By mid-summer, Chinese cinema operators were running out of patience at the enforced shutdown that had kept movie theaters closed since late January. Some were so bold as to ask the government why their sector was being especially penalized, compared with other industries.
Fast forward to the end of October, and not only are Middle Kingdom cinemas bustling again, but China is on the point of overtaking North America to become the biggest film exhibition market in the world this year.
Comparing international box office totals is, surprisingly, an art rather than a science, as it involves value judgements about taxation, resellers’ commissions and when to apply what currency exchange rates. Data provider Comscore this week declared the two markets as “neck and neck” at about $2 billion each, while analysis firm Gower Street wrote: “China’s achievement is now inevitable, if not actual, and will mean the domestic [North American] market becomes the #2 global market for the first time on record.”
“Now that most of the major Hollywood films have been pushed back to 2021, there is really no chance that North American box office will recover in 2020 and retain its position as the largest box office market,” concurs Wade Holden, research analyst at S&P Global Market Intelligence.
Many commentators have for years forecast China to overtake North America, only to find that they underestimated North America’s resilience and over-hyped China’s box office expansion. After a surge of 49% in 2016, China’s box office growth has been in single digits for the past two years. Last year saw China deliver $9.3 billion, compared to $11.4 billion from North America, even after a 4% decline.
As such, whether China will maintain its global box office crown beyond 2020 is debated.
Michael Nathanson, senior analyst at MoffettNathanson, and one of Wall Street’s most respected media and entertainment researchers, says North American theatrical revenues may never return to their pre-COVID levels.
In September, he forecast domestic grosses tumbling to $3.4 billion in 2020 — a figure that now looks too rosy — and then recovering to $8.5 billion in 2021 and $9.5 billion in 2022. After that, Nathanson sees theatrical definitively losing out to streaming, with box office for 2023 forecast as dropping to $9.2 billion in 2023, and $9.0 billion in 2024.
Other box office specialists are more confident that this year’s travails are a unique set of circumstances, and specific to 2020.
“2020’s box office is a pure reflection of the effect of the pandemic on what was poised to be a strong follow-up to a record-breaking big screen industry in 2019 that generated $42.5 billion globally, even with Apple Plus and Disney Plus joining an already robust array of small screen platforms offering an amazing slate of content,” says Paul Dergarabedian, senior media analyst at Comscore.
“Because the pandemic is under control in China now, the audience feels going to the theaters is a safe thing to do, and the audience’s film-going habit has resumed very quickly,” says Tony Gao, partner at Chinese consultancy Ent Group, and general manager of its Shanghai office. “When there are high-quality movies in theaters, people will go buy tickets, like before.”
Given that Chinese chains had zero revenue between late January and mid-July, and some seating capacity restrictions endure, China’s renewed competitiveness is remarkable.
China’s catch-up boils down to differences in how COVID-19 responses were handled in cinemas in China and North America, coupled with the success of Chinese-language films in China, says Rance Pow, head of Artisan Gateway, a theatrical and exhibition consultancy with offices on both sides of the Pacific. China’s coronavirus outbreak peaked on Feb. 17, while the U.S. is now working through its third wave.
Since Chinese cinemas reopened, Hollywood titles have profited from China’s success: “Tenet” earned $68 million in China, while “Mulan” has earned $40 million and “Onward” grossed $10 million. However, they haven’t driven the market quite like a string of local hit films. These include war action film “The Eight Hundred” ($464 million), animation “Jiang Ziya: The Legend of Deification” ($231 million) and propaganda omnibus “My People, My Homeland” ($378 million).
While Ent Group’s Gao identifies audience welfare as the key to a North American recovery — “it depends on whether effective vaccines are available in 2021,” he says — others put the emphasis on content supply and pent-up demand.
Dergarabedian says that despite the current cinema closures in the U.S., new films like “War With Grandpa” and “Honest Thief” have actually over-performed. He pitches 2021 as “a greatest-hits album of blockbusters with a majority of 2020 releases utilizing 2021 as a cinematic waiting room.”
But in the movie arms race between China and the U.S., it’s not just Hollywood that has a backlog of blockbuster material. The 2021 Chinese New Year season will have a mix of big new titles, as well as tentpoles like “The Rescue” and “Detective Chinatown 3,” which were held back since January this year.
However, once things are back on a more normal footing, both Chinese and U.S. theatrical markets will face similar challenges in maintaining forward momentum. “If China is the world’s top box office market, maybe Hollywood will value the China market more, and the Chinese film industry will grow faster,” says Ent Group’s Gao. “But the Chinese film industry is also facing challenges from other forms of entertainment, such as streaming, short video and gaming.”
Conversely, Artisan Gateway’s Pow says streaming isn’t viewed as an existential threat to the exhibition industry. “However, consumers will play the determining role for the relative scale and shape of the streaming and theatrical industries,” he adds.
“Long-term, North America will come back to box office prominence,” declares Dergarabedian, “but if China’s recovery shows that people of all cultures love movies on the big screen enough to support that experience — even in a pandemic — then, in the long run, that could be a currency more valuable than dollars and cents.”