East-West Lines Blur At China Box Office
Two interesting new reports about China’s box office paint very different pictures about the country’s movie industry. Everyone agrees the sector is growing at a rapid clip, and will probably eclipse the US over the next decade to become the world’s largest box office. But who exactly is fueling that growth is a subject of debate, with one report saying domestic productions are suddenly surging as another says Chinese film companies are boosting their appetite for foreign productions. The underlying factor behind this apparent paradox is a growing confluence between East and West, with foreign studios increasingly working with Chinese partners and customizing their films for Chinese audiences.
Let’s start off this look at the China box office with the latest big-picture numbers, which show China’s movie sales surged 35 percent in the first 9 months of the year to 16.4 billion yuan, or about $2.7 billion. That growth accelerated from a 30 percent increase in 2012, when box office proceeds totaled 17.1 billion yuan, according to a report in the China Daily. The government ministry that oversees the sector is crediting a boost in domestically produced films for the accelerating growth.
The report says domestic productions accounted for 58 percent of the market in the first 9 months of the year, up sharply from 48.5 percent of the total box office for all of 2012. Of course it’s possible that the big jump in domestic films is due to the improving quality of such productions. Industry watchers will also know that Beijing often manipulates the release of foreign films in China in ways that will benefit competing domestic productions.
But perhaps most significantly, a growing number of films that are technically domestic also have strong foreign elements, and an increasingly number of foreign films also have a strong domestic slant. This summer’s latest installment of the “Iron Man” superhero series included scenes made just for China; and the newest movie in Paramount’s popular “Transformers” series is now being co-produced with a Chinese partner and partly shot in China, meaning it’s likely to be classified as a domestic production when it’s released next year. (previous post)
Meantime, another media report is saying that most of China’s largest film makers were on hand looking for new material at this year’s American Film Market taking place in Los Angeles this week. (English article) AFM organizers said an A-list of Chinese buyers have come for the event, including Bona Film (Nasdaq; BONA), Galloping Horse and Wanda Group.
All 3 of these companies have growing Hollywood connections through their various business activities over the last year. Bona has strong ties to 20th Century Fox, after Fox parent News Corp (Nasdaq: NWSA) purchased 20 percent of the Chinese firm last year. (previous post) Galloping Horse also made headlines last year when it purchased Digital Domain, the bankrupt special effects house with strong ties to “Titanic” director James Cameron. (previous post) And of course many will remember that Wanda also made headlines last year when it purchased AMC Entertainment, operator of the second largest US movie theater chain.
In addition to that trio, other big-name Chinese film buyers at AFM included Huayi Brothers (Shenzhen: 300027), Enlight Media and China Film Group. This group of mostly private companies is increasingly sophisticated, and equally important are quite commercially focused and thus likely to chase films with the best chances of success in China. Many of these companies are also well-connected with Chinese regulators, meaning they can help Hollywood filmmakers navigate China’s complex regulatory environment that includes strict quotas on foreign film imports.
At the end of the day we’ll probably continue to see more mixed messages coming from domestic and global media, with the former spotlighting the rise of Chinese films and the latter harping on the huge potential for imports in the market. To me it looks like a case of everyone wanting to spin the story to their advantage, and I do expect we’ll see a win-win situation for both Hollywood and increasingly sophisticated domestic filmmakers in the next decade.
Bottom line: A growing group of increasingly sophisticated Chinese film buyers are blurring the lines between Hollywood and domestic movies, which will both benefit as China’s box office booms.
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