Exhibition business gambling on growth

A nomadic event, CineAsia has traveled around the region, alighting for a few years at a time in Asia’s cinematic hot spots. After two years in Asia’s growth capital, Beijing, the confab last year shifted to Macau, a growth capital of a different kind. Like the gaming industry on which Macau is built, Asia’s exhibition business is holding its breath, waiting to see if the economic crisis will obliterate its expansion plans or merely slow them.

Responses vary in different parts of the region, which is split between the muscular growth of developing countries such as China and Malaysia and the more sluggish performances in mature economies in Japan, Hong Kong and Taiwan.

Expectations for the Middle Kingdom make China arguably the biggest growth story in exhibition — and distribution.

After the film industry hit rock bottom eight years ago, government-orchestrated reforms targeted the country’s production sector and upping the number of cinemas. The impact on box office has been dramatic, with grosses more than quadrupling since 2002 — though cinemagoing is a distinctly urban pastime and one that cannot be considered mainstream.

Even after an expansion of the nation’s screens from 2,150 to some 3,500 at the end of 2007, the average Chinese person visits a cinema just once every 10 years. That compares with 3.3 times per year in South Korea and four times a year in Asian champion Singapore.

Foreign companies have made only modest inroads into China as, with the exception of Hong Kong firms, they are prevented from owning majority positions in Chinese cinemas. Korean companies such as CJ, Megabox and MK Pictures have toeholds in the market, as does South Malaysia Industries and Sun Wah Kadokawa, a Hong Kong/Japan joint venture. But restrictions have largely put off non-Asian companies. Hong Kong outfit Edko (aka Broadway) has a strong presence in China, and Golden Harvest operates a hugely successful multiplex in Shenzhen; its Chinese subsidiary Chengtian is outlining plans, too.

Now, more of the Chinese building effort is being taken up by local private companies, such as Wanda, CMG and Bona Group affiliate Eastern Dragon. Many observers regard this as a positive development for the industry as they argue local entrepreneurs will insist on greater flow of release-worthy films. China now produces some 400 movies per year, but total number of films getting theatrical release is less than 200 per year, including the 60 imports.

Even factoring in the effect of the global economic slowdown, U.K. exhibition consultant Dodona Research says, “The odds are that China will remain a relatively high-growth market, both in terms of cinema construction and B.O.”

Malaysia has seen B.O. triple since 2003, as screens have increased from 200 to 353 in 2007. According to Dodona data, Malaysia’s screen numbers will surpass 400 by the end of this year, with Golden Screen and TGV (both former Golden Harvest offshoots) leading the charge. Helping the advance is a local production industry now capable of claiming 10% market share and notable niche markets for Chinese- and Indian-language movies.

Buoyancy of China and Malaysia stands in contrast with territories nearer saturation. In Japan, Hong Kong, Taiwan and Singapore, new theater building is replacing older stock and needs to be justified by greater levels of service, increased concession sales and higher ticket prices.

Dodona predicts that tiny Singapore will get a boost from 3-D films over the next couple of years — the country already has one of the highest levels of digital cinema installations — but that admissions may plateau thereafter.

Most intriguing are Korea and Thailand. Bangkok cinemas are among the most luxurious and well equipped in the world. Screen and lobby advertising are particularly lucrative in Thailand, and many plexes earn handsomely from allied bowling alleys. Dodona says growth can continue as operators expand away from the capital.

Korean capital Seoul, on the other hand, is already home to the world’s busiest multiplex, the COEX Megabox, but country’s entire film industry appears to be stuck between boom and bust.

“In terms of admissions and per-capita attendance, Korea is on a par with the U.K.,” Dodona says. But the performance of locally made films has dipped sharply in the last year.

Although the country has top-grade infrastructure for moviemaking and exhibition, declining local-film performance at the box office has made investors and industry players nervous. That may be an opportunity for the rival telecom giants Korea Telecom and SKT to become still more vertically integrated. They both have been involved in film and TV production for a couple of years, and in the last year they became movie distribs.

Filmmakers around the region must be hoping the credit crunch and global slowdown don’t make current construction a Macau-style last roll of the dice for several years.

Tip Sheet

What: CineAsia

Where: Macau

When: Dec. 9-11

Only At

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Imax defies odds and grows its Asian biz.

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