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China’s Box Office Is Now Bigger Than North America: It’s Time to Start Worrying

First-quarter box office figures from China beat U.S./Canada for the first time. How it happened should concern studios.

Operation Red Sea

“Operation Red Sea”

Well Go USA Entertainment

The first quarter of 2018 is behind us, and for the first time, total box office in China beat domestic totals. Grosses for China in Q1 totaled $3.17 billion, compared to $2.85 billion in North America. Those figures reflect a 39 percent increase in China over the same period in 2017. Here, domestic totals fell two percent. On the one hand, none of this is surprising. We’ve long believed that China overtaking North America as the top market was inevitable; at 1.3 billion, it has four times the population.

And while Chinese theaters return a much lower percentage of the gross, American studios have looked to the Far East as a major guarantor of future growth and profits. So maybe this is good news? Not really. Although this quarter probably won’t reflect the full year, China’s success doesn’t bode well because it had almost nothing to do with the studios.

The growth surge came almost entirely from the massive success of several homegrown titles, led by “Operation Red Sea” ($574 million so far), “Detective Chinatown 2” ($541 million), and “Monster Hunt 2” ($356 million). By contrast, the biggest American import title has been “Black Panther” at $105 million.

Based on figures reported at Box Office Mojo, it appears that somewhere close to $2 billion of the total came from Chinese titles, with less than $1 billion from studio-related films (including some British productions). Films from other countries, including India’s “Bajrangi Bahijaan” ($45 million), made up the rest.

Among American titles released in China so far this year, “Black Panther” is followed by “Pacific Rim: Uprising” ($90 million), “Jumanji: Welcome to the Jungle” and “Tomb Raider” (both $78 million), and early results for “Ready Player One” ($62 million). “Star Wars: The Last Jedi,” which opened in January, topped out at only $43 million.

In the first quarter of 2017, American films grossed about $1.9 billion at the Chinese box office, led by “xXx: The Return of Xander Cage” ($183 million). Other strong performers were “Resident Evil: The Final Chapter,” “Kong: Skull Island,” and “Logan,” all of which made more than “Black Panther.” That period also brought a disappointing Chinese coproduction, “The Great Wall” starring Matt Damon. It made $170 million in China and double that worldwide, but proved a real bust stateside. Its $150 million budget was very high for China, much above most local productions (“Operation Red Sea” came in at a reported $70 million). That makes similar efforts harder to justify.

Those figures would look worse without a major first-quarter factor. The state controls China’s distribution system, dictating when films are released. Among the rules: the two biggest periods — late December, and Chinese New Year in February — are reserved for Chinese-produced titles. As a result, top American films in 2018 like “The Last Jedi” and “Jumanji: Welcome to the Jungle” missed out on the lucrative dates that helped them elsewhere, and “Black Panther” didn’t benefit from Chinese New Year.

Statham The Rock Fate of the Furious

“The Fate of the Furious”

However, there’s another disturbing element in these first-quarter results. “Operation Red Sea” and “Detective Chinatown 2” grossed more than any American film ever has in China (the two most recent “Fast and Furious” entries came close to $400 million). Along with last year’s massive “Wolf Warrior 2” ($854 million), these three homegrown films dwarf what America has to offer. It doesn’t matter that few people outside China want to see them; Chinese producers have figured out formulas that appeal to local audiences without international stars.

It stands to reason that producers would make more of the same, increasing their dominance of local screens. That would also please the central-state distribution system, appealing to its financial and nationalist interests. This is discomfiting for a country that studios once viewed as salvation, given their domestic struggles with a “mature” marketplace.

“The Great Wall”

Of course, American studios won’t back away from competing; it’s hard to imagine conceding the Chinese market. But regaining a foothold could come at the cost of making serious investments in films with less domestic appeal.

The curious counterbalance to this is “Black Panther.” The year’s biggest domestic success to date, it’s a big winner for Disney and Marvel despite China’s indifference. Still, when no film is big enough to be one size fits all, it creates a real conundrum around production-budget allocations.

Finally: China is the largest example of a growing local market, but it’s not alone. India has always been self-sufficient, Russia’s native industry is growing, and Japan consistently provides local hits. That suggests a declining need for U.S. films to fill their theaters; meanwhile, domestic box office shows little sign of growth. China may have 1.3 billion people, but that may not be enough to pick up the slack.

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