China on track to become world's second largest film market
By TANG YUANKAI, Beijing Review,Jan.13, 2011
BIG HIT: People queue for tickets of Avatar in January 2010 (CFP)
China's movie box-office receipts topped the 10-billion-yuan ($1.49 billion) mark at the end of 2010, giving a much-needed boost to the country's film market that had been sluggish. Among the imported films, James Cameron's science fiction epic Avatar (in 2D, 3D and IMAX-3D) was the biggest box-office success. Since its release on January 4, 2010, it has grossed 1.38 billion yuan ($206 million) in China. Christopher Nolan's Inception, rapidly pulled in nearly 500 million yuan ($74.63 million).
Domestic films, including Feng Xiaogang's blockbuster Aftershock and Zhang Yimou's Under the Hawthorn Tree, were also big successes despite their relatively low production costs. The former brought in 670 million yuan ($100 million) and the latter exceeded 100 million yuan ($14.93 million).
In December last year, Feng and two other well-known directors—Chen Kaige and Jiang Wen—presented their newest works, helping box-office receipts to top the 10-billion-yuan ($1.49 billion) total for the year.
Market-oriented reform
In 2010, China's film distribution system also continued to transform itself.
On December 9, the Beijing-based BONA Film Group Corp. became the first Chinese film and TV company listed on the NASDAQ stock exchange. Previously, all domestic films were distributed by the state-owned China Film Group Corp. In June 2003, the State Administration of Radio, Film and Television (SARFT) granted a trial distribution license to six private companies, including BONA, breaking the state monopoly on film distribution. Since then Chinese film makers have developed a strong marketing sense and it has become common for new movies to be promoted with dynamic advertising campaigns.
The number of movie theaters has also increased. The total number of screens in China now exceeds 6,000, with almost three new 450-seat theaters being constructed every day. However, even such rapid construction can only ensure that there is one screen for every 200,000 people, far less than the ratio of one screen per 9,000 people in the United States. Obviously, a huge distribution market is yet to be tapped.
In 2005, Dalian-based Wanda Group invested heavily to build the Wanda Cinema Line Corp. Owning over 50 regular cinemas across the country, it became China's first cinema chain to have box-office sales topping 1 billion yuan ($149.25 million) in 2010. According to experts, this result shows investors' higher interest in the distribution of films.
"As more and more excellent movies are shown to the public, increasingly larger audiences will be naturally attracted to the cinema, which will in turn arouse investors' enthusiasm for the industry. This is a virtuous circle," said Li Huailiang, Dean of the Media Management School at the Communication University of China. "The Central Government has carried out new policies, which help to stimulate the domestic market at first. As close contact is established between domestic and international markets, homemade films will have growing influence and competitiveness overseas."
China's film industry has entered a stage of rapid growth, said Wang Yunping, a researcher with the National Development and Reform Commission of China. Since a structural reform was carried out in this field seven years ago, on the average, movie box-office sales have increased at an amazing annual rate of 30 percent, which is quite an unusual case in the world, he said.
"The sharp rise of the audience population has created a golden opportunity for the development of the film industry," he said.
Fiercer competition
The number of domestic feature films had reached 530 by the end of 2010; at the same time, the number of animated cartoons, documentary films and films of other genres has increased sharply over previous years. "Statistics are not the only way to measure the development of the film industry," said Zhang Hongsen, deputy director of the film bureau under SARFT. "Nevertheless, only with the increase of quantity can quality improve."
China has also agreed to further open its entertainment market, in accordance with a WTO agreement. In the past, no more than 20 foreign films were allowed to be imported into China each year. As a result, fiercer competition is expected in the film industry, along with more opportunities.
The situation of the so-called "New Year movie" demonstrates the heated competition in the film market. This new phenomenon got its start in 1997 with Feng's Dream Factory, a comedy made on a slim budget of 6 million yuan ($895,522) that ultimately grossed 36 million yuan ($5.37 million). Now there are over 50 films vying for the title of box-office champion in the 90-day-long New Year season (roughly from December to February).
Meanwhile, film making has become a new hot area of investment. The number of investment companies in this area topped 1,100 in 2010, a sharp rise from the average figure of 400 or 500 in previous years. "A greater number of investors participating in the film industry means the business is profitable," said Zhang.
However, risks exist at the same time, he said. "In any case, every year only 100 or so films can be released. What's more, just a few of them will become big box-office winners in the end."
"But the fact is, there are different ways to recoup a movie's expenses, not just from ticket sales," Zhang said. "We have to judge whether a movie makes a profit or loses money in the long run, which is quite a complicated process," he said.
