Avengers can’t save China’s box office revenues hit by weak Hollywood blockbusters, tighter regulations

Tighter regulations from the top propaganda organ and a lacklustre performance by foreign films saw China’s box office revenues rise at the slowest rate in over a decade last year, according to official data.

China’s film industry, the world’s fastest growing market, generated box office revenues of 64.2 billion yuan (US$9.2 billion) in 2019, up 5.4 per cent from a year earlier, despite the number of movie screens growing by 16 per cent.

It marked a second consecutive year that China’s box office growth slowed, having fallen to a growth rate of 9 per cent in 2018, the first time it had dropped to a single digit in over a decade.

Revenue from Chinese films actually expanded by 8.7 per cent in 2019, but of the overseas produced films, only Avengers: Endgame and Fast and Furious Presents: Hobbs and Shaw appeared on China’s top 10 list for 2019. This led to only a 0.1 per cent increase in revenue from overseas produced films.

Hollywood blockbusters now contribute only around a third of China’s box office revenues, having been almost half in 2012.

The figures were recently updated after last year, the China Film Administration, which is supervised by the Publicity Department of the Communist Party of China, asked cinemas and online ticket vendors to verify their reported revenues for last year. This led to revenue for the second bestselling movie in China last year, the animated fantasy film Ne Zha, to increase its revenue by more than 20 million yuan (US$2.9 million) to break the 5 billion yuan (US$718 million) barrier overall.

Box office revenues in the United States slowed last year, down 4.8 per cent to US$11.3 billion from US$11.8 billion in 2018, according to IMDB’s Box Office Mojo.

The slowdown in China comes amid tightened regulations from the Publicity Department of the Communist Party of China, which took over the policing of the industry in early 2018, ranging from a crackdown on tax evasion to the stricter oversight on approval of film releases.

The most high-profile case saw Fan Bingbing, one of China’s most popular and highest-earning actresses at the time, ordered to pay US$129 million in overdue taxes and fines in October 2018 after an investigation found evidence of tax evasion.

This crackdown is believed to have contributed to a decrease in the level of investment in the industry, with the official Securities Daily claiming that around 1,900 film and TV production companies closed last year.

Hengdian World Studios, one of China’s largest film studios, saw the number of films and TV shows produced at its facility drop by nearly 20 per cent in 2019.

Film releases, including The Eight Hundred, a China-produced second world war epic focusing on the defence of a Shanghai warehouse during the Sino-Japanese war, were also delayed or cancelled due to “technical reasons” under increasing regulatory pressure.

Huayi Brothers, one of China’s main film studios, saw their net profits drop by 298 per cent to a net loss of 652 million yuan (US$94 million) in the first nine months of the year, according to a stock market disclosure. This was largely due to the fact that none of the films in which it had a major investment in, including The Eight Hundred, were released.

“Despite predictions, the huge changes in the market environment, capital risks, and economic situation in 2019 have caught us off guard. The side effect from the previous rapid expansion has started looming,” said Huayi Brothers co-founder Wang Zhonglei.

The previous rapid of expansion of China’s box office revenues was partly fuelled by subsidies from online ticket platforms such as Taopiaopiao.

But as the subsidies faded from 2018, the price of tickets increased, with Taopiaopiao estimating the cost of an average movie ticket in China rose from 35.3 yuan (US$5) in 2018 to 37 yuan last year.