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Are Hollywood Blockbusters Losing Their Punch at China’s Box Office?

The second-week decline in the global box office of “Batman v Superman: The Dawn of Justice” was an unpleasant surprise for Warner Bros. But its vertiginous drop in China, the world’s second-biggest movie market, was even more brutal, and may mark a rude awakening for not only the Burbank studio but for Hollywood in the Middle Kingdom.

The dueling-superheroes movie appeared to have a lot going for it, including a Friday day-and-date release on half the screens in the nation. But after suffering an 85% drop on its second Friday — placing fourth behind a trio of Chinese movies and “Zootopia” — the film was unsentimentally dumped by China’s exhibitors. At $94.9 million after 19 days of release, it is certain to finish below the $100 million mark, cuming less than last year’s clunky “Terminator: Genisys” ($113 million).

In sorting through the debris to find out what went wrong, it’s easy to blame the film itself; after all, “Batman v Superman” was savaged by the critics. But there are other factors at play. In 2015, despite a sensational spring during which “Jurassic World” ($229 million), “Avengers: Age of Ultron” ($240 million) and “Furious 7” ($380 million) dominated the Chinese box office, Hollywood films’ gross revenue in China grew by only 26%, while that of Chinese films improved by 67%. Local movies wound up with a 61% market share in 2015, while the year before, Hollywood films had the majority share, also at 61%.

There are many reasons for the trend in a territory where box office is routinely manipulated by the government, with practices that include blackout periods for foreign films; simultaneous releases of major titles, with an eye toward cannibalization; and official ticket-buying schemes to boost local titles.

Yet the Chinese box office is growing so fast — by 49% last year and by 50% in the first quarter of 2016 — that every major release should be breaking some kind of record. But there’s still debate as to whether “Star Wars: The Force Awakens,” at $125 million, was a hit or a miss. And Hollywood-China co-production “Kung Fu Panda” was a clear disappointment in the popular animation category, taking in $147 million. Only Disney Animation’s “Zootopia,” which has minted more than $230 million and established a new Chinese box office record for an animated feature, seems to have fulfilled the market’s growing promise. The title is showing such good legs that regulators have granted it an extra month of release.

“It is going to become more difficult for Hollywood to compete with an indigenous industry that is growing stronger.”
Marc Ganis, Jiaflix

Jo Yan, a former Disney distribution executive who now heads Universal in China, points to 2015’s less-than-stellar slate of Hollywood summer films, combined with multiple blackout periods and other releasing restrictions over the nine months since “Furious 7.” But he said that April to June of this year could be strong again for U.S. films, with releases expected to include Disney’s “Captain America: Civil War” and “Alice Through the Looking Glass” and Universal’s “The Huntsman: Winter’s War.”

“Check in again at the end of the current window, when the summer blackout clicks in. Let’s see where we are then,” Yan said.

Another Hollywood executive who is deeply embedded in China through joint ventures forecasts that the government-imposed blackout period, during which only Chinese movies are allowed to be released, will be much shorter this year than in 2015, because Hollywood movies are performing so much worse.

Other executives suggest Hollywood’s falling fortunes in the region are due to fundamental shifts taking place — changes that include audience makeup and the quality of local filmmaking.

“In just a few years, Chinese productions have become qualitatively better in both storytelling and production values,” said Marc Ganis, head of Jiaflix, a successful video-on-demand platform
on the mainland, with ties to both Hollywood and China. “It is going to become more difficult for Hollywood to compete with an indigenous industry that is growing stronger.”

Ganis said Hollywood films would continue to see box office returns in the $75 million-$150 million range in China, but that the territory’s massive annual increases in total B.O. revenue won’t translate to imported movies.

Supersonic Growth
With box office expanding so fast, every film is expected to break records
50% Chinese B.O. growth in Q1 2016
49% Chinese B.O. growth in 2015
32k No. of screens at the end of 2015, up from 24,000

Moreover, Ganis suggests that some of Hollywood’s current crop of comic book franchises may be too nuanced and English-dialogue driven for Chinese mainstream audience tastes, particularly among moviegoers who live far from the nation’s biggest cities.

Last year, the number of cinema screens in operation jumped by a third — making an astonishing leap from 24,000 to nearly 32,000. The majority of the additions were in smaller cities, where audiences have less Westernized tastes and may be less tolerant of subtitles than are moviegoers in the Beijing, Shanghai and Guangzhou-Shenzhen megalopolises. The pattern of building cinemas in smaller population centers also has lowered the mean audience age, which now stands at 21.5.

“It is not that Hollywood is becoming less popular in China but that Chinese movies are becoming more popular,” explained Yan, adding that the pendulum might swing back. “These new audiences may gradually see more Hollywood films, enjoy them, and become fans.”

That would allow movies like “Batman v Superman” and “Star Wars: The Force Awakens” to be considered as investments in lucrative future franchises, rather than as box office stumbles.

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