Why movie theaters are a growing new fad in China

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Photo courtesy of Hollywood.com

By Andy Milone

The Chinese government starved its population from having access to privatized cinema entertainment throughout the mid to late 1900s. Now, the effects of this entertainment chokehold have been exposed and a culture change is sweeping the Asian nation — a population of over one billion desiring theatrical entertainment more than ever. Americans have shown a diminishing interest in going to movie theaters over the last decade, but the Chinese continue to see their box office sales on the rise. Media streaming and video-on-demand platforms claim responsibility for diminished cinema popularity in the US but have not touched the box office results within the most populated country in the world.

“Chinese video streaming platforms are not cannibalizing theatricals like it is here [in the US],” said Jason Squire, Associate Professor of Cinema Practice at USC.

The Chinese commercial industry for movies originated in the 1980s, and Squire believes the theater experience is a novelty for Chinese millennials.

The industry sparks novelty because diversity in cinema is so young; past, stricter censorship laws significantly limited the number of available movies for public viewing. The Chinese limited the number of revenue sharing contracts for foreign produced movies, and thus flat fee deals were common; this led to a lower number of popular films in China because the top studios of the world rejected the flat fee offer to deal a movie to China. Flat fee contracts didn’t provide gross revenue from Chinese box office sales, and thus studios like ones in Hollywood would not be interested in losing a large chunk of what the movie was capable of fiscally producing.  These factors presented issues to having the best film in China, but this is now changing according to Jonathan Landreth, founding editor of China Film Insider and managing editor of ChinaFile.

“As recently as five years ago, if you went outside of a first or second tier city in China, you would be hard pressed to find a theater, that played first-run movies because they didn’t exist,” said Landreth. “There has been such a big boom where you have whole segments of an enormous population, who are for the first time in their lives, perhaps maybe in their family’s lives, able to go a modern multiplex and have choice as a consumer.”

The infrastructure has grown in the number of multiplexes, so the Chinese government has allowed more first run movies into the domestic market in order to afford these facilities.

“The government has come under pressure to allow more films in because in order to keep movie goers going to the theater, they have to give [the Chinese] choice. Because the Chinese are discovering that there is a wealth of entertainment to be had on the phone, the audience is beginning to be fragmented. But there is all this this infrastructure and all these shopping malls that are anchored by multiplexes that need consumers to pay off the investment in movie theaters,” said Landreth.

At the moment, the theater business is a part of the Chinese way of life, and it’s not showing any symptoms of digressing.

According to Bloomberg News, “The Fate of the Furious” showing resulted in a $192.1 million gross amount during its recent three-day opening weekend (April 14-16) in China, the highest ever opening weekend in China’s history.

China added 7,500 new big screens last year, and the government cap has grown to 38 foreign films from the previous 34 allowed to enter the Chinese market. IMAX and 3-D movies became a desirable new item for the Chinese in 2012 when they pressed for these types of films through a new deal involving the US and China. The demand is continuing to be fed.

Landreth believes that there is pent up demand caused by the lasting effects of  the Chinese Cultural Revolution where only communist propaganda was released to the public from 1966-1976… no movie theaters were open in the country during this period of isolation from the rest of the world.

“There is this huge pent up demand to feel a part of the world in China – feeling like you can share some sort of universal culture with the rest of the world,” said Landreth.

It’s now also a comradery amongst the Chinese movie goers, which spurs a love for theater, Squire believes.

Landreth agrees in the sense that going to the multiplex in China is a communal event where you go the theater and then you go out to eat a meal. There are often large tour buses full of Chinese movie goers.

It’s not a secret that the most populated country in the world is an attractive market for any global business, but it’s a difficult market to enter as regulated by the Chinese Communist Party. Netflix pushed some of their content overseas through a recent licensing deal with video streaming platform, iQIYI, a subsidiary of Baidu, the Chinese search engine equivalent of Google.

The licensing deal did not include “House of Cards,” a series that is focused on a rise of power through American politics; this exclusion exemplifies how the Chinese government continues to limit certain content from accessibility. This censorship creates a stronger desire to see movies in theater but also to use the online landscape to crack through this barrier.

“Today’s Chinese generation has grown up since high speed internet existed. Their wealth of choice is huge, and it is still limited because there are certain movies that are not allowed and banned. Because no matter what the government does to block anything, kids will find their ways around anything,” said Landreth.

The Netflix long term view revolves around eliminating linear TV and the movie watching experience, which involves TV channels and theaters presenting shows and movies at particular times on a set schedule. Netflix counters this linearity with on demand, ability to personalize, and availability on any screen. It’s a question for the long term whether movie going is permanently installed in China’s culture, or if the movie going business will eventually age.

Yiouku is a popular streaming platform in China, but at the moment, it’s not having the same effect on Chinese consumers that Netflix is having on US consumers. It doesn’t mean Yiouku isn’t popular; the sphere of influence just is not affecting the commercial industry for movies in China, mainly due to the larger size of the population.

“There is no question that in the last 20 years, there has been an enormous shift to the global movie business, not just China, but every overseas market depending on the movie is enormously lucrative, and that is the new movie business,” said Squire.

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