The Astonishing Rise of China's Fim Business Continues

In an April 6th, 2013 post to his invaluable ChinaFilmBiz blog, Robert Cain marshalls some truly breathtaking numbers about the growing number of modern movie theaters grossing record numbers in China.

Looking at these numbers, they add up to one inescapable point: The future of the theatrical film business will reside in China.

In Robert Cain's words:

"Under conservative assumptions, we’ll see China’s gross box office surpassing that of North America by 2018, and going on to double North America by the middle of the next decade. No other territory will come close even to North America, except possibly India. Hollywood’s century of hegemony over the global movie business will clearly soon come to an end."

In other words, if you're dreaming of a job in theatrical distribution, and you don't already know it, it may be time to learn Chinese.

Even some of my savviest movie business friends in the US and Europe still don't get it.

This week one of them tweeted me that "theatrical is dead."

I think he's wrong - or maybe just near-sighted.

The US and Europe are mature markets, where the theatrical audience for films may have peaked.

But what about China and India?

Western movie know-it-alls (myself included) need to appreciate just how real the changes in China and India are.

The impact of a rising middle class - with fewer entertainment options - in cultures that are movie-mad - cannot be ignored.

And it won't be.

It's just too tough to argue with the numbers that Robert Cain cites.

There is a HUGE theatrical business evolving in Asia - with sparkling new theaters and the beginning of a new tide of local films that draw on elements from the East and West in wildly unpredictable (but entertaining) ways.

It's now simply beyond question that Asia will soon dominate the global box office - and (unlike in the West, where the internet is seen by many in the film business as a force that threatens Old World revenue models) the coming explosion in internet connectivity in China and India is likely to only pour gas on a fire that's already pretty intense.

This last point (the positive impact of the internet on Asian cinemas) is admittedly a bit more speculative and to my knowledge even Robert Cain has not been opining (for the time being only perhaps) about the even greater changes that smartphones and tablets will bring to the way movies are marketed and shared in Asia.

But China Mobile is currently rolling out 4G to its 700,000,000 customers.

Read that number again. In a few years, China's state-owned telephone company will connect hundreds of millions of people in China with smartphones: Hundreds of millions of potential movie customers who aren't currently connected to social media through a mobile device, but who will soon have the greatest invention for recommending movies ever invented in their pockets. And the same phenomenon is about to hit India too - although probably not as dramatically.

What's going to happen to theatrical movies when perhaps a billion smartphones and tablets are suddenly connected all over Asia?

If you're worried about "piracy" you're wrong again.  (Come to think of it, you're probably also one of those people who loudly declaim that you'd never watch a movie on a mobile device, so what are you worried about anyway?)  You can't "pirate" a great in-person experience - and that's what the next generation of theatrical films must offer.  Mobile devices aren't for viewing the films that will succeed in theaters in the 21st Century - mobile devices are for learning about those films.  This distinction (just like the difference between a TV Movie and a Movie Theater Movie) will become clearer to those of you who still don't get it as the next few years unfold.

If you haven't thrown down your connected device (your Commodore 64?) in disgust at my lack of concern about "piracy," thanks.  Here's what I see happening in Asia in the next few years: Hundreds of millions of newly connected fans will begin to see trailers and recommendations on their mobile devices. In China this will happen at the exact moment that world-class digital movie theaters are opening in their towns - towns where there hasn't been much else to do and a consumer culture is rapidly taking hold (a new class of people who can finally aspire to certain types of entertainment, fans who already soak up games and television, but fans who haven't been adequately represented in big budget movies until now).

Is it too hard to imagine that Chinese moviegoers will go to theaters in even greater numbers when friends and marketers use these new devices to recommend new films?  Films that are theatrical experiences with local voices and faces?

Despite the machinations of the MPAA and other luddites (am I the only one paying attention to all the other businesses that have gone through a disruption in their sector and profited? Apple and the music business anyone? the movie business and VCRs?), isn't it clear that (while the sales of physical media will plummet) the internet will actually help to spread the word about the unique new experiences (e.g., 3D or an event film that must be seen in theaters this weekend with friends) to an audience that will have the economic power to yank the global movie business in their direction?

Is theatrical dead?

I don't think so.

Look at the numbers.

Then look to China.


