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Ticket sales for imported films in China are up 34 percent this year, to roughly $2.3 billion, according to the Beijing research firm EntGroup. Look at Paramount's "Transformers: The Last Knight." That sequel managed only $45 million in its opening weekend in North America, but it took in $120 million in China.
On closer look, however, the rosy picture doesn't quite hold up, underscoring why Hollywood has recently been pushing so hard for film-related concessions from the Chinese government.
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China's softening ticket sales are drawing Hollywood's focus
New data from comScore, a Virginia-based analytics firm, indicates that Hollywood is having a tough time in China. From Jan. 1 to June 30, Chinese cinemas played 24 movies from Hollywood, generating $1.76 billion in ticket sales. In the same period a year earlier, the country let in 22 Hollywood movies, which collected about $1.73 billion.
That is a 1.7 percent increase — a far shot from 35 percent, the figure for all imported movies. Films from countries other than the United States made up the difference. One was "Dangal," a Bollywood drama (partly financed by an Indian subsidiary of the Walt Disney Company) that collected a runaway $191 million in China in May.
Over all, box-office revenue in China totaled $3.7 billion in the first six months of the year, up 2 percent, an alarmingly low growth rate compared with what the market has delivered in the recent past. The slowdown is one reason the Motion Picture Association of America, which represents the six biggest Hollywood studios, recently hired an accounting firm to audit the box-office figures reported by Chinese theaters.
Any uptick is positive, of course, but Hollywood is counting on China to deliver box-office gains that are substantially higher. In North America, ticket sales for the summer are down 8 percent, compared with the same period in 2016, according to comScore; box-office revenue for the year to date is flat. Analysts have been downgrading multiplex stocks as a result; Cinemark got that treatment on Sunday from RBC Capital Markets.
So as they scratch for growth, studios like 20th Century Fox and Universal have been scrambling to position themselves as bigger players in China, where the number of movie screens has increased to more than 40,600 from 12,407 in 2012. The accounting firm PwC recently estimated that China would have roughly 80,377 screens by 2021 — double the number in the United States.
Studios have even made minimal fuss over the censorship demands. China not only limits the number of foreign films that play in the country, but often asks for substantial cuts in those it does allow in.
Some Hollywood offerings have done very well in China this year. "A Dog's Purpose, " made by Steven Spielberg's Amblin Partners, collected a strong $88.2 million; in comparison, it took in $64 million in North America, which remains the world's No. 1 movie market. Sony's "Resident Evil: The Final Chapter " collected about $160 million in China; it managed only about $26.8 million in North America.
At the same time, however, Hollywood suffered a parade of duds in China, including "The Lego Batman Movie," "Sing," "Power Rangers" and "King Arthur: Legend of the Sword." Even "Rogue One: A Star Wars Story" did only so-so. And after that initial box-office pop, "Transformers: The Last Knight" fell off a cliff.
Hollywood could always make a comeback in China in the second half of the year, particularly if Beijing relaxes its traditional late-summer blackout period for foreign films, as some analysts predict. "Everything can be changed as the political needs dictate," said Stanley Rosen, a political scientist with the U.S.-China Institute at the University of Southern California. He noted that Universal's "Despicable Me 3" had a strong arrivallast week, taking in $66 million over its opening weekend there.
But analysts say studios are facing systemic challenges in the country, including a slowing overall economy. Chinese moviegoers are also growing more discerning; film quality is increasingly important. Movie theaters in China may also be hurt as streaming services proliferate. More than 80 million people in the country now pay to watch video online, a 32 percent increase from last year, according to Analysys, a Beijing research firm.
"People just don't have time to go to theaters," Zhang Zhao, chief executive of Le Vision Pictures, a subsidiary of the financially troubled Chinese tech company LeEco, said at a conference in Shanghai last month. (On the plus side, some Hollywood studios are benefiting from selling content to streaming services like iQiyi and Youku Tudou.)
Difficulties at the Chinese box office come as Hollywood presses Beijing to loosen its restrictions on imported films. Under an expiring five-year deal, China annually allows 34 new overseas movies to play in its theaters. Although Chinese regulators have quietly inched that number higher, Hollywood studios want an expanded quota formalized and have asked for at least 50 slots.
American movie executives are also pushing for shorter blackout periods, which China uses to promote local films, and longer marketing windows; under the current setup, Hollywood studios are given only about a month to mount advertising campaigns for their movies.
"That's probably going to happen," Mr. Rosen said, referring to more advance notice. (China controls the release dates.)
Hollywood also wants to receive a bigger portion of ticket sales. Studios receive about 50 percent of box-office revenue in the United States, but China allows foreign companies to receive only a 25 percent cut. Studios have asked for closer to 40 percent.
Mr. Rosen said negotiations over revised film terms, taking place between Chinese officials and the Office of the United States Trade Representative, could drag into next year. He noted that the Communist Party's 19th Party Congress will take place in Beijing in the fall.
"I would be very, very surprised if anything was in place related to Hollywood before that," Mr. Rosen said.