China’s Box Office Surges Ahead; On Pace to Nearly Double Japan This Year


By Robert Cain for China Film Biz

February 28, 2012

Several weeks ago I published an article asserting that China has surpassed Japan in box office revenue and is now, on a week-to-week and month-to-month basis, the 2nd largest theatrical market in the world after the United States. I forwarded this article to friends and acquaintances at several publications, including “The Los Angeles Times,” “The Wall Street Journal,” “The Wrap” and “The Atlantic Monthly.” To my disappointment and dismay not one of them picked up the story. I suspected that they and others doubted my figures were correct.

Over lunch in early February an acquaintance who runs international production for a major Hollywood studio confirmed my suspicion. He said he’d spoken with several of his executives and they told him that the numbers I was relying upon were wrong.

So I went back and double-checked my figures, and during the past few weeks while traveling in China I conducted further investigation. Having carefully studied the data and having interviewed a handful of experts in China, I must report that the studio executives were right, that my numbers were off. But not in the way they think.

My numbers for China, it turns out, were low; China is ahead of Japan by an even wider margin than I had thought, and it has been ahead for quite some time.

One major reason for the discrepancy is that I had failed to take into account China’s massive box office skimming. As I reported last week, according to most of the experts I consulted, as much as 40 percent of movie ticket revenue in China never makes it back to its rightful recipients, the distributors. If the ticket sales don’t get reported then they’re not captured in SARFT’s official figures, and so SARFT’s figures are too low.

But even if we disregard the skimming and rely on official figures—after all, the number that distributors care about is the amount that goes into their coffers—China still easily beats Japan by virtually every measure.

Comparing officially reported weekly box office results, China beat Japan in 7 of the first 8 weeks of 2012 (it also beat Japan in each of the last 3 weeks of 2011).  All told, China’s total gross for 2012 so far is 64 percent higher than Japan’s, at US $426 million vs. US $259 million.

2012 Weekly Box Office Results, China vs. Japan

Source: Pacific Bridge Pictures research

If skimming was indeed equal to 40 percent of gross receipts last year, then China’s real box office total for 2011 would have been close to US $3 billion, far ahead of Japan’s reported $2.2 billion.  While there may be some under-reporting in Japan, it is almost certainly modest compared to China’s, and there is little doubt that China has been out-grossing Japan for several quarters and possibly longer.

And why shouldn’t it? China now has more than 10,000 movie screens, with the number increasing daily. Japan, on the other hand, has only 3,400 screens and virtually zero growth. China’s box office for the first 8 weeks of 2012 was up by 49 percent relative to the same period in 2011; Japan’s was down by 3 percent .

Most important to those Hollywood studio executives I mentioned is how their own films fare in each market. And by this measure there’s no contest: China beats Japan hands-down. Each of the last ten Hollywood films to play in both markets earned more in China than in Japan, in most cases a lot more. The aggregate gross for the ten films in China was US $330 million versus $175 million in Japan.

Source: Pacific Bridge Pictures research (Note: Mission Impossible 4 ultimate China gross estimated at $107mm)

Assuming that Japan continues at its zero-growth pace for the rest of this year, and that China reaches $2.8 billion in officially reported revenues, the actual, unreported totals for 2012 would put China at $3.9 billion (2.8 billion plus 40 percent) and Japan at $2.2 billion.

So the question of whether China is bigger than Japan has been long settled. The real question now is how long it will take China to catch up with the U.S. It will happen faster than most realize, and when it does it will be too late for many to do much about it.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

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What Types of Films Over-Perform in China?


By Robert Cain for China Film Biz

December 4, 2011

For international distributors whose films underperform in the global market, China can sometimes offer a welcome boost. Even when they fall flat elsewhere, some foreign films perform extremely well with Chinese audiences. And occasionally, big global hits that do well everywhere do even better in China. This phenomenon is what distributors call “over-indexing;” that is, the situation when a film performs significantly better in a given market than its performance in other markets would lead one to predict.

With China now accounting for about 5 percent of global box office receipts—$1.6 billion out of about $32 billion worldwide in 2010—one would expect a “typical” foreign film to take in 5 percent of its theatrical revenue from a China release. And indeed, the median indexing film this year, Lionsgate/Mandate’s The Next Three Days, took in almost exactly 5 percent of its $70 million in global revenue from China (Note: international revenues are difficult to come by; for this report I am relying on public sources such as boxofficemojo.com and IMDB.com, which may in some cases provide information that is inaccurate).

Let’s take a look at the foreign films that over-index in China, and see what patterns emerge.

Sony’s sci-fi-action film Battle Los Angeles has been the highest indexing foreign film in China so far this year, with 15.4 percent of its global revenue coming from Chinese ticket sales.  On top of its $82 million in U.S. receipts, the film took in an additional $133 million overseas, with an impressive $34 million of that total coming from China.

As it happens, Battle Los Angeles is the prototypical China over-indexer. Almost every one of the top 10 over-indexing films in 2011 is either a sci-fi or action film, or in several cases, both.  CG special effects are also a big factor in these films, as is evidenced by the second highest over-indexer, Transformers: Dark of the Moon. Transformers earned a whopping $165 million in China, for 14.5 percent of its global total.

Although it presents an exception to the sci-fi/action rule, it’s fairly obvious why the third highest over-indexer, Kung Fu Panda 2, did disproportionately well in China.  In addition to its strong local cultural appeal, Kung Fu Panda, like Transformers, was a sequel to a franchise that had previously out-performed at Chinese theaters.

These films outperform in China for the same reasons they outperform in other non-English speaking territories: they are long on spectacle and (mostly) short on dialogue and character emphasis; they provide a level of effects and production value that can’t be matched by home-grown films; and they target the prime movie-going demographic of 12-25 year olds.

Of course, many films don’t perform so well. It can be just as instructive to take a look at those movies that under-index in China.

What went wrong with these films? Note that there are no science fiction movies on this list. Cars 2, an animated film, had no built-in following in China, and likewise for Rio and Alpha and Omega. It takes an especially targeted animated film like Kung Fun Panda 2 to draw Chinese audiences, or one with characters and stories that they know well.

Two of the other under-indexers, Thor and Captain America, are superhero pictures. There is no tradition of superhero stories in China, and apparently not as much interest in these types of films as there is in other markets.

As for Red and The Eagle, it may be that the casts or stories didn’t click with audiences, or perhaps that they weren’t marketed well. Both were distrbuted by the extremely busy China Film Group, and perhaps they just fell through the cracks at times when CFG had its hands full with other movies.

One big lesson to take away is this: For a producer with a sci-fi film that is likely to succeed in China, it’s worth considering making it as a co-production, in order to get around the import quota. Co-productions return as much as 40 percent of Chinese box office revenues to their owners, as opposed to just 13-15 percent for quota films. In the case of a film that grosses $100 million or more in China, the extra revenue could make it worth the extra effort of working with Chinese partners. And with the way China’s box office is growing, there are certain to be many more $100 million grossers in the future.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.