly a deputy general manager of Beijing-based cinema management company New Film Association, said it remained to be seen if the Emperor-UA project - aimed at mid-market to high-end filmgoers - would be a success.
"Many Hong Kong investors have been operating cinemas on the mainland," Gao said. "Some are doing well, others are not."
The Emperor-UA deal follows a central government initiative last year to encourage more Hong Kong-produced Cantonese films to be shown in Guangdong under the closer economic partnership arrangement between the mainland and Hong Kong.
But as about 10 new screens are added on the mainland every year, according to data from the Motion Picture Association of America, nearly 80 per cent of cinemas opened in the past couple of years are reportedly losing money.
Chu Yam-chi, Emperor's general manager of sales and distribution for the mainland, said it was normal for a new cinema not to make a profit in the first three years.
"On average, we spend 30 million yuan [HK$37 million] on each of our cinemas and we can't take that back in three years," Chu said. "Perhaps we can do so in the fourth to sixth year."
Gao expects the investment boom in the industry to continue for more than 10 years because the mainland box office will keep growing during that period.
China is the No2 film market worldwide, with box-office spending of 17 billion yuan last year, according to the State Administration of Radio, Film and Television.
Gao said that for cinema operators, the greatest potential was in second and third-tier cities.
"The city with the largest single-day box office in China on February 14, Valentine's Day, was not Beijing, Shanghai, or Guangzhou," he said. "It was Harbin."
In big cities, competition between cinemas is intense, but Chu said Emperor-UA would avoid price wars and cater for high-end consumers who appreciated a quality film experience.
Second and third-tier cities would provide better opportunities than the mainland's first-rank cities, he said. "But the challenge in those cities is that we need to educate the market, and that takes time."