Dadi Cinema expands in smaller Chinese cities to tap stronger growth in movie ticket sales
Dadi Cinema Group, mainland China’s second-largest cinema investment and management company, plans to build as many as 60 new outlets this year, focusing on lower-tier cities where people have more spare time to make the trip to a cinema.
The group, trailing only Wanda Cinema Line in China in size, will also actively seek acquisition targets to increase the number of screens it owns following the purchase of Golden Harvest’s mainland cinema arm early this year, according to Dadi chief executive Yu Xin.
“People in second- to fifth-tier cities have much more time to spend watching films,” she said. “They will continue to be a high-growth territory for Dadi to exploit.”
At present, Dadi owns more than 400 cinemas and about 2,500 screens across the mainland.
At the start of 2017, it paid 3.3 billion yuan (US$485 million) to buy out City Entertainment Corp, a subsidiary of Orange Sky Golden Harvest Entertainment (Holdings), which operates and manages 76 cinemas with 531 screens on the mainland.
Dadi Film Distribution, a sister company of Dadi Cinema, books film screenings at a further 400 partner cinemas in the country.
Both Dadi Cinema and Dadi Film Distribution are controlled by Dadi Film Group.
Yu told reporters on Saturday that the northwestern part of the mainland, despite being underdeveloped in terms of economic scale, had huge potential to grow as local residents showed keen interest in blockbuster Chinese and Hollywood films.
“The first-tier cities are stepping up control on population growth and an increasing number of people are relocating to second- and lower-tier cities,” she said. “The frequency of people in second- to five-tier cities visiting cinemas is also set to rise since they are more willing to spend on entertainment activities.”
Box-office revenue in China grew 3.7 per cent to 45.7 billion yuan in 2016, slowing from the nearly 50 per cent year-on-year growth recorded in the previous year.
But HSBC forecast that ticket sales on the mainland could climb 20 per cent this year as the outlook for the country’s film market remained bullish.
Mainland China has more than 40,000 screens in total.
Market leader Wanda Cinema, a unit of Dalian Wanda Group controlled by billionaire Wang Jianlin, operates about 4,000 screens.
Since 2014, growth of box-office sales in second- and lower-tier mainland cities began to outperform that in the biggest four first-tier cities of Beijing, Shanghai, Guangdong and Shenzhen.
In 2016, box-office taking in the first-tier cities was worth 9.8 billion yuan, nearly unchanged from 9.7 billion yuan a year earlier.
In third-tier cities, full-year sales rose 4.5 per cent to 8.3 billion yuan in 2015.
Alibaba Pictures Group, the entertainment flagship of e-commerce giant Alibaba Group Holding, last year subscribed to a one billion yuan tranche of convertible bonds issued by Dadi Cinema.
The investment gave Alibaba Pictures the right to convert the bonds into a 4.8 per cent stake in the cinema operator.
Alibaba is the owner of the South China Morning Post.