China b.o. set to double by 2010

But piracy, lack of cinemas holding real boom in check

LONDON -- Boxoffice revenues in China are predicted to more than double by 2010, according to a report published Thursday by research specialist Screen Digest and Nielsen NRG.

Titled "China: The Opportunities for the Cinema Industry," the report says that, from 2001 to 2006, boxoffice returns tripled to $336 million. Screen Digest forecasts that by 2010 these revenues will exceed $720 million.

The research also predicts the number of screens will rocket upward in line with revenue growth -- almost doubling from 2,940 in 2005 to 5,000 by 2010.

The report also looks at three major obstacles facing players looking to get a slice of the action in China.

The first major hurdle flows from the fact that the Chinese government has only partially liberalized the market to allow foreign investment.

It points to the China experience of Warner Bros. International Cinemas, which saw the studio invest heavily upon entering the market in 2003, only to pull out three years later in the face of tight government control and investment regulations.

On a brighter note, the report also points to a boom in China's production industry, which has seen restrictions loosened, making China the third-largest movie producer in the world, after India and the U.S.

The second big hurdle facing producers and distributors in the territory is piracy. Estimates put Chinese video piracy rates at 95% at the end of 2005, billed as "a major challenge for any company trying to make a profit from film."

Finally, the report points out that the majority of Chinese never visit a cinema or even have access to one. The report has identified a "Cinema Class" of urban, middle-class consumers who can afford the high ticket prices of 30 yuan to 80 yuan ($3.50-$10) for a standard seat and 120 yuan ($15) for a VIP seat, some of whom go to see a film at one of China's new modern cinemas on average seven times a year.

This group is currently estimated to represent just 19% of the population, yet the appetite for films across the entire Chinese population "is potentially huge," the report says.

"Rampant piracy means every new film release is available to buy on the street at a fraction of the cost before it reaches the cinema theater," Screen Digest analyst and report author David Hancock said.

"High ticket prices mean the thrill of experiencing one of the new multiplexes isn't enough to get the average worker to spend a significant proportion of their monthly salary at the boxoffice. To reach anything like a mass market, China is going to need more cinemas across the country, not just in the major urban centers, and significantly lower ticket prices."
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