Every Publication This Side of the Great Wall Wrote the SAME Article on the 2019 Year-End China Box-Office.
Which Effectively Read: “Only Two Hollywood Movies Made the Top 10 Films in China – Is This the End For the Dynamic Duo?”
By Ryan Carroll, Managing Editor
OK, maybe I was a little hyperbolic in that last part but if you have been watching the China Box-Office for as long as I have, nearly a decade and a half. When you read multiple articles from prominent outlets whose only focus is on the “so-called” decline of Hollywood in China. When there is a more nuanced story to the 2019 box-office in China, and even further back to 2018, it can be difficult to not add a little flare to these articles.
In 2018 one may argue that the China Box-Office could have had only two Hollywood films in the Top Ten, if it were only but a sets of unique characteristics that put two films in that Top Ten that year; Venom and Aquaman.
A trendy social media marketing campaign in the case of Venom, from Sony Picture’s strategic and equity investment partner, Tencent Picture. The other being from a charismatic lead, in Jason Momoa’s Aquaman, mixed with a sub-plot that taps into the popular tomb raiding genre, and an Atlantis that looks an underwater Pandora from Avatar – the first Hollywood movie to breakout in China.
Without those two unique and unexpected hits in 2018 that year “may have” been a Top 10 China Box-Office with only two Hollywood films in it.
This is a trend – a trajectory – that should not come at any surprise to any seasoned China Watcher out there, one which only saw Avengers: Endgame and Hobbs and Shaw in the Top Ten in 2019.
Especially, when you dig deeper into the numbers that were finally released by the Chinese state media outlet Xinhua News. That the China Box-Office only grew by 0.5%. Yes, that is correct that is ZERO POINT FIVE PERCENT.
– “Wait!” You might ask, “how is it not 5.4% growth instead of 0.5% as Xinhua reported!?!” –
I will break down the reason for this article on how the Hollywood, non-Chinese, trade pundits focused on the wrong aspect of Year-End results. Then move to how the China Box-Office had but a few key outcomes that resulted in a 5.4% YoY growth that is not wholly correct, and how it is really only saw growth by just 0.5%.
State-run Xinhua News released the official figures of the China Box-Office numbers of $9.2BnUSD in total box-office gross, with 64% coming from local films. At a rate of 5.4% year-on-year growth, a decline from the 9% YoY growth of 2018.
These official figures were released after The Washington Post, The Wall Street Journal, The Hollywood Reporter, and Forbes all posted similar, or near exact same articles, decrying the decline of Hollywood in China or that only 2 films made the Top Ten of China’s 2019 Box-Office.
Patrick Frater’s Variety article stayed on point with stats.
The Washington Post article was possibly the most off with its claim that “China is massively consequential to Hollywood. In a climate of flat domestic box office earnings” and that Trump’s Trade War six month earlier [took its toll on the quota system of Hollywood films entering China.]
Neither which were true, as 36 quota films were released last year and Hollywood has always only received 25% of their box-office receipts.
Scott Mendelson of Forbes (who honestly for a non-China Watcher – who took over for Rob Cain, who is, and has done excellent job so-far), went a little further than most. In pointing out that Hollywood has failed to produce a hit at the China Box-Office outside of Marvel / DC / Fast & Furious (Hobbs and Shaw) Cinematic Universes or franchises in the past 18 months.
I did correct him on LinkedIn and Twitter that Frozen 2 was a hit in China, not as big as Frozen, which Scott Mendelson did get back to me on on his Twitter feed. As Frozen 2 had made $116MMUSD in its initial 30 day run before getting the magically rare 30 day extension.
Looking back on Scott Mendelson’s analysis Frozen 2‘s $125MM (as of 60 days), falls into the category of superhero box-office average take in China.
Stated Revenue for Hollywood Studio Films is “Misleading”
Revenue from U.S. studio films released through the country’s quota system fell 2.7 percent, to $2.6 billionData from box office consultancy Artisan Gateway via The Hollywood Reporter
Missing from The Hollywood Reporter article on the 2.7% drop to $2.6BnUSD in 2019, and the excellent China Box-Office statistics provided Artisan Gateway, is that there is a big piece of China’s Box-Office missing from THR’s reporting.
As this box-office drop, this new normal, only takes into consideration the official 36 quota films – that not all were Hollywood films – of last year, down from 42 the year before in 2018, and not all of the international releases in China.
If you look at the overall box-office of China and how much the local films made, compared to that of how much Hollywood films brought in. The numbers just do not add up.
The local box-office take of Chinese movies was only 64%, according to state-run Xinhua News compared to 62% in 2018, if Hollywood films only accounted for $2.6BnUSD of the $9.2BnUSD and only 64% of that was made-up by Mainland Chinese films. Then I believe someone needs to call Democratic Presidential long-shot Andrew Yang because we have a MATH problem.
As the $2.6Bn which Hollywood contributed to the China Box-Office is only 28% of the over-all box-office, while local Chinese films chipped in 64%, leaving us with 36% of the China Box-Office unaccounted for…..oh my.
Flat Fee Distribution, Land of the Rising Sun, India & a Lebanese Film!
When the trades talk about foreign releases in China primarily focus on big Hollywood tentpole distributed films that fall under the official quota system of China, that are distributed by either the China Film Group or Huaxia Film Distributor. Both are own and operated by the Chinese State Government, and the quota system is officially 34 films per year broken down between x amount Hollywood, animated features, IMAX, and other international films. Which only receive 25% of their box-office receipts.
