Real estate boom brings movies to the masses

Movie screens on the mainland have grown almost 50% in a year

BEIJING — When Chinese real estate giant Dalian Wanda bought U.S. cinema chaim AMC in May for $2.6 billion, big waves of change reverberated through the entertainment world.

Wanda, which prior to the acquisition owned 86 cineplexes and 730 screens, had the cash to buy AMC, which operates 5,034 screens in 346 theaters in the U.S. and Canada, because of the revenues from its fleet of theaters on the Mainland. It’s now the biggest cinema owner in the world, and is reportedly looking for a European cinema operator and other entertainment investments to further grow its holdings.

Indeed, it’s a far cry from the days when film exhibition in China meant a propaganda pic screened in a drafty hall by a revolutionary Red Guard. Even as late as “Titanic,” in 1997, which many see as the start of the new era for film in China, moviegoing was often uncomfortable and inconvenient.

That’s all changed thanks to a real estate boom that has seen the number of movie screens in China rise 47% last year to 9,200, and the number of cinemas grow 40% to 2,800.

China is on track to install 25,000 screens over the next five years, and this year, it overtook Japan to become the biggest foreign market for Hollywood films. Many of these new hardtops will have 4K digital technology installed, or will be upgraded to include such technology. Giant-screen operator Imax has around 60 screens on the mainland. And the country is launching its own version of Imax technology, called Dmax.

Still, Mathew Alderson, a Beijing-based partner in the Seattle firm of attorneys Harris Moure, urges caution when considering investing in movie theaters in China, because foreign involvement is still very restricted, and after factoring in tax and regulatory issues, the attrition rate on such deals is very high.

“The deal flow gets interrupted, and only a small proportion make it to closure,” Alderson says. “Some of the smarter foreign producers let their Chinese partners (take) exhibition rights for the market in return for a lump sum up front. That way they don’t have to worry about receiving or verifying their share of the box office. It’s the least risky option.”

And while the data firm Entgroup is forecasting a 28% rise in screen numbers for 2012 to 11,800, with the number of theaters expected to rise 20% to 3,370, this marks a slowdown from last year, when the real estate sector was so hot that the government tightened bank credit to developers to cool things down.

Gao Jun, general manager of Sheng Shi New Film Distribution, and formerly veep of New Film Assn. cinema chain, points out that traditional patterns of distribution and exhibition have struggled to keep up with the growth of China’s film biz. Of the hundreds of domestic movies that get made every year, only a very few end up on screens.

There was a time when the government strictly controlled distribution. From the State Administration of Radio Film and TV, down to the city and district level, there were five layers of bureaucracy for distribs to get through. “Now,” Gao says, “the filmmaker brings the film to the theater chains for agreement on distribution and does the marketing, although all imported films are still controlled by the state-owned companies China Film Group and Huaxia.”

That limitation is an illustration of how, despite the continued excitement over the February deal in which China agreed to allow U.S. studios to release more films every year on the Mainland, and to keep more of the B.O. from those films, the nation is still opening up only gradually. And Alderson adds that censorship is a more endemic problem in China than the quota system is.

“Even if China plays ball under the (World Trade Organization edict that it loosen its borders to foreign films), it is not going to relinquish censorship,” he says. “Chinese authorities regard film as having a special role in the communication of cultural ideals.”

And what manages to avoid the censors scissors is not always clear-cut.

In a self-fulfilling example of pure irony, some 13 minutes of “Men in Black 3” were sliced out of the film by the Chinese government, because a scene in which a group of Asian-Americans have their memories wiped clean in Gotham’s Chinatown was seen as a possible commentary on China’s censorship rules.

World Report: China 2012
Filmmakers play by China rulebook | H’wood takes censorship in stride | Real estate boom brings movies to the masses | Studios, exhibs get China boost | Regime change carries warning signs | TV a tiny share of China market | H’wood needs no introduction | Top mainland mavens own inside scoop