The Chinese film business is leading the world in growth - driven by many factors - including a stunning expansion in the number of theatrical screens - with many of these new screens going into new multiplexes in the relatively rich southern province of Guangdong.
By 2015 Chinese theatrical revenue is predicted to reach $5 billion - which is roughly half of what the major Hollywood studios earned in English speaking North American theaters in 2011.
And that's just the beginning. Eventually, China's movie-going market may well become the world's biggest.
A large part of what is driving the current boom times in Chinese movie-going is the explosion in the total number of China's cinema screens - with the number of screens more than doubling in the last 5 years.
Still, China is "vastly under-screened [by US standards]. Whereas the U.S. has a movie screen for every 7,700 people, China [currently] has one for every 150,000."
And there is still enormous room for continued growth in theatrical attendance in China, where the "average Chinese person only goes to cinema 0.3 times per year, compared with over five times annually in Iceland, the top movie-going country."
A November 8th, 2012 Chinese Films report says that "Chinese B.O. is well on track to exceed $2 billion this year , according to biz watchdog the State Administration of Radio, Film and TV (SARFT), with 12.2 billion yuan ($1.95 billion) notched up in the first three-quarters of 2012."
These box office numbers for the first three quarters of 2012 represent a 27% increase over the same nine month period last year - which was also a boom year for Chinese movie theaters ("Chinese box office up by 30% in 2011").
What sorts of movies are driving this boom?
No one genre seems to have a hold on China's movie theaters:
But, so far in 2012, the top three movies in China were imports: The 3D reissue of "Titanic" which took $150 million, followed by "Mission: Impossible 4" with $109 million and "The Avengers" with $90.5 million.
This taste for big-budget Hollywood fare has been great news for the (struggling at home) Hollywood studios.
And the future for filmmaking foreigners in China seems to be brightening.
To start, during Vice-President Xi Jinping's February 2012 visit to the US, China agreed to expand the quota system, allowing 14 more foreign films into the domestic market annually. That expanded the number of non-Chinese films that can play in China from 20 to 34. At the same time, it was announced that non-Chinese film companies could retain a 25 percent cut of the Chinese box office, compared with 13.5 - 17.5 percent previously.
Since only 34 non-Chinese films are permitted to play in China each year (note: certain co-productions fall outside the quota system), most American filmmakers won't see their films playing on Chinese screens anytime soon. But the slow opening-up of China to Hollywood fare on theater screens is only part of a cultural shift - that includes increasing adherence to international standards of copyright protection and potentially a huge market for non-Chinese fare on the internet.
Seen in this light, a small foothold for American films in China - and the growing appetite for content from around the world that a few Hollywood films are currently building in China - may soon result in a world of new opportunities for filmmakers who've paid attention to the Chinese market and are prepared to work within the evolving Chinese system.
Part of what's driving the opening-up of China to outside films seems to be pressure from China's theatrical exhibitors.
Hollywood films - especially the unique brand of big-budget blockbuster entertainment that Hollywood has been creating for the world market - were outperforming domestic Chinese films in 2012. For example, domestically produced Chinese pictures have disappointed so far in 2012, garnering only 40% of total Chinese B.O. in the first three quarters. The pie chart below shows how domestic Chinese films started the year very slowly.
In addition, mainland Chinese producers are actively seeking co-production of feature length films.
So far, the activity in Chinese co-productions has primarily been in mainland China-Hong Kong co-productions.
According to the 2011-2012 China Film Industry Report: 70% of co-produced films in 2010 were mainland China-Hong Kong co-productions, with an additional 8% being mainland China-Taiwan co-productions and 10% being China-US co-productions.
Admittedly, co-productions account for only a small fraction of the films released each year in China - but they have been taking a disproportionate share of the box office: Of the top 20 films of 2011, 12 were co-productions (primarily mainland China-Hong Kong co-productions). And of the total reported Chinese box office for 2009, domestic films accounted for 53% of the revenue.
What are the concerns about the Chinese market for movies?
Relative to income, movie ticket prices remain high in China. (In 2000 a Chinese exhibitor experimented with reducing ticket prices at their theaters, but the experiment apparently did not last.) A 2010 survey of the Chinese film industry reportedly found an "average ticket price of 36.38 yuan [approximately $5.75 US] for Chinese movies." That means that, at the start of 2010, a single movie ticket in China represented 2.3% of an urban family's disposable monthly income. That percentage is significantly higher than the average cost (0.5% of disposable monthly income) that movie admission represented in the rest of the developed world.
And the level of "piracy" in China prevents exploitation of rights that elsewhere mean huge revenue. For example, currently in China, box-office receipts account for close to 90 percent of the total return on motion picture investment. If reliance on the box office could be reduced - perhaps by increased revenue from digital streaming - China's film market could really explode. But the culture of unpermissioned streaming and bootlegged DVDs creates barriers to exploiting ancillary rights.
What might the future hold?
The boom in exhibition in China has led to rumors that a Chinese company may make a bid for a US major studio. One possible contender for that role is the Wanda Group that recently acquired the AMC Theater chain in the US. According to an April 11, 2012 post to Forbes.com: "Two China cinema chains are competing to become the first from the industry to list on a mainland stock exchange... Wanda Cinemas, controlled by billionaire Wang Jianlin, and Jinyi International Cinemas, associated with a Guangzhou real estate company, have both applied to list on the Shenzhen Stock Exchange. Wanda, according to its website, has 86 movie theatres with 730 screens. Jinyi is said to have about self-run 60 theatres."
UPDATE March 7th, 2014: The dominance of Hollywood films in China in 2012 (discussed in the above post) came to an abrupt end in 2013.
In 2013, locally produced Chinese films accounted for RMB12.8 billion of the total - representing a 58.7% market share.
Zhang Hongsen, head of the Film Bureau under the newly formed SGAPPRFT (the Chinese government agency formed when the State Administration of Radio Film and TV or SARFT merged with the General Administration of Press and Publication or GAPP), may have telegraphed that Chinese officials were willing to put their thumbs on the scale to favor local product back in April of 2013 when he touted figures showing that local films had increased box office share from 44% to 69% (year on year) in the first quarter of 2013.
An example of how Chinese officials might make it easier for Chinese films to compete with Western fare (besides quotas)? As reported in the Economist on December 21st, 2013, the Chinese government has rewarded independent producers for making films it approves of: For example "Desen International Media, a production company, received a bonus of 3m yuan for “Full Circle”, which promoted filial piety." And, SARFT (the predecessor to SGAPPRFT) has been known to "block Hollywood films during national holidays, to help Chinese ones."
The best performing Chinese film in the early part of 2013 was Stephen Chow’s “Journey to the West: Conquering the Demons.”
But after Stephen Chow's comedy-action success, numerous Chinese films were capable of holding their own against Hollywood fare (sometimes with what US filmmakers felt were unfair advantages granted by SGAPPRFT). Perhaps the best known (most notorious?) example of how local Chinese films now compete with Hollywood franchises occurred in the Spring of 2013 - when "So Young" and "American Dreams in China" beat back "Iron Man 3" only after So Young's youthful and very beautiful Chinese director, Vicky Zhao, reportedly "showed up at the [Film] Bureau and literally cried her way to sympathy and ultimate victory."
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