Thursday, February 25, 2016

China’s Movie Industry: Worth the Hype?

Touted to become the largest movie market in the world by next year after it dethrones the US, China has been racking up overseas deals with big names in the movie world even as more players enter the domestic market. Movie theatres are springing up like weeds across China's larger cities and becoming increasingly accessible in smaller ones. But with heavily discounted tickets and a market that appears very crowded, is China’s movie industry really worth all the hype?

CEIBS Professor of Marketing Chiang Jeongwen takes 5 questions on the issue.

Q: It seems, from recent deals, that the US is betting on the Chinese movie market. Is this a wise move? Is the business model of Chinese movie theatres sustainable?
Chiang:  Movie and movie related businesses are booming in China. Names like Alibaba and Wanda are now familiar players in this lucrative industry. Many other players have also seen the attractiveness of the business. For example, 3C retail giant Gome is behind Shao Shuai, a hot TV drama series. China's movie market is huge and all the signs suggest it will continue to grow exponentially. Though thousands of theatres have been built across the country in recent years, the penetration or population per screen is still low compared to the US. Ticket price, on average, is affordable and thanks to online and mobile APPs, discounts are common. Demand is very strong, judging from box office sales. 

Q: There seems to be a big push to build more and more movie theatres but are they really making money?

Chiang: Theatres (especially in shopping malls) can be a way to attract customers. Since more and more shopping malls have positioned themselves as destinations for family outings, movie theatres are becoming one of the enticing features, along with restaurants and entertaining sports/amusement facilities. So, cross-subsidizing from other businesses can be a way to cover the costs of theatre operation.

Q: With so many discounted movie tickets online, how do China's movie theatres make money?

Chiang: Indeed, more and more discounts can be found from the mobile APPs. Discounting tickets is an easy way to fill the empty seats and money can be made from food and beverages.  

Q: What's the strategy behind all these deals by Chinese companies with international movie houses?

Chiang: I believe US movie houses are chasing other markets like China for business growth. Chinese elements and tie-ins have appeared in recent big hits. I am sure these tricks helped in the China market. It is foreseeable that more of these movies will be shown in China once Chinese companies are involved in the production. The quality of movies made solely by Chinese is still a long way from perfect. US influences will continue; but beyond pursing market and money, Chinese companies should invest in grooming talented individuals in every aspect of the industry: script writing, acting, directing, etc.  

Q: Do we expect similar deals like these in the future? Why? Any predictions?

Chiang: Entertainment is one of the big bright spots even though the Chinese economy is slowing down. Movie going is still an attractive activity for all generations despite prevalent online movies and mobile APPs. More and more companies (including firms from Taiwan and Hong Kong) will join the feast. The industry is also being encouraged by the government too as culture-related creation is being heavily promoted and has been made a key area for development in the government's 13th 5 year plan.

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