Players push to increase theater construction

The recent boffo run for “Avatar” in China — it became the country’s biggest-grossing film ever, taking $81 million in two weeks, and was still going strong after the 2D version was pulled to make way for local product — underlined the growing importance of China’s growing legion of multiplexes to the bottom line.

Chinese B.O. topped $900 million last year, a rise of more than 40% on the previous year, and a record 450 films were made and screened on the Chinese mainland.

The main impetus behind the strong growth rate was the rise in hardtop numbers. According to the State Administration of Radio, Film and TV (SARFT), China added 1.65 new cinema screens every day last year.

By the end of last year, China had more than 4,700 screens, including nearly 800 3D screens and 1,800 digital screens. Given the country’s population of 1.3 billion people, China is seriously underscreened, so the potential for growth is immense. Because of the regulatory environment, it remains a difficult market for Hollywood to penetrate, but as the bigger local exhib firms are planning listings in places like Hong Kong, there may be opportunities for foreign investors in the Chinese market at some point.

Many of the screens are being built in shopping malls, and there is a rise among the young in the popularity of moviegoing as a pastime, especially in China’s growing middle class.

People pay a hefty $9 to $10 for a ticket — more for “Avatar” in Imax 3D, as they splash their newfound disposable cash.

One of the giants of the exhibition biz in China is the Wanda Intl. Cinema chain, which is part of the Wanda real estate group. Wanda has taken cinemas into the second-tier cities and underdeveloped parts of the big metropolises in China with amazing success. Its local knowledge means it can move into city areas with young people in the middle- to higher-income brackets. And its tie-in with Imax has also reaped massive rewards.

Wanda’s B.O. take was $122 million last year, up from $73 million the previous year.

“By the end of 2009, we owned 50 theaters, including 400 screens, compared to 40 theaters and 300 screens in 2008,” says Chen Hongwei, marketing director of the Wanda Intl. Cinema group.

The way the company has expanded so fruitfully, says Chen, is by combining theater and real estate development.

“This year, our target is to build another 21 theaters, and 200 screens,” he says.

Wanda currently operates around 120 3D screens, and says it is easy to expand this number depending on market demand by simply buying 3D equipment.

It’s not all rosy in China’s garden. The government’s cash injection of $590 billion into the economy, plus massive bank lending, has sparked fears of an asset bubble in what is now the world’s second-biggest economy. If that bursts, the fallout in the movie business could be messy.

But most players remain sanguine.

“As the market is rapidly growing, people are not worried about the economic bubble having much of an impact, as China is the fastest-recovering country from the 2009 financial crisis,” says Ricky Tse, head of distribution at Media Asia.

Nansun Shi of Asian sales outfit Distribution Workshop is also not too worried.

“There is still plenty of silly money around. Also there is plenty of sound money from media companies including satellite TV stations and media groups,” says Shi.

Another big player is the China Stellar Theater chain. According to Yan Yu, vice general manager of Stellar, the company’s B.O. revenues last year were $116 million, which marks a 49% rise on the previous year

The biggest cinemagoing demographic is in the 16- to 40-year-olds city-based high-income groups, particularly 20- to 30-year-olds in the big cities like Shanghai, Beijing, Shenzhen, Chengdu, Chongqing and Kunming.

“However, second-tier cities are also putting effort into film market development. I believe that as the second-tier cities’ theater facilities improve, the gap between big cities will be narrowed,” Yan says. “The growth of the theater chain system has had a positive impact on the Chinese film industry. Moreover, people begin to understand more about the importance of film exhibition.”

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