What’s Gone Wrong With China’s Box Office?

Five reasons why cinema box office in mainland China is enduring a steep reversal of fortune in 2024.

After rebounding strongly in 2023, when they were up 80% in US dollar terms compared with 2022, Chinese movie theatre revenues have retreated by some 23% year-over-year in the first nine and a half months of 2024.

The latest weekend (Friday-Sunday, 18-20 October) is a case in point. “The Volunteers: The Battle of Life and Death,” the second part in a patriotic war trilogy, limped to a third consecutive weekend win, but with a lacklustre $8.6 million score.

The second of eight “Harry Potter” films to re-release in China in a season stretching to the end of November, placed second with $4.7 million.

And the nationwide weekend box office total was stuck at $33.6 million, according to data from US-China consultancy firm Artisan Gateway.

While the second half of October is, generally, fairly miserable at the China box office, the consultancy calculates that the YTD total box office is $5.30 billion. That is 22.5% shy of this time last year.

Another way of putting that is that Chinese cinemas are missing $1.4 billion of gross revenue.

The causes are multiple. Here are five:

1)    Audiences are drifting elsewhere (mostly online).

Audiences in China have become more fickle and less loyal to the theatrical experience. The Middle Kingdom has some of the newest and best equipped multiplexes in the world. So, the facilities are not the prime weakness. Rather, long-form streaming (film and TV), gaming and social media make for strong competition for eyeballs and wallets. Those factors are also not especially different from other developed markets. But, add in “retail video’ and ultra-short online fiction, which are both significant and growing rapidly in China, and online is a real challenge.

2)    COVID’s impact on film production is delivering a thinned-out local movie slate.

If COVID’s negative impact on film production sounds like old news, it is worth remembering that China’s pandemic-related shutdowns largely came at different times from elsewhere. After an early 2020 panic, the Chinese economy largely returned to business as usual for nearly two years, albeit in a fashion physically separated from the rest of the world. In 2020 and 2021, China’s cinema box office overtook the North American market to be the largest in the world. The country’s longer lasting and more disruptive lockdowns rolled from March to December 2022.

That disrupted distribution of films shot before 2022 and put the production of many new titles on hiatus. Anecdotal evidence for this comes from filmmakers including Lou Ye and Guan Hu who have multiple completed pictures. And Yicai Global has quoted researchers from TopData and China’s Central Academy of Culture and Tourism Administration who cite a backlog of film inventory. Some 30% of films released in the first eight months of 2024 were started three years earlier, they said.

Extending the time between a film’s greenlight and release means that story and stars risk looking dated when they do finally reach cinemas. More importantly, it also lengthens the recoupment period for producers and other investors, thus weakening their finances and slowing the next cycle.

3)    Holiday season peaks may have become flatter.

Over several years, China’s theatrical cinema business has become more dependent on holiday seasons, such as Lunar New Year (in January or February), May Day, the ill-defined ‘summer season,’ National Day (the week from 1^st of October) and Christmas.

Commentators generally suggested this was a bad thing. Film producers and distributors staked out these prime slots far in advance and neglected other periods, such as early January or September. There were also examples of over-saturation of new film releases in some of these slots, sometimes causing the weaker films to pull out at the last minute and reschedule.

In 2024, at least two of the peaks were lower than in previous years.

Summer (the three months from June to August, according to ticketing agency Maoyan) was down by nearly half, despite a flood of releases. “Box office for the summer season in China’s film market in 2024 was RMB 11.64 billion ($1.64 billion), representing a year-on-year decrease of about 44%. This was mainly due to a reduction in the number of blockbuster films,” the company said.

National Day holiday in China’s film market amounted to RMB2.104 billion ($296 million), representing a year-on-year decrease of 23%, the same company reported.

With only the Christmas season remaining, there is little chance of this year’s box office returning to 2023 levels ($7.74 billion). Let alone the heights of 2019, which came in at RMB64.3 billion ($9.04 billion at current exchange rates).

4)    Fewer Hollywood films have much impact in China.

Possibly in reaction to the need to re-stimulate the theatrical market, Chinese authorities are currently imposing only minimal restrictions on Hollywood imports.

But Hollywood films, both franchises and original IP, have been doing less well in Chinese cinemas than they did in the pre-pandemic era. Here too the reasons are multiple and include: ‘franchise fatigue’; better Chinese films; and shifts in audience tastes.

The taste question is difficult to prove, but it may stem from growing cultural differences between the US and China and audiences that have become accustomed to the ‘main melody’ diet they have been served. And as multiplex building has expanded into lower tier towns and cities, it is understood that tastes become more parochial.

Last year, the market share achieved by all imported films in China was just below 15%. This year, the final result could be a little higher, powered by decent numbers for “Godzilla x Kong: The New Empire” and “Alien: Romulus”.

A Hollywood title has headed the China box office only on eight of the 42 weekends so far this year. Japanese animation features had four weekend wins. Chinese-language films have accounted for the other 30.

The performance of “Venom: The Last Dance” is to be watched closely. R-rated in the US, it opens in China on Wednesday (23 October).

5)    The weak state of the Chinese economy.

When a Bloomberg business reporter asked the question about the correlation between the weak state of the Chinese economy and the parlous state of China’s summer box office, state media fired off indignant editorials against the messenger.

The connection between a weak labour market and a stalled housing market on one hand and weaker consumer spending power seem logical enough.

Bloomberg’s fault may have been to question the strength of the economy message before authorities were ready to acknowledge its weakness.

Now, however, the political tone has changed. The steep drop in box office is undeniable. And central government has in recent weeks introduced stimulus measures to reinvigorate the economy.

Conclusion: Exhibitors and distributors must be having a tough time. While there could be a rebound in the economy, an end to the COVID overhang and a string of must-see movies, theatre operators need a lot more progress in order to return to health.

The 2019 box office revenue was earned by some 68,000 cinema screens, implying a mean per screen income of $138,000.

The 2023 box office total was shared by 86,000 screens, for a mean $90,000 per screen.

That is translating to measurable declines at company level. China Film Group (a state-owned distributor and exhibitor) reported a year-over-year decrease of 26% in revenue and a 43% fall in net profit for the first half of 2024.

Shares in the company were recently downgraded to a ‘reduce’ recommendation by investment analysts at HSBC. It would be surprising if more signs of pain fail to emerge.