Chinese Moviegoers Prefer Local Films to Hollywood’s

Chinese Moviegoers Prefer Local Films to Hollywood’s

By Christopher Palmeri October 24, 2013

A year ago the Chinese government raised the number of foreign films allowed into the country to 34 from 20 per year. Many thought Hollywood studios were set to play a starring role in the world’s second-largest movie market. Instead, Chinese filmmakers are capturing most of the industry’s growth because of booming interest in local productions and talent. A case in point: Journey to the West: Conquering the Demons. The action-adventure film, featuring a Buddhist monk who battles a pig demon and a monkey king, is China’s top-grossing film this year, with $189 million in ticket sales.Such made-in-China fare is benefiting from an explosion in moviegoing. Box office receipts across the mainland have surged 42 percent in 2013, to $2.69 billion, through Oct. 15, according to researcher Rentrak (RENT), helped by theater construction that’s brought more screens to smaller cities. Revenue for U.S.-made fare, led by Iron Man 3Pacific Rim, and Man of Steel, has risen just 3.8 percent.

Local audiences outside major cities favor Chinese films, says Dong Yu, chief executive officer of Beijing-based Bona Film Group. These viewers, who have better access to movies than in the past, have been a boon to younger Chinese directors. “People in smaller cities and villages tend to prefer local humor and productions,” Yu says, “as opposed to Hollywood blockbusters where you have to read subtitles.”

The number of theater screens in China has tripled since 2008, to 13,118 last year, while the number of chains operating in rural areas leapt 65 percent, to 248, according to EntGroup, a Beijing-based research firm. To get around quotas and capitalize on the market’s growth, Hollywood has invested in partnerships with Chinese businesses—Rupert Murdoch’s 21st Century Fox (FOX), for example, owns 20 percent of Bona Film. DreamWorks Animation(DWA), with three local companies, is building an animation studio in Shanghai. The venture will make Chinese-language films and television shows. Despite those efforts, the U.S. share of film receipts in China shrunk to 42 percent this year through Oct. 15, from 58 percent in the prior-year period.

Many of the films doing well in China this year are not the historical epics traditionally favored by the government’s culture ministers. Instead, smaller films produced by independent operators are flourishing, according to Michael Curtin, a professor of film and media studies at the University of California at Santa Barbara. Recent hits include So Young, about a love triangle, which marked the directorial debut of 37-year-old actress-singer Zhao Wei, and Tiny Times, the story of four young women looking for love in the booming metropolis of Shanghai. The latter was scorned by cultural critics and government officials for its shallow materialism, Curtin says. “U.S. films may be losing market share, but the biggest winners are not films that are embraced by the state,” he says.

Hollywood continues to face a government-controlled market that divvies up screen time and favors local productions. Django Unchained, a slave revenge fantasy, was pulled from Chinese theaters on the day of its release in April. Reintroduced after some violent scenes were cut, it ended up selling $2.7 million in tickets, a fraction of its $425 million worldwide gross. Many in China expect such actions by film regulators to continue. “They are open to Hollywood films doing well,” says Robert Cain, a partner at independent producer Pacific Bridge Pictures and founder of the ChinaFilmBiz blog, “as long as they don’t do too well.”

The bottom line: The number of theater screens in China has tripled since 2008, to 13,118 last year, fueling demand for local films.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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