China Box Office Growth Slows to 9 Percent in 2018, Ticket Sales Reach $8.9B

Emperor Motion Picture Group
Dante Lam's 'Operation Red Sea' was China's biggest film of 2018

Chinese state media reported that growth slipped from a rate of 13.5 percent in 2017, but the full picture is somewhat murkier.

China's movie box office revenue grew 9 percent to $8.9 billion (RMB 60.98 billion) in 2018.

The expansion would be considered impressive in most markets, but it represents an ongoing slowdown for China, the world's second-largest film territory and a continual source of growth for Hollywood for the better part of a decade.

Chinese state media reported that box office revenue growth was 13.5 percent in 2017, with this year marking only a modest decline. As with everything related to government statistics in China, the complete picture is somewhat murkier, however.

Over the past three years, drawing conclusions about China's box office growth has been complicated by Beijing's decision to include new service fees in official revenue totals.

In 2016, China's box office experienced a shock correction, with growth plummeting to just 3.7 percent from a roaring 48 percent rate in 2015. Perhaps in response, at the start of 2017, China's media regulator quietly began including service fees charged by online ticketing companies when reporting box office figures. Given that nearly 90 percent of all film tickets are sold over such platforms in China, including the fees represented an instant jolt to official box office tallies.

The move was somewhat controversial, though, as the service fee revenue goes to technology companies rather than entities traditionally associated with the film industry, like studios, distributors and theater chains. Many viewed the move as an effort to juice official growth numbers.

At the end of 2017, state regulators included the fees in the official full-year box office total (RMB 55.9 billion, or $8.6 billion at exchange rates at the time) but subtracted it from the growth rate, which resulted in a reported expansion of 13.45 percent rather than 22.3 percent (including the fees).

For 2018, regulators included the fees for calculating both the full-year box office total and overall growth rate. They did not mention that the rate used for 2017 did not include the fees, however, presenting this year's 9 percent growth rate as a year-on-year comparison to the 13.5 percent rate for last year (without fees) rather than 22.3 percent (including the fees).

The 2017 decision to include the online service fees created unavoidable distortion, and perhaps it's unsurprising that Beijing decided to bend the numbers to its benefit, suggesting a modest recovery in 2017 — rather than another spike — followed by a softer decline in 2018. Notably, though, no caveats or asterisks have accompanied any of the official box office reporting from Beijing state media.

However it's framed, 2018 was a strong year for many of China's biggest domestic film studios though. Chinese-made films claimed 62.2 percent of total ticket sales in 2018, a big jump from the local industry's 53.8 percent share last year.

A breakdown of revenue for U.S. film imports versus movie product from other international territories wasn't included in the official state data released thus far, but the Hollywood majors are expected to have logged a significant decline in the Middle Kingdom this year. According to early reporting from regional box office tracker Artisan Gateway, revenue from U.S. studio films released through China's quota system was down 16.5 percent in late December. The slide is all the more notable given that the North American box office soared to an all-time record total of $11.9 billion in 2018 — suggesting product quality alone can't explain the downturn in China.

The five biggest films at China's box office last year were local blockbusters Operation Red Sea ($532 million), Detective Chinatown 2 ($496 million), Dying to Survive ($452 million), Hello Mr. Billionaire ($367 million) and Hollywood's solitary top-five contender Avengers: Infinity War ($349 million).

Back in 2013, China overtook Japan to become the world's second-biggest theatrical film market. Since then, analysts have continually revised their forecasts for when the Middle Kingdom will unseat North America as the worldwide number one. During China's roaring industry growth of 2014 and 2015, the date was often pegged at 2017 or 2018. Lately, most research firms place the occasion much further out — a November report from Ampere Analysis scheduled China's ascendance for 2022.