China Passes Japan and is Now the World’s #2 Film Territory


By Robert Cain for China Film Biz

February 2, 2012

You heard it here first: China has surpassed Japan and is now the world’s biggest film territory outside the United States, as measured by total box office revenue.

For the past several months China has handily beaten Japan’s national box office take, and the gap is widening as China’s torrid pace of revenue growth continues.  Although China’s annual total of $2.05 billion for 2011 fell slightly behind Japan’s $2.29 billion, the last few months of 2011 and January of 2012 saw China surge ahead. 2012 will undoubtedly be the year in which China solidifies its position as the world’s number 2 market behind the United States.

.                    Source: Pacific Bridge Pictures research

.             Source: Pacific Bridge Pictures research

Now it is just a matter of time—about 6-7 years if current trends continue—before China overtakes the United States to permanently become the world’s biggest and perhaps most important movie territory.

For Japan, the lingering effects of the 8.9 magnitude earthquake and tsunami that devastated the country last March have certainly been a factor in its descent to #3. Hobbled by the damage to northeastern Japan’s infrastructure, and by a dampened national mood, box office dropped by 10 percent (nearly 18 percent in local Yen currency) from the record-breaking tally of $2.66 billion in 2010.

But even had there been no earthquake, Japan would have inevitably yielded the number two spot to China by 2013. Japan, like the U.S., has been a mature market for some time; even if we dismiss 2011 as an aberration, the annualized box office growth rate there has been in the low single digits for years. China, by contrast, has been growing by nearly 40 percent per year for a decade.

And aside from total box office, China outperforms Japan in other key measures. As a market for Hollywood films, China has the clear edge over Japan. Of the 26 Hollywood films that were released in both territories in 2011, 19 grossed more in China than they did in Japan, many by a very wide margin. Transformers 3 and Kung Fu Panda 2, for example, each grossed 3 times as much in China as they did in Japan. Had China allowed more American films into its theaters last year, it would have undoubtedly surpassed Japan in total box office in 2011.

.       Source: Pacific Bridge Pictures research

China also offers better upside for its domestic films than Japan does for its films. The top grossing Chinese films of the past year—The Flowers of War, Flying Swords of Dragon Gate, Let the Bullets Fly and Aftershock—have all earned more than $85 million in their domestic Chinese releases. During the same period, not one Japanese-made film cracked even $60 million in Japan.

The implications of China’s rapid ascension are enormous for the global entertainment business. As China’s theatrical business grows, so will its television and home video industries. In the coming years China’s global share of the entertainment pie will expand from the low single digits to 20 percent and higher, and China’s buyers will rapidly gain clout in deciding which films get made, and how and where they are produced. The flows of capital for production and marketing of movies will increasingly come from China. By simple attrition, U.S. tastes will become less dominant, and Chinese tastes will become more influential.

Hollywood’s major studios have been extraordinarily slow to respond to China’s emergence. It is no longer reasonable for them to expect that China will play by their rules, or that Hollywood will remain the world entertainment industry’s center of gravity for much longer. Any of us who hope to enjoy career longevity in the global film business had better start thinking and acting more with China firmly in mind.

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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A Sweet and Sour Week at the Cinema


By Robert Cain for China Film Biz

January 4, 2012

It was a December to remember in China, with the national box office hitting a new record at just over $2 billion. What has been most noteworthy about the past year—and the past decade—is the Chinese cinema industry’s extraordinary rate of growth. The quadrupling of the country’s overall economy in the decade since 2001 has been astonishing enough, but that was barely a blip compared to the nearly thirty-fold growth of China’s theatrical box office during the same period. In the blink of an eye China has matured from a minor film territory into an international powerhouse, the country to watch.

One of the bright spots in December was the ongoing competition between Zhang Yimou’s The Flowers of War and Tsui Hark’s Flying Swords of Dragon Gate. Both films performed extremely well, becoming the two highest grossing Chinese language films of 2011, with nearly $77 million in revenue for Flowers and $69 million for Flying Swords so far.  Both are in contention to possibly break the all-time record gross in China for a Chinese-language film, which is currently held by the 2010 release Let the Bullets Fly with $105 million.

And yet, in some ways December was a disappointment. Without a single major Hollywood film released during the entire month, Chinese audiences had limited choices at the multiplex, and many stayed away. For the week ending January 1st, revenues declined by 4.5 percent compared with the same week in 2010, despite higher ticket prices and nearly 3,000 new movie screens in operation. Per-screen averages were down by about 40 percent from last year.

