Chinese Revenue for U.S. Films Has Doubled in Five Months

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by Robert Cain for China Film Biz

May 4, 2012

After more than a decade of sizzling hot, 35 percent annualized growth, China’s theatrical film market is showing no sign of slowing down.

In fact, as incredible as it may seem, the pace of growth has actually picked up. So far this year China’s box office revenue is growing faster than the historical trend. While the average per-film revenue for all films has remained flat through April, many more films are being released this year relative to 2011, with the result that total box office is up by nearly 40 percent.

American film producers have been the biggest beneficiaries of China’s latest growth spurt, as Chinese audiences have increasingly turned away from homegrown product in favor of U.S. tent-pole movies.

Since we last looked at China’s contribution to the global box office of U.S.-made films five months ago, the numbers have positively exploded. In 2011, the average American film release in China earned $19.5 million in ticket sales, and the median U.S. film saw 5 percent of its total global theatrical revenue come from China. This year both those figures have doubled, with the average U.S. film earning $39.2 million in Chinese box office receipts, and the PRC now accounting for 11 percent of the median U.S. film’s global theatrical revenue.  (Note: international revenues are difficult to come by; for this article I am relying on public sources such as boxofficemojo.com and IMDB.com, which may in some cases provide information that is inaccurate).

Even if we take Titanic 3D, an outlier if there ever was one, out of the calculation, the average U.S. film has still grossed $30 million in China this year, 50 percent more than in 2011.

At this pace, by 2014 I expect Hollywood films will routinely earn more ticket revenue in China than they do in North America. This prediction would have been outlandish even six months ago, but now it’s looking inevitable that China will soon rival the United States in importance to Hollywood. The reality that Chinese tastes will swiftly become a major driver of the global movie business is one that Hollywood is not yet prepared to deal with, but it is the raison d’etre of my company, Pacific Bridge Pictures. At Pacific Bridge we’re dedicated to developing, financing and producing China/foreign film co-productions, and we’ve consulted to numerous studios and entertainment companies on cross-Pacific media initiatives.

While things are looking up for American films, for domestic Chinese films the trend has gone in the wrong direction. Revenues for the average Chinese-made release in China have fallen by 40 percent, from $5.6 million in 2011 to less than $4 million in 2012. Hong Kong-made films and China-Hong Kong co-productions are down by 18 percent on average, though Taiwanese films have been the exception to the rule, soaring this year to an average of $8.4 million per film, up from $1.9 million in 2011.

Wang Zhongjun, co-founder and CEO of the prominent film production and distribution conglomerate Huayi Brothers recently said, “2012 is a prosperous but difficult year for Chinese films. As Hollywood is getting a larger portion of the market, we are concerned about the competition. Huayi Brothers feels the pressure, but we are putting the responsibility on ourselves.”

Wang went on to express a commonly held view: “Through the years of cooperation, all the foreign companies came to us with their only interest being how much revenue the Chinese market could hold for them,” he complained. “When I asked how much revenue they can bring in for us from the overseas market, they just couldn’t answer.”

Foreign producers had better be prepared to answer that question if they expect to continue to prosper in China. What China’s film industry, and the Chinese government, want more than anything is to become major players on the global stage. It’s unlikely that the PRC’s leadership will tolerate foreign domination of such a strategically important sector as media for very long. The smart long-term players are crafting strategies for cooperation and mutual benefit with Chinese partners. More on that topic next 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.

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