Currently, Chinese filmmakers mainly raise funds on their own, but new channels for raising capital are emerging. "With the improvement in China's banking system, more and more film and TV companies are relying on financial institutions to raise money, with box-office income, copyrights and sometimes an individual's personal reputation as guarantees," said Wang Ran, CEO of Yikai Capital Co. Ltd.
In the past, Huayi Brothers—which became a public company in September 2009—helped Director Feng several times to obtain collateral-free bank loans. To a great extent, Feng's great renown in China had already become a guarantee for box-office sales. But less famous filmmakers, and productions without famous stars, can't expect the same ease in attracting funding.
"To measure whether or not China's film industry has reached maturity, we have to see how many investment companies are actually operating normally and regularly in this field," said Wang.
Unsatisfied quality
Many Chinese directors believe that acclaimed stars are the best way to attract audiences. This may explain why three directors—Feng, Chen and Jiang—chose Ge You, a Cannes Best Actor winner in 1994, to play the leading role in their films released in last December.
"As a matter of fact, there are not many highly rated films to sustain the market," said Gao Jun, Vice General Manager of the New Film Association Co. Ltd., a Beijing-based cinema chain. Citing the 27 domestic films shown in October last year as an example, he said that only one made a profit, while all the others lost money. "In the final analysis, the audience is more concerned with quality than other elements."
"Altogether some 500 films were produced last year. If they equally shared the 10 billion yuan ($1.49 billion), each would gross no more than 20 million yuan ($3 million) on average and the net profit for each movie's producer would be just 3 million or 4 million yuan ($447,760 to $597,000). In other words, many studios could not even recover their costs," Gao said.
Nevertheless, Director Jiang's Let the Bullets Fly, starring himself, Ge, and Hong Kong star Chow Yun-fat, appeared to be a huge box-office success. This film, which had a budget of 110 million yuan ($16.42 million), brought in 400 million yuan ($59.7 million) in its first two weeks.
"To attract an audience of 20 million, box-office receipts should exceed 600 million yuan ($90 million). That means we have to let at least 200 million people hear of the movie in advance, if 10 percent of them eventually show up at the cinema, in order to reach this goal," said Ma Ke, the producer of Let the Bullets Fly. Therefore, he spent 50 million yuan ($7.46 million)—nearly half of the movie's budget—on advertising.
"Of course, the prerequisite is that we must shoot a good movie that is really appealing to the audience. A person who spends dozens of yuan going to the cinema wants to have an artistic treat, not be fooled by low-quality stuff. We must manage to meet the needs of the people; then naturally we shall be repaid by good box office sales," he said.
Jiang and Ma attached great importance to screenwriting, which ensured the quality of the film and helped to bring in huge box-office takings at the same time.
More cooperation
The year 2010 also featured more cooperation between Chinese and foreign filmmakers.
Actually, three films jointly produced by Chinese and American studios—Shanghai starring American actor John Cusack, Chow and Chinese actress Gong Li, The Karate Kid featuring kungfu star Jackie Chan, and Hot Summer Days—drew large audiences last year.
In late December 2010, Director Zhang Yimou announced that British actor Christian Bale would join the cast of his latest movie Nanjing Heroes.
Last December, a major Hollywood studio also bought the rights to remake Director Jiang's Let the Bullets Fly, and Jiang himself has been invited to direct the U.S. remake.
This cooperation trend continues this year. A 3D animated cartoon, Little Big Panda, made by Chinese and German studios at a cost of 350 million yuan ($52.24 million) will be shown in China during the Spring Festival period starting from February 3.
A film summit between the United States and China—with the theme of Co-production and Cooperation—was held in Los Angeles last November. This shows that the enormous Chinese market has attracted the attention of Hollywood directors and producers.
"Breaking the cultural barrier is the foundation of the bilateral cooperation in the film field," said Bill Mechanic, who served as chairman and CEO of Fox Filmed Entertainment from 1994 to 2000. In collaboration with Hong Kong director John Woo, he is currently planning to shoot a movie about Chinese immigrants building railways in the United States in the late 19th century. "We hope to produce a movie enjoyed by both Chinese and American audiences," he said.
In the past, Hollywood sold a lot of U.S. films to China, but seldom cooperated with Chinese studios in making movies. Such a situation may be changing soon. Hawk Koch, Co-president of the Producers Guild of America, has had a pleasant experience working with his Chinese colleagues. He believes China will become the world's second largest film market in the near future.