Six new films opened last week, but their combined revenue amounted to less than $6 million, with the Chinese action pic Speed Angels leading the way at $2.4 million. Speed Angels was the seventh film of the year released by the successful indie distributor Enlight, but it fell far short of the company’s 2011 hits Mural ($27 million gross), All’s Well Ends Well ($24 million), and White Vengeance ($23 million).

The lone American opener was the Daniel Craig-Rachel Weisz ghost thriller Dream House, which echoed its weak U.S. opening with a tepid $1.4 million take at the Chinese tills.

Flowers and Flying Swords should continue to lead the market for the next two weeks, as there won’t be any serous competition until January 15th, when Sherlock Holmes: A Game of Shadows, hits the theaters. Things will heat up after that, with the Jay Chou action vehicle The Viral Factor opening on the 19th, and All’s Well Ends Well 2012 opening on the 20th.

Late in the fall American movies’ share of the Chinese box office was above 50 percent, but because the last Hollywood blockbuster release of the year—The Adventures of Tintin—came all the way back in mid-November, U.S. box office share drifted down to 46 percent by the end of the year. Home grown Chinese films captured a 24 percent share and China/Hong Kong co-productions took 22 percent.

        Share of China Box Office receipts by Film’s Country of Origin, 2011

Look for more 2011 box office analysis in an upcoming post later this week.

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.

China’s Box Office: Zhang Yimou’s ‘Flowers’ Still Smell Sweet


By Robert Cain for China Film Biz

December 27, 2011

For the week ending December 25th, 2011, Flowers of War and Flying Swords of Dragon Gate once again held the first and second spots in what was a very good but not great weekend at the Chinese box office.

The $71 million cumulative box office total may look good at first glance—indeed, it was the second best week of 2011 after Transformers 3’s opening week in July, and Flowers set a new single-week record for a Chinese film. But the total box office was actually up only 4 percent on a Chinese RMB basis compared with the same week last year. And considering that there are 45 percent more movie screens operating across China now than at this time last year, the past week’s box office looks downright unimpressive by comparison.

The problem may have been the oversaturation of Flowers and Flying Swords. Those two pictures grabbed up more than 80 percent of China’s 9,000 screens, leaving little else in the theaters for moviegoers who might have wished to see a different film. The strongest new opener, China Film Group’s romance Dear Enemy, managed just $6.5 million in sales, and the second best, The Allure of Tears, brought in $3.8 million. The rest of the field, a mix of 3 holdovers and 3 new releases, every one of them Chinese, brought in a grand total of $600,000.

Flowers of War will pass Beginning of the Great Revival this week to become the highest grossing Chinese film of 2011. With a couple more strong weekends it could possibly challenge Kung Fu Panda 2’s  $92 million China gross for the number two spot among all films released this year. But even if it does reach that lofty height, Flowers will only recoup a third or so of its negative cost in China. In order to break into the black it will have to gross, at minimum, $120 million in the international marketplace. This has only happened once before for a Chinese film, when Crouching Tiger, Hidden Dragon became a breakout hit in the United States back in 2001. Flowers of War lacks the compelling narrative, the exotic appeal, and the universally resonant themes that Crouching Tiger offered, so the possibility that Flowers might replicate those numbers seems remote.

The most important box office news this week is that China’s cumulative gross for the year has definitely crossed $2 billion, making it only the third country in history, after the U.S. and Japan, to reach that mark. Even more remarkably, it was only last year that China crossed the $1 billion mark for the first time ever. The above analysis notwithstanding, a $71 million box office haul in one week would be extraordinary anywhere in the world outside North America; it’s indicative of China’s incredible growth that the number fails to impress only by comparison against last year’s numbers.

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.

Dragons and Flowers and Swords, Oh My! A solid box office weekend in China


By Robert Cain for China Film Biz

December 19, 2011

The hotly anticipated box office duel between the Zhang Yimou/Christian Bale historical epic The Flowers of War and the Tsui Hark/Jet Li wuxia action pic Flying Swords of Dragon Gate came to a head last week with solid but not record-breaking results.

Both films did brisk business, with Flowers pulling in $23.9 million versus Flying Swords’ $22.3 million, but their producers were undoubtedly hoping for more.

With its reported $91 million budget, Flowers of War needs to do Avatar-sized numbers (that film cumed $208 million in China in 2009-10) to have a profitable theatrical run, but it failed even to exceed the opening of the $1.4 million budgeted Love is Not Blind, which took in $28.5 million in its opening week back in early November.

