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Will China’s Movie Industry Recover From Coronavirus?

Every year, the box office figures for the Chinese New Year holiday, the biggest moviegoing week in China, have been higher than the last. This year should have been no exception. But then the unthinkable happened: As the death toll from the coronavirus epidemic mounted, all seven of the unusually strong blockbusters scheduled to debut pulled out just days before their release.

After 18 months of turmoil due to changes in its tax and censorship rules, China’s film industry was more desperate than ever for a robust Spring Festival in 2020 to replenish its coffers. Instead, it has been slammed with what, for some, could be a series of fatal blows that impact talent, exhibitors, production houses, studios and investors.

Cinemas are shut and production entirely halted. Production company stocks are down, and many in the industry may be facing unemployment. Talent schedules have been disrupted, as have release-date line-ups. Companies are expected to collapse and may need to be rescued. “In the short term especially, the impact is huge,” says Li Dan, a Beijing-based film festival organizer. “And the hardest thing is that we don’t know when this virus will stop.”

So far, more than 1,000 people worldwide have died from the virus, with all but two in mainland China.

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Li has postponed the China Women’s Film Festival in Hong Kong, which was scheduled for March, and is uncertain about the fate of a mainland event in May, worried that fear of the disease will scare off attendees.

The exhibition and distribution sector has been the hardest and most immediately hit. Many cinemas expecting to reap anywhere between a quarter and half of their annual earnings during the Lunar New Year period were left penniless after all holiday films were yanked — with two titles bypassing theatrical entirely and going straight to streaming. Days later, authorities ordered all cinemas to shut indefinitely, leaving the country’s nearly 70,000 screens blank and silent.

Many assume theaters will remain shuttered until at least the end of April, leaving a three-month hole in the release schedule for both local titles and studio imports such as Disney’s “Mulan” and Universal’s “Dolittle.” U is also taking international on the new James Bond movie “No Time to Die,” likely during that period.

But one senior U.S. film studio executive, agreeing to speak on the condition of anonymity, tells Variety that studio revenues are the least of China’s problems: “If, God forbid, we’re still talking about this virus by summer and theaters are not operating and the country is in a form of economic paralysis, that impact is way beyond a movie.

“For their local movie business, studios are only a [portion] of it. The local industry usually accounts for 55% to 60% of box office revenue, and exhibition is 100% owned by China. Their loss dwarfs anything the studios have at risk.”

Indeed, losses for exhibitors have been “extreme,” says Jiang Wusheng, CEO of Chinese distributor United Entertainment Partners, which has had to postpone the release of four films.

With no clarity as to when theaters can reopen, there’s been no way to predict or adjust existing release schedules, leading to a large backlog of unscreened films, he adds. And if films are leaked and pirated, losses will also be difficult to recover, particularly at a time when most are stuck at home watching content online.

Jiang expects some cinemas to go bust unless the government steps in with support. The current hardships may thus “indirectly push forward the consolidation of different cinema chains and accelerate a process of survival of the fittest,” he says.

Some fear that audiences will return nervously and slowly after the all-clear is given, feeling it’s not worth the health risk to sit in close quarters. Others predict a rapid rebound, with demand pent up and people eager to meet friends and family and restart group activities — similar to what happened after the 2003 SARS crisis.

Independent screenwriter and producer Lin Chi-an feels that young people, who make up the vast majority of China’s moviegoing public, still vividly recall the experience with SARS and will be exercising extra caution. “Even if the peak of the epidemic has passed, people are going to think, ‘I’ll just watch this online, where it’s free or RMB 3 [$0.40].’ Why go to the cinema and pay RMB 70 [$10] and maybe get coronavirus? It just feels like an unnecessary risk,” she adds, noting that she will be surprised if any film can break RMB 2 billion ($285 million) during this period.

At the time of SARS 17 years ago, China was still an economic also-ran, and its movie industry a box office minnow. Now it is a global titan, but with the coronavirus setback, the much-ballyhooed predictions that its film industry will overtake North America’s will have to wait a while longer to be realized.

Authorities called for a halt to all production nationwide on Feb. 1 as a measure to stop people from gathering and infecting one another, and no real production work is expected before April.

Fearing punishment, those in charge of shoots have scrambled to comply. Some halted productions still have to pay for stages they aren’t able to use, or for crew and staff who are unable to work. Few companies have the kind of insurance that Western productions use, which means that pain will largely fall on investors’ shoulders.

Two of the world’s largest studio complexes — in Qingdao and Hengdian — now lie idle, along with scores of smaller stages and locations. It remains unclear whether film crews will be able to travel abroad and restart work overseas. This will lower box office prospects, increase employment precariousness and reduce the number of film and TV productions in the second half of the year and into 2021.

“Whether it’s in post-production, special effects or crew or anything, there will be a portion of people who may end up losing their jobs,” says a producer working with Frant Gwo, director of last Spring Festival’s breakout hit “The Wandering Earth.”

Some of those most affected by the virus are therefore those who were in the middle of shoots or planning to begin.

“This is going to drastically change their plans and maybe even cash flow,” laments Lin, who is currently communicating with her writing team via video conferencing.

Meanwhile, the streaming giants, whose production expenditure now exceeds that of traditional broadcasters, are comparatively positioned for a windfall. Though likely unable to make new shows for months, they are in the interim reaping the benefits of supplying films, games and online advertising to tens of millions of citizens who are going stir crazy in quarantine or in cities under lockdown.

The shares of exhibition chain Wanda Film have plunged 26% since Jan. 17, Imax China is down 21% and China Film Co. has fallen 21%. In contrast, streamers Tencent, iQiyi and Bilibili are up 1%, 2% and 12%, respectively.

Independent producer Shan Dongbing predicts that some high-profile companies will struggle to survive.

“Companies like Huayi Brothers, Ding-long Culture, Great Wall Movie & Television, Lead Eastern Investment, and Talent TV and Film, which have lost money for two consecutive years already, will likely go bust,” says Shan. Some see that scenario as sparking financial rescue missions by state-owned enterprises.

With increased uncertainty, industry players expect to see a rise this year in lower-risk, low-budget, quick-turnaround web movies commissioned by streamers. Thus, theatrical’s pain may be streaming’s gain: The unprecedented period of cinema closures has, Lin says, made it even more clear that theatrical release in China is deeply unpredictable and “very, very brutal.”

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