April 6, 2013
Year after year I keep telling myself that China’s box office growth has to eventually slow down. An industry that has been rising at a pace 4 or 5 times faster than its country’s GDP for over a decade can’t continue at that rate for long. But year after year I’m amazed that growth just keeps accelerating. From 2001 to 2007, theatrical revenue increased at a 34 percent compound annual rate (as measured in US dollars); from 2008 to 2012 the pace quickened to 43 percent per year. So far in 2013 China’s movie revenue has increased 51 percent, and there’s no sign of a slowdown.
This year, China’s theatrical movie business is growing more than 6 times faster than its GDP. North America’s theatrical business, in contrast, has been growing slower even than its recession-worn economy, at an annual rate of just over 1 percent since 2002.
Over the past few days China enjoyed a national holiday, the Qing Ming Festival, and again moviegoers turned out in huge numbers, roughly doubling last year’s holiday box office total with over $31 million in revenue on Thursday and Friday.
There are three main factors driving this incredible growth:
Things will eventually have to cool off, but with so many big cities still lacking multiplexes, it will be many years before China reaches a saturation point. The biggest factor constraining growth is the shortage of screens. There are currently about 13,500 movie screens in 3,700 theaters across the country, the second largest national total in the world, but with its 1.3 billion population China is still woefully under-screened, with just one per every 100,000 people. The U.S. has almost 40,000 screens, or one per roughly every 8,000 people, according to the MPAA. To reach the U.S. level of screen density per capita, China would have to build an additional 155,000 screens.
Even if we assume China never gets anywhere near that massive screen count, and even if we assume that the growth trend slows down, it’s inevitable that China will soon have a much, much larger movie business than North America. For the sake of illustration let’s make a few conservative assumptions:
What we wind up with is a picture like this:
Under conservative assumptions, we’ll see China’s gross box office surpassing that of North America by 2018, and going on to double North America by the middle of the next decade. No other territory will come close even to North America, except possibly India. Hollywood’s century of hegemony over the global movie business will clearly soon come to an end.