Although it’s too early to say for sure, it looks unlikely that Flowers will break $100 million in Chinese ticket sales, much less the $200 million it needs. Given its limited international prospects due to its dark and China-specific subject matter, Flowers could earn the unwelcome distinction of becoming the biggest money-loser by far in China this year.

Bona Group’s Flying Swords also slightly under-performed relative to expectations, but with its much lower $35 million budget and its stronger international appeal, it will be much more likely to recoup its investment. Both films will be pinning their hopes on a strong finish to 2011; as in many other territories, the last few weeks are traditionally among the best of the year in China.

Overall, box office totaled $50.8 million for the week ending December 18th, a 34 percent increase over the same week last year, when Let the Bullets Fly began its record-breaking run with a $27 million opening.  It was also a 122 percent jump from last week’s $22.8 million.

Flowers’ and Flying Swords’ respective box office performances made for the 4th and 5th best opening weekends of 2011, and together with The Adventures of Tintin they raised the count to 30 films that have grossed $20 million or more in China since January 1st.

By my tally, as of last Sunday the PRC’s total box office for 2011 now stands at $1.92 billion, with 13 more movie-going days to go. If Flowers and Swords hold up, as I expect they will, and if the year’s remaining 9 new releases do at least a fair amount of business, China will exceed $2 billion for the first time. Considering that total national box office was less than $200 million just 7 years ago, that would be an auspicious way for the film industry to enter the new year.

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.

SARFT Report Confirms It: China Box Office to Exceed $2 Billion in 2011


By Robert Cain for China Film Biz

December 16, 2011

SARFT Chairman Cai Fuchao picked an auspicious day, December 15, to announce the latest statistics for China’s cinema business. While two just-opened films featuring Christian Bale (Flowers of War) and Jet Li (Flying Swords of Dragon Gate) battled for moviegoers’ attention and drew huge crowds at the theaters, Cai dropped the news that box office revenue in China this year has already exceeded 12 billion RMB, or US $1.86 billion at 2011’s average exchange rate. Cai also noted that the country’s cinema screen count has crossed the 9,000 mark, a 45 percent increase over the 6,200 screens operating at year end 2010.

That 12 billion figure was for the week ending December 11, which means that there are still 3 more weeks in the year for China to extend its record breaking revenue surge. With last night’s screenings of Flowers of War and Flying Swords reportedly running at better than 90 percent of capacity and with ticket prices high$12.50 for Flowers and nearly $19 for the 3D Flying Swords—these two films alone will likely push China past $2 billion for the year.   

For those of us who closely track China’s film business, Cai’s announcement was like water in the desert, as SARFT only announces these figures a few times a year. Both the box office and screen count numbers were positive surprises for me. It now appears certain that box office growth will hit or exceed the 30 percent rate I had predicted. New screens have been opening at a rate of 8 per day, and the current screen count has surpassed my year-end estimate of 8,900.

Total revenue has expanded by a staggering 110 percent in just two years, and is up more than six-fold in the past 5 years. When compared with North America’s sluggish growth of less than 2 percent per year (actually, negative growth on an inflation adjusted basis), it’s mystifying that Hollywood’s major studios haven’t deployed teams of their best people to tackle the opportunities there.  Most are largely sitting on the sidelines, tossing a picture or two a year into Chinese theaters, and mainly just watching the China juggernaut pass them by.

For 2011, China’s box office growth has once again nearly quadrupled the country’s overall GDP growth rate, at least the 8th year in a row that it has done so. And contrary to those who think the industry is due for a downturn, I believe China’s film business is still in its infancy.  It will most likely pass Japan in 2012 to become the world’s biggest territory outside North America; give it 7 or 8 more years and China will pass North America. The reasons for this continuing surge have to do with income growth, improving availability and quality of films, and especially rising screen count. Cinemas will continue to be built because there is a huge shortage of them: China has dozens of cities with populations larger than Boston or Washington that still lack a single multiplex.

There exists a fairly predictable straight-line correlation between the number of cinema screens in a country and total box office revenue. If you build it, they will come, so long as you aren’t over-built. Even with its spectacular 10-year long cinema expansion, China is still the world’s most under-screened major market. Given the country’s projected GDP and per capita income growth, it can build another 50,000 screens and still not be anywhere near over-built. With upside like that, fortunes are just waiting to be made.

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.

China’s Box Office: The Calm Before the Storm?


By Robert Cain for China Film Biz

December 14, 2011

For the week ending December 11th, White Vengeance held the top spot for the second week in a row in a disappointingly sluggish frame at the Chinese box office. While Vengeance grossed a respectable $8.3 million for the week to up its cume to $21.4 million, the 5 new openers combined mustered an aggregated gross of only $5 million between them.

