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Chinese box office growth slows as movie fans turn to online streaming

After a less than sizzling summer for mainland box offices, more and more Chinese movie fans have been going online to stream their films at home, a trend which analysts say may hurt the outlook of cinema providers such as IMAX.

Emma Chen, who works in a financial firm in Guangzhou, is a film fan who likes going to the cinema to catch the big Hollywood blockbusters. Last year she was spoiled for choice, with numerous big-screen hits such as Tom Cruise’s Mission: Impossible – Rogue Nation and Fast Furious 7.

This year, however, her trips to the cinema have become less frequent.

“So far this year there were not so many good quality blockbusters showing in the mainland like last year,” she said. “I believe many people share my thoughts: as long as the movie is good and has some well know movie stars, we do not mind paying money to buy the tickets to watch it in the cinema.

Chinese people now have money to go to the cinema but we are very selective. We would not waste money on the bad movies.”

China’s box office – it is now the world’s second largest film market, having risen an average 30 per cent each year from 2012 to 2015 – has been supported by the rapid growth of the mainland’s middle-class and the expansion of cinemas across the country.

This year, box office takings have increased again but at a much slower pace.

A report by CICC analyst Zhao Liping said China’s cinemas took 35 billion yuan (US$5.25 billion) in the first nine months of this year, up 10 per cent from 31.52 billion yuan during the same period of 2015. That compares with the 48.7 per cent growth rate seen last year.

It’s still much faster growth than the US, the largest film market worldwide, which reported gross box office revenues of US$8.52 billion in the first nine months, up just 3.9 per cent from the same period a year ago.

“The film industry was very hot in 2015, when the box office saw more than 45 per cent year-on-year growth. Many players are accelerating their new screen installations. However, as the market cools, we guess the installation driven by hot money will eventually slow, which might impact IMAX installations,” Zhao said in the report.

“Box office growth has slowed significantly, including for IMAX format films. We compared this year’s box office for IMAX format films with that of last year and noticed a decline of 7.7 per cent year-on-year.”

Last year, several mega blockbusters were released in the first nine months, including Fast Furious 7 which sold tickets worth 2.4 billion yuan in April and Monster Hunt which took 2.43 billion yuan in the same month. Avengers: Age of Ultron earned 1.5 billion yuan in receipts in May, while Jurassic World clocked receipts of 1.4 billion yuan in June.

Mission: Impossible – Rogue Nation broke the record for 2D movies in China, notching up 869 million yuan in ticket sales.

So far this year, no Hollywood movie has taken more than 2 billion yuan at the box office. Zootopia came the closest with 1.53 billion yuan, while Warcraft received 1.47 billion yuan and Captain America: Civil War came in at 1.25 billion yuan.

As a result, Zhao cut the share price target of IMAX, which operates large format screens in China, by 13.6 per cent from HK$33 to HK$28.5.

She said the drop in cinema revenues is also due to increasing competition from other forms of entertainment.

“Other entertainment such as mobile games and self-made shows saw very fast growth, carving into the film audience. Looking at the film slate for the national holidays and Christmas periods, we

believe there are still very limited films that can contribute more than 1 billion yuan at the box office,” she said.

CICC expects China’s box office receipts to continue growing at 10 per cent for the remainder of this year, which would bring the total to about 48 billion yuan. That would compare to the 48.7 per cent growth rate seen last year, which took total cinema revenues to 44 billion yuan.

A BOC International report led by analyst Martin Bao said online live broadcasts have become increasingly popular in China, driven by internet celebrities and an influx of investment. However, although the online live streaming sub-sector is booming, most live broadcast platforms remain in the re, the report says.

According to iiMedia, at the end of 2015 there were around 200 online live streaming platforms operating with over 200 million registered users. The market size reached 9 billion yuan last year.

“Looking ahead, we expect leading platforms to optimise cost structure and a new wave of consolidation to come, driven by rising content cost, dwindling interests from investors and tightening regulations,” Bao said.