Hollywood's Box-Office Market Share Down Sharply in China

'Operation Red Sea' Still - Publicity - H 2018
Emperor Motion Picture Group

Ticket sales for studio imports have fallen 24 percent this year in the massive market, the largest drop since the country's box-office boom era began.

Trump's trade war with China has yet to directly impact the entertainment business, but Hollywood's position in the massive Middle Kingdom marketplace is becoming somewhat precarious.

That was the takeaway of a recent in-depth presentation on the state of the Chinese theatrical marketplace given by box-office analyst Rance Pow, CEO of consultancy Artisan Gateway, at the fifth annual U.S.-China Film & Television Industry Expo held in downtown Los Angeles.

"Hollywood studio product is down 24 percent so far this year in China," Pow revealed during his data-packed keynote in front of the U.S. and Chinese industry crowd on Sept 26. "On a year-to-date basis, Chinese-language films are out-preforming while imports are underperforming." 

With nearly three-quarters of 2018 elapsed, total tickets sales for U.S. studio imports have fallen to 11.3 billion RMB ($1.64 billion) from 15 billion RMB ($2.17 billion) during the same period in 2017. Meanwhile, Hollywood's shortfall has been "more than made up for by a surge in Chinese-language box office," Pow explained.

By this time last year, total revenue for Chinese films was 20.1 billion RMB ($2.92 billion), but in 2018 sales have grown 46.7 percent to 29.5 billion RMB ($4.28 billion). (Revenue for other non-studio imports from the U.S. and other territories is also down: 4.2 billion RMB in 2018 from 4.5 billion RMB in 2017).

Thanks to the huge gains of locally produced titles, China's total box office remains up a healthy 13.7 percent for the year so far. "This is interesting because there's lots of talk in the industry about the difficulties of creating, distributing and marketing films in China, but the results we're seeing this year are simply a fact of a [Hollywood] product cycle that isn't being taken up as quickly by the Chinese audience."

Hollywood's China doldrums also are notable given that the U.S. studios are enjoying a banner year at the North American box office, where summer ticket sales jumped 14 percent. The divergence suggests that the Chinese market's loosening embrace of Hollywood fare is being driven by changing tastes rather than an off-year in overall product quality.

Pow cited two factors that appear to be contributing to the market shifts: the increased quality of Chinese filmmaking and ongoing cinema construction in China's rural regions, which tend to be less cosmopolitan and less receptive to foreign content.

"The fact of the matter is that Chinese-language films are getting better," he said. Six films have earned more than $300 million at the Chinese box office in 2018 to date, but only one — Marvel and Disney's Avengers: Infinity War ($359.5 million) — was from Hollywood. "This is a key point to keep in mind when we assess opportunities within the market as foreign producers, investors and distributors," Pow explained. "[Chinese films] in fact are getting very good, and without the crutch of the regulatory environment — they are simply connecting very strongly with their audience."

Some of the 2018 Chinese box-office highlights Pow cited were Bona Film Group's military action flick Operation Red Sea, which earned $575.9 million from a budget of $73.5 million, and Beijing Culture's summer hit Dying to Survive, which brought in a whopping $451.9 million from a budget of less than $15 million.

Presenting data showing the concentration of recent cinema construction in provincial China, Pow said: "What we see is that as we go further and further into the rural markets, the box office indeed continues to grow, but most of that success is weighted in major Chinese-language films — which means that Chinese tastes in film, and what sells big tickets, is becoming more and more local."

"As you get further screen development into the rural areas, we see this as possibly not only continuing, but accelerating," he added.