Hollywood's Grip On China's Movie Audience Is Fading Fast

Chinese moviegoers are going mad for Chinese movies. And that’s a very bad thing for America’s movie studios.

Hollywood’s sway over the Middle Kingdom’s multiplexes is in precipitous decline. This year imports from America will tally their lowest market share ever in China’s modern cinema history, most likely less than 35%. That’s a far cry from the 63% share they held as recently as the first half of 2012.

Critics like to point out that China’s movie market is manipulated by government authorities bent on promoting local films at the expense of imports. Most Hollywood movies are given second-rate release slots, shorter runs, and less opportunity to market and advertise relative to domestic Chinese movies. And under-reporting of revenue by China’s cinemas and the state-owned distributor China Film Group has been an ongoing problem according to studio representatives. These factors clearly have had an important impact. But none of this matters much if China’s tastes are shifting to locally made films, and that is indeed happening at a faster rate than most in Hollywood expected.

Released last week, ‘Goodbye Mr. Loser’ is yet another runaway sleeper hit that is captivating Chinese audiences.

China's locally made movies are steadily getting better, and they’re drawing bigger box office numbers. In 2015 at least 7 Chinese movies will gross $150 million or more in mainland multiplexes. Only 3 or 4 Hollywood imports will reach that threshold. There have been only a few upside surprises–like Furious 7's stunning $391 million China gross–but plenty of surprising under-performers among the American imports. Mission: Impossible – Rogue Nation, is the latest such example. It will finish up its PRC run with a decent $135 million gross, but that’s barely half the level of the consensus pre-release estimates, and it will be the first Mission Impossible film to fail to crack China’s annual top 10.

Meanwhile, there’s hardly a month that goes by that doesn’t unleash another massive, surprise Chinese blockbuster success. The summer saw Monster Hunt, the animated Monkey King: Hero Is Back, and the comedy spoof Pancake Man (Jian Bing Man) all break out as enormous hits. With its $2 million budget and $187 million box office haul, the latter film may well be the world’s most profitable film of the year.

What seemed like a freak occurrence then is happening again, barely a month later, as 3 current Chinese-made releases, Lost in Hong Kong, Chronicles of the Ghostly Tribe, and the sleeper comedy hit Goodbye, Mr. Loser are all booming despite the competition amongst them.

As of September 30, 2015, China’s year-to-date box office total was RMB 32.8 billion, or $5.2 billion, and RMB 21.2 billion of that total, or nearly 65%, was generated by domestic Chinese movies. Hollywood still has 10 more major releases pending for China this year, but only two of them, The Martian and Spectre, appear likely to cross the $100 million mark there. Meanwhile three upcoming Chinese films–The Ghouls, Skiptrace and Breakup Buddies 2–all have solid chances of beating $150 million.

The problem for Hollywood is bigger than any one territory. The studios’ home market of North America has been stagnating for years, with growth barely averaging 1% annually. Europe is likewise flat, and Latin America and Africa are still too small to matter much. China is a crucial growth market for America’s filmmakers, and if their market share there continues to decline then they’ll have to face the unfortunate prospect, for their first time ever, of a waning overall global business.

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