Sluggish China Box Office Brings Down 2016’s Global Totals

Publicly, studio executives tend to be a rosy bunch, predicting that each year’s crop of movies will be better than that which preceded it. But behind closed doors, few in the business were expecting much from 2016.

When the final numbers are tallied, the global box office will probably fall short of last year’s record-breaking $38.9 billion. Most observers expect ticket sales to fall roughly 2% to just over $38 billion. That decline is reason for some alarm, particularly as the shortfall is largely attributable to a slowdown in China. After years of explosive growth, in which returns were expanding at a 40% clip annually, revenue in China was essentially flat in 2016 — a disappointment for the world’s second-largest film market, which had been expected to surpass the U.S. in terms of revenue in a matter of months.

“As China goes, so goes the international marketplace,” notes Paul Dergarabedian, senior media analyst at ComScore.

There are worries that Donald Trump’s presidency could have a further chilling effect. Trump has been a proponent of stricter tariffs on foreign goods and has often cast China as an adversary.

“Who knows what our trade policies will be like in a year?” Dergarabedian asks.

If Trump is true to his word, there could be some type of retaliation from China at a time when Hollywood is increasingly reliant on Chinese financing and viewership. In particular, there are concerns about a move toward tighter restrictions on the number of U.S. films that are allowed to screen in the country.

But many studio executives remain bullish on the long-term prospects of Sino-Tinseltown relations.

“In China, there has been a slowdown off a base of massive growth, but it’s still the biggest of the markets where we or any studio does business, and it will still be on pace to displace the U.S. in box office, though maybe not as quickly as people thought,” says Dave Hollis, Disney’s global distribution chief.

China aside, there is a sense that 2016 could have been worse. “Deadpool” and “Zootopia” were blockbusters that few saw coming. And while “Rogue One: A Star Wars Story” and “Finding Dory” weren’t hits on the level of 2015 smashes such as “Star Wars: The Force Awakens” and “Jurassic World,” they resonated with global audiences.

“If you look at the slate last year, it played pretty well,” says Eric Handler, an analyst with MKM Partners. “The numbers would suggest there might be a modest decline in attendance, but the movie business is still holding in quite well.”

Across the globe, the story was one of slowdowns, stall-outs, and surges. Spain began to rebound after tough economic times, with ticket sales rising 5%, and France had its second-best performance in 50 years. Yet other major markets had problems: Revenue fell by double digits in Germany, and growth stalled in South Korea.

In some cases, the declines can be chalked up to weaker local product. In others, the studio blockbusters didn’t excite as they had in previous years. (Studios point to parts of Asia and Latin America as regions in which Hollywood products are still finding a warm reception.) There were also currency headaches; a strong U.S. dollar meant that Europe and Russia failed to contribute as much to the returns of major blockbusters as they once did.

Still, there is optimism, fueled by a look at the slate for 2017, which will see sequels to “Star Wars,” “Transformers,” “Guardians of the Galaxy,” “Pirates of the Caribbean,” “The Fast and the Furious,” “Despicable Me,” “Spider-Man,” and “Cars.” This Murderers’ Row has left analysts like Dergarabedian reaching for the perfect metaphor to encapsulate the moneymaking on the horizon.

“I call it the 100-year flood of movies,” he says.

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