Marco Sparmberg said...

hey randy,
we talked about that today and i just want to add some points to this discussion.
i'm a bit skeptical about the future growth rate in china. at the moment we see an audience that simply wants to consume. as society evolves this will soon change. also, i approach numbers coming from china only with high caution. we've heard so much about ticket sales scams orchestrated by the distributors or the theater chains. on top ticket prices are sky rocking and exclude a vast majority from even thinking about watching a film in cinemas.
the 4G rollout will have a great effect, yes. but hardly on cinema. in my opinion this will primarily fuel the smart TV movement and subsequent media merger of TV, mobile and home internet. numbers in this sector are far higher than those theater ones. chinese cinema is more and more isolating itself from the outside influences for various reasons and fails to address the actual wants of the own audience. most big budget films still tank (especially when they are period pieces) and the annual 100 mio RMB director club is still a manageable size.

Randy Finch said...

Thanks for the comment Marco. I realize that ticket prices in China currently present a barrier for many. But even if you’re correct and the Chinese box office numbers are exaggerated and the booming consumer culture there will soon slow down (I’m cautious but not as skeptical as you are about the trends in the reported box office figures from China, and I think you’re just wrong about how consumer culture has taken hold and will play out on the mainland) here’s my point: Even if a great majority of Chinese won’t be able to afford regular admission to the new theaters over the next few years, it is also undeniably true that theaters are being opened at an unprecedented rate there and it is also undeniably true that hundreds of millions of customers in Asia can afford theatrical films right now. That’s why films in theaters are undeniably booming in China and other South-East Asian territories right now (even the MPAA, which has been known to cook the books, and has no reason to exaggerate the numbers in China, agrees on this). Yes - I agree with you that the 4G rollout in mainland China will have an effect that will be strongly felt in the marketing and circulation of what used to be called “TV” programming. Convergence will be a huge story in Asia. But Chinese filmmakers who walk away from the theatrical opportunities that will play out in the next few years may live to regret their short-sightedness. I remain convinced that new theaters and smartphones (with apps and social media for marketing theatrical films) hold the potential for a significant (even if short-lived) boom in theatrical box office in China. And people who say that China's reported appetite for films isn’t for real or that theatrical is dead will be proven wrong.

Marco Sparmberg said...

yes, sure, the numbers right now are unprecedented, but then again we're talking about china which means the scale to measure these numbers is a total different one. even though i'm a mobile entertainment evangelist, i don't consider theatrical dead, not in asia anyways. it won't vanish but rather step back into a side medium like music concerts or opera. i see a tremendous potential in large format projections and especially FullDome which is very up and coming in the mainland. on the other hand i witness the slow death of theatrical in HK as screen sizes at home become bigger than in cinemas and average ticket prices climb far beyond the HK$ 100 mark. successful films are 2hrs of non-stop dialog typhoons and barely hold anything cinematic/visual anymore. so why bother going to the cinemas when one can get this on your phone on a daily basis for free? but this is hk, not the mainland.

however, there are a lot of additional factors in this equation most don't take into account. that a lot of prod houses rather make money with real estate and not their films is one thing. overall, the ties of film industry with the currently emerging real estate bubble in china might give this whole trend a sudden end. hence, my main concerns are more related to how sustainable this growth and how open the industry towards foreign players will be.

Randy Finch said...

On your last post, we're in total agreement. The current movie theater building frenzy in China feels like the leading edge of a real estate bubble. And non-Chinese filmmakers shouldn't be making too many plans for China based only on the events of the last few quarters... But history tells us that once a brick and mortar theater is built, even if the original owner goes bust, the facility often remains in business as a theater. And remember, globally the movie theater business has survived prior economic downturns (e.g., the great depression, the recent recession) and the competition from other forms of entertainment (TV, the internet, etc.). What does this all mean? In my view, there's no reason to think that China's current crop of new theaters will suddenly stop serving a large cohort of new customers - even if their economy takes an enormous hit. And I remain fascinated by the way social media can drive people to the theaters. So I think China's theatrical business is likely to emerge from the current period as an anomalous new market for movies. Like you, I realize that China's theatrical film business will be overshadowed by the huge potential of online convergence in China. My point is simply that Chinese movie theaters will be a viable and exciting place for filmmakers (yes, mostly Chinese filmmakers) over the next few years - and that to ignore the way new theaters, a growing consumer class and social media are combining right now in China is to miss what should be a very exciting time in the history of theatrical motion pictures.

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