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Will COVID-19 Hand the 2020 Box Office Crown to China?

Jackie Chan in Vanguard
China Film (Shanghai) International Media Co.

Back when Chinese developers were building cinemas at the rate of 10,000 screens per year, a favorite guessing game of distribution executives was trying to determine when China’s theatrical box office would overtake that of North America.

That scenario hasn’t happened yet. Last year, China’s box office growth slowed to a pedestrian 5% and reached a $9 billion total, according to the Motion Picture Association. Meanwhile, grosses in North America slipped 4% but still remained over $11 billion.

The turmoil caused by the coronavirus pandemic, lockdown orders and increasingly powerful streamers, however, is changing the odds. As U.S. cinema closures stretch on, it increasingly appears that 2020 could be the year the box office crown finally crosses from West to East — albeit not for reasons anyone would have initially imagined.

Even among China bulls, box office dominance was not an outcome expected this year. In January, Alibaba’s Beacon analysis tool was predicting only a $9.5 billion haul in China. Moreover, with Chinese cinemas shuttered from Jan. 23 until just two weeks ago, turnstile takings were at zero for nearly six months. Data from analysis and consultancy firm Artisan Gateway shows year-to-date Chinese box office down by 93%, as of July 26, at just $336 million.

But as the box office in the rest of the world — and the U.S. in particular — sinks to historic depths, even anemic numbers out of China will be comparatively strong.

“Barring another major shutdown — and the Chinese are pretty good at controlling those situations — they’re going to have the biggest box office in the world,” predicts Tom Ara, a Los Angeles-based entertainment lawyer with DLA Piper who recently led a congressional visit to China.

There are other reasons as well for optimism in the Middle Kingdom, some say.

“China has been very conservative in the cinema space, and wants to be very sure that if they open, they stay open,” says Richard Gelfond, CEO of Imax, a company that now operates more premium large-format screens in China than in the U.S. “The fact that cinemas are [among] the last [business sectors] to reopen may enable the cinemas to open stronger than they otherwise would have.”

On the ground in China, what outwardly looks like a soft start is being read as a sign of encouragement.

The first weekend back in business, cinemas saw a nationwide cumulative gross of $12.6 million, with Universal’s delayed “Dolittle” topping the chart with just $5.1 million.

The result was achieved with less than half of venues back in action — 5,206 complexes, or 45% of the nationwide total — and despite government-mandated 30% capacity restraints, intended to maintain physical distance between patrons.

Artisan Gateway chief Rance Pow calls the early results “positive and encouraging,” while Tony Gao, a GM at EntGroup, one of China’s leading cinema market analysis firms, says they were “better than we anticipated.”

Analysts say they are currently more focused on the trajectory of attendance over gross figures as the key indicator for China’s pace of recovery, due to the differential ticket pricing models currently at play and the large number of reruns on offer.

In week one, 4.19 million people ventured back into cinemas to check out five new-release titles and more than 10 rereleases.

Theaters are resuming business at an “accelerating rate,” says Gao, noting: “The occupancy rate in the first week was about 8.7%, which leaves plenty of room before hitting the 30% ceiling.”

Nonetheless, there is ongoing debate about the long-term damage done to China’s exhibitors by five months of shutdown. EntGroup expects that only 80% of China’s 11,451 theater complexes open at the end of last year will still be operational by the close of 2020.

Imax’s Gelfond isn’t too concerned that the potential loss of more than 9,000 cinemas could lead to a significant dip in grosses. “China had some overcapacity issues. Many of the cinemas that closed didn’t do big box office,” says the executive. “China’s box office has much more to do with content.”

On that point, Chinese firms are preparing their cards. Huayi Brothers CEO James Wang says the firm “plans to release high-profile films in each of the box office seasons from this August.”

As most of the blockbusters originally scheduled for late January’s Chinese New Year high season still remain unreleased, titles including Jackie Chan vehicle “Vanguard” and Dante Lam’s mega-actioner “The Rescue” could be set to vie with Hollywood spectacles including “Tenet,” James Bond movie “No Time to Die,” “Wonder Woman 1984,” “Black Widow” and “Top Gun: Maverick.”

“A blockbuster release will accelerate the return of audiences. Either a local Chinese movie or Hollywood movie will do it,” says Gao.