The East is green, as Chinese box office soars for Hollywood films

Soaring mainland box office returns have prompted Hollywood to sign a flurry of deals with Chinese partners

PUBLISHED : Saturday, 20 June, 2015, 11:02pm
UPDATED : Saturday, 20 June, 2015, 11:02pm


The box office China is giving Hollywood, which continues to grow at breakneck speed, has hit another milestone: ticket sales have jumped nearly 50 per cent from a year earlier.

Mainland movie-goers spent US$2.6 billion in the first five months of the year, according to film tracking firm Rentrak. This puts the country on pace to overtake the US and Canada, which racked up US$4.3 billion in sales over the same period.

There are many reasons behind the expansion. The mainland’s rising middle class has led to a multiplex building spree.

American movies are also growing more popular, highlighted by the more than US$600 million draw for Furious 7 and Avengers: Age of Ultron. More recently, Jurassic World took in US$100.1million in its first five days of screening in China.

Hollywood is paying attention.

The growth has prompted a spate of deal-making as studios and producers look to gain a foothold in the mainland market.

“The strength of the market and dollars that are available in China are astounding,” says Paul Dergarabedian, a senior analyst at Rentrak. “If you leave out China, you’re going to leave a lot of money on the table.”

That’s never been more evident than with Furious 7 and Avengers, which could be a harbinger of bigger and bigger returns for the studios.

The available dollars are astounding. If you ignore China, you’re going to leave a lot of money on the table

Universal’s Furious 7 pulled in US$391million through May after its April 12 debut, making it the highest grossing film ever in China and even surpassing US and Canadian sales.

The movie surpassed the previous record set by Paramount’s Transformers: The Age of Extinction, which accumulated US$319 million.

Unlike Transformers, Furious 7 did not include any specific use of Chinese actors or locations to make the film more appealing to Chinese audiences. The movie did, however, benefit from the support of the China Film Group.

The state-owned entity, which controls the import and distribution of movies on the mainland, took a nearly 10 per cent stake in Furious 7, which had little competition from other foreign films.

Disney/Marvel’s Avengers: Age of Ultron also did a banner business.

The superhero action sequel has generated US$229.1million since its May 12 debut, more than double the ticket sales that the first Avengers movie had in China in 2012.

The film’s success attests to the popularity of the Marvel franchise and the “unbelievable expansion” of the country’s box office, says Dave Hollis, head of international distribution for Walt Disney Studios. “It’s hard … to expect numbers that are as big as what are coming out of China on a regular basis,” he says.

While ticket sales are expected to slow somewhat in the second half of the year, analysts predict China will easily surpass last year’s record level at the box office, when sales grew 34 per cent to US$4.8 billion.

One reason for the growth is that the world’s most populous country is adding an average of more than 10 new cinema screens a day nationwide.

China opened 554 new cinemas and 2,806 screens from January to the end of March, bringing the nation’s total capacity to around 5,700 cinemas with 26,000 screens, according to Artisan Gateway, a Shanghai cinema consulting firm.

Guangdong, Zhejiang and Henan provinces were the top three markets in cinema openings.

The wider reach is helping deliver big box office numbers for movies such as Avengers, which opened on 17,000 screens, most of them in higher-priced 3D formats.

“There has been an incredible development in building screens both in key cities and in the B and C cities,” says Duncan Clark, president of distribution for Universal Pictures International. “That’s a critical factor, as we can monetise our position by playing in such a wide range of screens.”

The expansion has pushed studios to make partnerships and deals. For instance, Universal opened a new office in Beijing last year. Next year it will release The Great Wall, a Chinese co-production with Legendary East. The film, starring Matt Damon, is in production.

Hunan TV closed an agreement to invest US$375 million in Lionsgate’s movie slate over three years; real estate firm Fosun last year put US$200 million into Jeff Robinov’s new Studio 8 production company; and Beijing-based Huayi Bros studio announced in March that it was investing in an 18-picture slate with STX Entertainment.

But Hollywood’s success in China also has fuelled growing speculation that the Chinese government may impose new restrictions on foreign films to boost the domestic industry.

“The Chinese film industry is growing in confidence, but it is a concern for China … to have their marketplace dominated by imported movies,” Ellen Eliasoph, chief executive of Village Roadshow Entertainment Group Asia, said at a recent conference in Hollywood.

Studios get to keep only a fraction of the ticket sales from the movies they show in the country.

China allows 34 foreign films into the country each year under revenue-sharing agreements, and studios collect only 25 per cent of the box office revenue. However, studios whose movies are made with Chinese partners and sanctioned as co-productions get about 40 per cent of the revenue. The current quota expires in 2017.

Its ostensible purpose is to protect the domestic film industry.

Each year, the China Film Group tries to ensure a roughly equal split between foreign and domestic movies to ensure that local producers aren’t crowded out.

Chinese films have been growing audiences, as well. Two of the five highest-grossing films in China this year were homegrown: From Vegas to Macau II (US$149 million) and Dragon Blade (US$119 million), according to Rentrak.

Some industry experts believe China may seek to balance out the market this year by expanding blackout periods, limiting how long foreign movies play, or releasing films in the same genre at the same time. This last practice, known as “double dating”, sparked controversy in 2012 when the China Film Group released Dark Knight Rises and The Amazing Spider-Man simultaneously.

“This is going to be a very interesting year because it’s the first time there has been such overwhelming success on the part of foreign import movies” early in the year, Eliasoph said during a panel discussion last month.

“It may be the Chinese government looks at the strength of Chinese films right now and says, ‘You know what? We’re not going to do anything.’”

Los Angeles Times