Quality. Quality. Quality.

The growth of China’s film market has been remarkable, profiting from the country’s growing middle class and an influx of capital.

Growth

Many sectors of the Chinese entertainment industry have enjoyed over 30 per cent annual growth in box office in recent years, building it into the world’s second-largest market after the United States.

That momentum reached its zenith in 2015, with an astonishing 48 per cent surge in ticket sales, which led to predictions that China was on track to overtake the US market in size as soon as 2017.

Coloton_Movie_Revenue

It took China eight years to increase box office revenues from less than 1 billion yuan in 2002 to 10 billion yuan in 2010. China then became the world’s second-largest film market in 2012. The continuously rising annual box office revenues reached 44.07 billion yuan in 2015, an increase of 48.7 percent from 2014.

But in 2016, the growth rate of Chinese film box office only delivered single digits. It was certainly a sharp jolt for China’s previously booming movie-going sector and market watchers have now scaled back their expectations, dramatically.

Cinema building spree

Even though China’s box-office growth has slowed in 2016, China is adding movie theatres at a record rate, partly thanks to government subsidies. It took China about a year to increase its screens from 30,000 to 40,000. Over 2016, the number of screens grew by an impressive 26 per day.

Latest figures show the number of cinema screens in China reached 40,917, surpassing the United States (40,759 screens) to become first in the world.

Capture

It is widely believed that the number of cinema screens in China still has room to grow, based on the country’s population.

Cooling off

The forces behind China’s slowdown are a regular subject of debate.

The Chinese government blamed the decline on the yuan’s depreciation.

Most industry observers converge around a combination of factors: a crackdown on box-office fraud, cutbacks in last year’s generous ticket subsidies from fast-growing online platforms, and overall Chinese economy.

Indeed, the Chinese film market is going through changes.

The simple fact is that as personal income levels continue to rise, movie-going emerges as a much more affordable form of high-quality entertainment, particularly in increasingly affluent mid- and lower-tier cities. This trend will not die out easily. The opportunity for film business remains. The market potential remains.

David Hancock, director of film and cinema analysis at IHS Technology, describes the brakes on the box-office forward march as a market correction from the previous red-hot growth. “I do not see the slow growth of this year as a sustained decline,” he said. “Rather a reaction to a poor slate of films and a number of structural issues.”

“As screens continue to grow, and if the popular films are there, I do not see why growth should stop,” he said.

It is no secret to anyone who is aware of the Chinese industry trends, in 2015, Chinese audience still treated the cinema as a place mainly for entertainment and did not care much about the actual content of films they watched. But now, the increased consumer discernment among China’s new moviegoers show that they have wanted more. They are clearer about their taste in films.

 

Though ticket sales show signs of slowing, the market itself has been expanding. 

So what next?

The short answer is quality, quality, quality. 

 

 

 

Chinese audiences want and need high-quality film entertainment products.

The fact is that audience always expect quality when purchasing the tickets, and if they are not satisfied with one company’s products, they will seek alternatives. Film companies that deliver high-quality products are likely to retain their audiences and enjoy repeat business. Highly satisfied audiences are also likely to recommend a company’s products to others.Quality products make an important contribution to long-term revenue and profitability.


Essential extended reading:

New Era of China’s Film Industry – Deloitte

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