But China is lenient with the 34 foreign films released at their box-office, as seen in not only additional quota films allowed but in what are known as Flat Fee or Buy Out Films for distribution. These are films that Chinese studios or distributors are allowed to purchase a license for, in the past they were restricted to two film licenses per year, and beyond the “flat fee” these Chinese distributors pay for the film. The owner of the film receive no box-office receipts or back-end (officially) from the China Box-Office.
Thus, here-in-lies our missing 36% from the China Box-Office. A percentage of the box-office which in reality is contributed to international films and not to Chinese local one. Turning the measly 28% that Hollywood contributed into a slightly false number.
The reason why I say that is, in 2019 the highest grossing film from the Flat Fee / Buy Out film, and the the country which has the most number of films, was not surprisingly the United States. It was Japan.
Spirited Away was the year’s top Flat Fee film with $49.46MMUSD and Japan had 24 films released compared to 17 from Hollywood (down from 28 in 2018). Green Book was the second highest grossing with $68MM, followed by the surprise Lebanese breakout hit Capernaum which made $53.35MM (more than anywhere combined!), and India continued to have a good year but not as well as in the past with Andhadhun at $46.2MM, and the Japanese anime Weathering with You $40.9MM bring out the Top 5.
Spirited Away made international headlines when it opened at the top of the China Box-Office dominated Pixar’s Toy Story 4, which was not a surprise to us seasoned China Watchers.
Even though China imposes a strict-ish quota distribution system at their box-office, this hyperbolism of the “decline of Hollywood” is written a bit larger than it possibly is. It is natural for Chinese to migrate more towards their own local cinema fare as the quality increases, but it is not a decline of Hollywood that we are seeing but a larger issue of the China Box-Office that many are overlooking and should be paying attention to.
One that Rebecca Davis, China Bureau Chief at Variety, article Hidden Flaws Plaguing China’s Film Market, Says Tencent Report, points out for 2020 but as I have been going through with this article. They have been present, and very clearly aware and visible since the beginning of Q1; before the 2019 Spring Festival. If you had been watching.
NOTE: I would very much recommend you read and save the article on Tencent’s Report, as I had been working on this piece prior to Rebecca Davis’, and I really glad that I did not get this out before her’s. As there is data points in the Report which helped back up this very article.
2019 Q1 & Spring Festival Were “Technically” Down Year-on-Year
Looking back on the 2019 China Box-Office, the numbers were already present in January and during the big Spring Festival / Chinese New Year box-office season. As the entire month of January in 2019 was down 31% YoY.
The 10 Day long Chinese New Year Box-Office saw that even though the Top 8 films earned 3.34BnRMB, compared to 3.25BnRBM in 2018, it turned out that the ticket prices are higher – while less tickets were sold – resulting in the higher box-office take.
Meaning that the 2019 Chinese Spring Festival Box-Office was Down Year-On-Year from that of 2018, and it is not looking good for the 9 films vying for the 2020 Spring Festival. As the city of Wuhan is completely closed down for the Coronaviruses quarantine, all films have decided to postpone their releases. With IMAX China following suit on their planned line-up of releases, and even Well Go USA is postponing the release of Legend of Deification: Jiang Ziya the follow-up to NeZha in the Fengshen Cinematic Universe by Beijing Enlight’s Coloroom Animation Studio here in the USA.
Even with higher ticket prices which saw a dollar-to-dollar, or shall we say yuan-to-yuan, increase over the Chun Jie / Spring Festival Box-Office. Q1 at the China Box-Office still saw an 8% drop YoY and a 7.95% drop in ticket sales over the same period.
None of which had to do with Hollywood films, as the majority of this period was graced by the “Black Out” period where only local films are for release, or had a Star Wars film in January – and we know they do terribly in the Middle Kingdom – except for merchandising and licensing in China!!!
Up Through H1 Even Beijing Enlight Was Hurting Until NeZha
I have written on the Box-Office Inequality in China and how it is reported that only a few films actually break even, and even fewer are profitable, while the majority may even loose money. And it shows that even a company like Beijing Enlight in H1 had its net profits down by 95% in the first half of the year. Needless to say, H1 only includes Q1 &Q2, and Beijing Enlight’s Coloroom’s NeZha ($723.65MM) was reported under Q3 results.
Along with NeZha and The Wandering Earth earlier in the year, it was three films over the October 1st National Holiday of China (70th Anniversary) that saved the China Box-Office was being a down year, and provided the 5.4% (due to an increase in ticket prices) or reality 0.5% increase in box-office growth (by actual ticket sales / admissions).
It was the Red Liberation Films aka “Main-Melody” The Climbers, Chinese Pilot and Me and My Mother Land, that pushed China over the ticket sales / admission increase, which produced the for real growth of 0.5% that the China Box-Office needed in 2019.
China Built Too Many Cinemas & Screens Too Fast & China Streaming Wars is Real, And It Effects The Cinema Industry Unlike Netflix in North America
Tencent’s 2020 Report as laid out by Variety provides insights that I have been talking about for years, cinema screens are going up in numbers across China’s third and forth tiered cities at a rate that is unsustainable. Especially, as Chinese Gen consumers are now much more willing to pay for subscription streaming services.
The China Box-Office is beginning to mature and level off, we’re no longer going to be seeing year-on-year surges as we have in the past. Were some of that was due to subsidized ticket prices during the Mobile Ticketing Apps War, that Maoyan (Tencent-backed) has come out on top. China still has a ways to go before it over-takes, if ever, North America – with pundits keep telling us next year, then the next and the next. You get it.
Stay Tuned China Watchers!
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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.