Tops among the new entrants was South Korea’s monster flick Sector 7, which picked up $2.5 million, good enough for second place and also making it the highest grossing Korean film in China this year. Far behind among the new releases was India’s Bollywood smash hit from 2009, the Aamir Khan starrer 3 Idiots, which despite amassing a $55 million total in India, managed a scant $1.2 million from Chinese theaters.

Priest and The Adventures of Tintin held onto the 3rd and 4th slots, respectively, raising their cumes to $5.3 million for Priest and $20.4 million for Tintin. Distributor DMG has done a respectable job in handling Priest; despite the conventional wisdom that horror doesn’t click in China—not to mention the fact that vampire movies are technically prohibited under SARFT rules—the picture has significantly over-indexed in its PRC release, earning an estimated 8 percent of its worldwide gross there.

White Vengeance became the 34th film of the year to join the 100mm RMB/$15mm club, double last year’s total of 17. Of those 34 films 17 are from Hollywood, 9 are from China, and 8 are China-Hong Kong co-productions.

Breakaway rom-com hit Love is Not Blind winds down its run with nearly $56 million, making it the second highest grossing Chinese language film this year behind Beginning of the Great Revival.

All told the week was one of the slowest of the year, with total receipts of $23.4 million, a 21 percent dip from the same week in 2010.  Many are hoping that the year-end box office will kick into high gear next week when the $35 million budgeted Tsui Hark/Jet Li wuxia action romp Flying Swords of Dragon Gate opens against the  Zhang Yimou/Christian Bale $90+ millon historical epic Flowers of War.  Both pictures represent big gambles for their backers, as each will need to make record or near record box office numbers in order to recoup its investment.

Indeed, with questionable prospects outside of China due to its dark subject matter and contrived, melodramatic plotting, Flowers of War will need to gross well over $200 million in China to pay back its reported $91 million investment. That would be double the existing record for a domestic release of a Chinese language film (Let the Bullets Fly at $111 million). Although director Zhang Yimou is a huge draw in China, and star Christian Bale is well known there, it’s unlikely that this film has the commercial juice to pull in the Avatar sized numbers it needs.

Flying Swords of Dragon Gate seems the likelier of the two films to achieve commercial success. The Tsui Hark/Jet Li pairing represents a potent box office combo with a long pedigree of success. The Once Upon a Time in China films they made together are well-loved around the world and propelled both of their careers as masters of the action genre. And it should also help that Flying Swords is a remake of the beloved classic 1966 King Hu film Dragon Gate Inn, one of my personal all-time favorites.

Still, as Chinese audiences have proven, nothing is certain and anything is possible. Both films should perform well, and it won’t be much of a surprise if this turns out to be the biggest week at the box office this year.

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.

Chinese Audiences Screaming For “Vengeance”


By Robert Cain for China Film Biz

December 9, 2011

Writer-director Daniel Lee’s period action epic White Vengeance led a crowded field of new entrants to take the Chinese box office crown last week with a gross of $13.1 million. This was enough to give the China/Hong Kong co-production the 7th best opening week for a non-Hollywood film this year, and the 13th best opening week amongst all films.

The rest of the field, which included a total of 7 new films, failed to excite moviegoers. Second place went to another China/Hong Kong co-pro, holdover East Meets West, which took in $3.4 million. Two of the openers were foreign imports: the critically panned Screen Gems action-horror flick Priest, which grossed $3.1 million for DMG, and Terry Gilliam’s France/Canada co-pro fantasy The Imaginarium of Dr. Parnassus, which picked up just $1.2 million for Huaxia.

Still, total box office for the top 10 films amounted to $30.6 million, a decent if not spectacular week.

It will take some major hits in the next few weeks for China’s total theatrical revenue to cross the $2 billion mark in 2011, but that’s exactly what might happen, with two big Chinese blockbusters slated to open against each other on December 15th. Tsui Hark’s $35 million action film Flying Swords of Dragon Gate, starring Jet Li, will go up against the $100 million Zhang Yimou-Christian Bale historical epic Flowers of War.

The rivalry between the producers of these two films will add some spice to next week’s box office competition. The feisty and outspoken Zhang Weiping, producer of  Flowers of War, has banned Bona Group, the producer-distributor of Flying Swords from carrying his film in Bona’s company-owned theaters, claiming that Bona has dragged its feet in paying Zhang monies owed on previous films.

Whatever happens, look for box office records to be broken as these two highly anticipated movies kick-off China’s peak holiday season.

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.