China’s Box-Office Inequality

So-Far, Only 6 Chinese Films Have Been Profitable in 2018 (Reportedly)

By Ryan Carroll, Editor-at-Large

July, 2018.

According to WeChat / Weixin’s media account Yiqi Pai Dianying of the Top 50 grossing local films at the China box-office for the first half of the year, only 12 made a profit and only 6 broke even. That means of the Top 50 Chinese films released in China, 32 films bombed at the box-office!

As speculators continue to discuss the “certainty” of the China box-office overtaking North America’s, by as soon as next year, they are yet again missing key points to what really makes up the box-office. Highlighting the fact of China still being an immature market, and the facing of another major slump in the box-office. Is a real possibilities.

If another slump occurs, it will not be due to the discontinuation of cheap subsidized movie tickets from the mobile ticket app wars of yesteryear. One that Alibaba’s Tiao Piaopiao seemingly won, with a current market share of 40%, but one that is slowly being creeped upon by Tencent backed Maoyan-Weiying. The merger of the number two and three ticketing apps, Maoyan Culture and Weiying Technology.

The only reason why China’s box-office has seen an uptick in its year-on-year growth is largely due to just a few of those movies that “made a profit” in Q1 &Q2. Namely; Operation Red SeaDetective Chinatown 2Monster Hunt 2, and most recently the surprise mega-hit Dying to Survive ($420MM and counting).

All four of these films have made between $360MMUSD (the box-office disappointment, that was Monster Hunt 2) to $579MMUSD (Operation Red Sea, the second highest grossing movie – so far – in China).

China is witnessing box-office inequality.

An issue that is not really something new to the Middle Kingdom, but since the 2016 box-office boom it is appearing to grow larger. As the overall box-office continues to rise. An issue that could cause major disruption to the industry, if an unforeseen force unrelated to the box-office preventing audiences from turning out in droves for these key event movies.

No matter how much the box-office, especially the growing international box-office, is talked about in regards to Hollywood. The box-office in reality makes up only 30% of the revenue studios take in from the films they produce – and this is taking into consideration worldwide box-office takes for these films.

Ancillary revenues for films; from Home Video (DVD / Blu Ray / LaserDisc!) to VOD, cable, streaming, and airline & cruise ship rights. Provide years if not decades for certain films (John Carpenter’s The Thing once a box-office bomb is now a Cult Classic, producing revenue for Universal Pictures for over three decades).

While other types of films such as the MCU – Marvel Cinematic Universe – with over $17BnUSD so far at the box-office, and billions more via Home Video sales (MCU films sell on par with animated features – a rarity in the Home Video circuit for live-action).

But, Disney did not buy the Marvel for its box-office potential, and even with $17BnUSD in box-office returns, it is still not the revenue stream the MCU Business Model is built around.

The MCU Business Model has its roots all the way back to the Saturday Morning Cartoon of the 80s. The heyday of the action figure business. Were the Saturday Morning Cartoon, be it; He-Man GIJOE, ThunderCats or Voltron: Defender of the Universe. The Saturday Morning Business Model was, to produce a cartoon that was basically an advertisement for the toy lines that were being sold.

If kids knew what they were missing out of Saturday Morning Cartoons and the toys they produce, they would rise-up to overthrow their parent overlords in retaliation.   – source unknown…..

This business model was so effective that properties from major toy manufacturers, Hasbro’s Air Raiders (one of the coolest toys of the 80s that only saw one line of production) that did not have a tie-in Saturday Morning Cartoon rarely lasted. The business model was so successful that fringe conservative groups, similar to the comic book scare of the 1950s, and more recently the blaming of juvenile behavior on violence in video games, effectively shut down Saturday Morning Cartoons by the mid-90s.

China on the other hand does not have a mature enough market to see derivative revenues beyond the box-office, (link) which contributes to 90% of all revenues seen by Chinese studios.

The 32 films mentioned above, that did not turn a profit, is but a fraction of the number of local films released in the first half of 2018 that have provide losses to their investors and studios backing them. Showing the need for the continued growth of IP in the Chinese entertainment industry, or the industry itself could face a structural crisis if there is a turn at box-office in the near future.

A turn that just two weeks ago witnessed the most expensive movie made (and released) in China, become one of the biggest box-office bombs in modern cinema history. In less than ten days.

Out of 271 local film released so far this year, all but 18 have failed at the box-office. That’s a whopping 253 films that have “lost” money for the people behind them. It is also unclear how downstream sources are contributing to their bottomline, such as the growing rise of streaming platforms in China.

One thing is clear, the China box-office is not the solidified threat as many pundits and industry insiders think, but one that is more existential to Hollywood’s bottomline.

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About the Author
Born and raised in the Missouri-Ozarks Ryan studied Film Production, and East Asian Culture, at the University of Kansas where he was a UGRA recipient that led him on a seven-year long, Journey From the West, to China. Where he worked with Warner Brothers, the China Film Group Corp. and the National Bureau of Statistics of China. Before returning to the States, where he specializes in Chinese Anime & Comics, China’s Box-Office, and Chinese entertainment-tech industries. He has a dog in China, Abigail, and a dog in the Arkansas-Ozarks, King Blue, who help ease his anxiety of suffering from the “Two-Dimensional Complex” that is trying to understand the Culture Industry landscapes of the Middle Kingdom.