3D as the core of an exploding film market, 40% 3D in H1, 2012 42% p.a. box office growth rate, 65% foreign films in H1, 2012
Last year (2011) was the first year that annual box office in China crossed US$2.0 billion (RMB13 billion). 3D films had a 40% share of it (US$ 790m, RMB 5bn).
First half of 2012 growth rate was 42% compared to 2011, after an already astonishing 29% growth in 2011 over 2010. If the Chinese box office maintains its 42% growth rate through the whole year, 2012 box office could reach $2.9 billion and China would be the second largest film market after the US, although behind India in terms of number of productions.
Since the further opening of the 3D film market to foreign productions, foreign films increased their box office share from 49% in 2011 to 65% in H1, 2012.
Industry analysts attribute box office growth to the surge in cinema screens as well as the accompanying growth in audience numbers among China’s youth. Additionally, a growing middle class, along with a hike in ticket prices, especially for 3D movies, has contributed. 3D movies, and especially the recently released “Flying Swords of Dragon Gate”, a 3D remake of 1967 Kungfu Classic, reaped $ 100m in box office revenue on an initial production investment of $35m ($3.5m for visual effects and $ 1.8m for post-production services), and created a new IMAX revenue record of 12 million US$ in 63 IMAX cinemas.
After Titanic 3D made it’s total 2D to 3D conversion costs of US$ 18m back in the first weekend in China alone ($20m), Painted Skin 2 became the best selling ever domestic film, shot in 2D, converted to 3D and released to cinemas in 3D only. It reached a box office in excess of $100m since its release end of July.
Titanic 3D took more than $147m in box-office in China, while Transformers III took $170m and Mission: Impossible IV took over $ 100m.
3D screens have an annual growth rate of 212% on average (59% in 2008; 438% in 2009; 189% in 2010; 165% in 2011), reaching 8.000 plus 3D screens this year. From only 9 in 2007, IMAX screen are 92 and contracts have been signed for a total of 229.
But it’s not only the cinema market which is going through the roof in terms of 3D and internationalization; all other markets report staggering figures as well.
Over 660 licensed Internet Video Service Suppliers, 350m Online Video Users, 100m Mobile Video Users until 30 June, 2012
China has now licensed 617 Internet audio and video service suppliers, 7 IPTV operators, 21 mobile TV operators and 15 radio and TV stations to launch Internet stations. 5 companies primarily running Internet audio and video businesses have listed on stock exchanges.
Chinese online video users have reached 350 million by the end of July, according to the 30th China Internet Development Statistics Report released on July 19. 25 million of these users were new in the first half year. Online video usage rate has risen to 65.1%. Mobile video users have also surpassed 100 million, accounting for 27.7% of all Chinese mobile Internet users.
3D has reached TV, online and mobile already and it’s only a matter of time when the 40% box office share for 3D in cinemas will translate into a large share of 3D in all other film distribution channels as well.
The production infrastructure to satisfy the growing demand for content The newly privatized Chinese film and TV production business counts for 1,700 production companies, 200 post-production and visual effects companies, on top of the 700 broadcasters with over 3,000 channels most of which have their own production arm.
15,000 TV episodes were produced in 2011, close to 2,000 of those by CCTV, the central government channel.
5,094 hours of documentaries were produced in 2010, thereof 3,027 hours by CCTV who launched their dedicated CCTV9 documentary channel in 2010, and 2,076 hours by the provincial level broadcasters (Shanghai Media Group 599 hours, Chongqing TV 199 hours and Yunnan TV 192 hours)
With 558 theatrical film productions China has reached the output of the Hollywood film business, but this figure is indicative for the challenge the Chinese film business is coping with:
Of these 558 theatrical film productions only a fraction made it to the cinemas, and they only count for 35% of total box office, whilst foreign films, which are limited to 34 per year and almost exclusively from the US, make 65% of box office currently. Only Painted Skin 2 made it into the top ten in H1 2012, all the other big hits were of US origin, and even titles which flopped in the US made it into the charts in China (John Carter #7 with box office of 42m and Wrath of the Titans as #10 with $25m).
A similar situation is seen in the online video world: US TV episodes are topping the charts and domestic productions are finding their home mainly in the government owned broadcast system.
And this shows the challenge the Chinese film and TV production business is facing: The Knowledge Gap.
As liberalization of the production markets and of the distribution channels takes place and the consumers can decide about where they spend their entertainment budget, the quality of productions is the most important factor for determining their success. The Chinese government knows this and is encouraging international co-productions, the large domestic film studios know this and have taken US film studios into their business and into their large film productions as minority partners and every kind of transfer of foreign film making knowledge, production and post production skills are meeting a large, very receptive audience.
The last example is the opening of Cameron & Pace in Tianjin, a 14m people city close to Beijing, who have announced that their core business in China will be training, standard setting and knowledge transfer rather than film production itself.
The Chinese Government and the Entertainment Industry
China is at a stage now where middle class development is the dominant economic factor. China has become the largest car market worldwide and is the largest energy consumer. The UN estimates that by 2030 the size of the middle class in China will be four times larger than the one in the US. This goes together with the urbanization of China. Presently China has over 170 cities with a population of over one million and this number is expected to grow to over 220 within the next twenty years.
In its 12th 5-year plan (2012 to 2016) the Chinese government has not only put emphasis on the economic development of the domestic market in general, but in particular on the development of “culture as a business”.
The Development of the Chinese Film Industry
In China, the film business (theatrical, home and mobile) is the centerpiece of the cultural development. China has become the fastest growing movie market worldwide in number of (digital) cinemas, production companies and television productions.
For the Chinese film industry, 2011 was largely characterized by five major developments: the surge in box-office receipts, the onset of the 3D era, the governmental crackdown against copyright infringement, IPO fever, and last but not least, Chinese FDI (Foreign Direct Investment) flowing into the international media industries.
But this business orientation of the Culture Industry goes hand in hand with a strengthening of the government‘s influence on content and on production of film and tv. After broadcasters have been government businesses since the beginning, government regulations have not hampered but in fact stimulated the Chinese cinema business by setting standards in all areas of cinema distribution. These regulations have now been extended to other sectors which enjoyed relative freedom in the first phase of their development: the internet distribution channels need to have a full content distribution license and they have been forced to establish a system of censorship for their content, every single new production of a film or a tv episode needs government approval and SARFT, the regulator ( State Administration of Radio, Film and Television) has even taken part in the development of content by deciding what is socially acceptable to broadcast and what would not be in the interest of the development of the Chinese society.
The Chinese Government as a Supporter of Film Business Development It is in line with this proactive policy for the development of the industry that the Chinese government is also organizing training and education, where the most influential institutions are the Beijing Film Academy and the Communication University of China, the Central Academy of Drama, Shanghai Theatre Academy, and the National Academy of Chinese Theatre Arts.Another government sponsored activity has become the largest meeting of film professionals and interested public in the world:
The Beijing International Cultural Creative Industry Exposition (ICCIE), in which over 2 million people have participated since it was founded in 2006. After the 3D industry has been determined as one of the core growth areas within the Cultural Industry in China, the China 3D Technology & Creative Exposition (hereinafter referred to as the “3D Expo”) has been founded in 2010. Starting with 6,000 participants in 2010 and growing to 20,000 in 2011, the 3D Expo is an annual event that has won strong support from all levels of government and has the greatest influence in the domestic 3D field so far. The purpose of 3D Expo is to build a cooperation platform for dialogue and exchange in the 3D industry domestically and internationally, to strengthen the integration of 3D technology and cultural industries and to promote the development and prosperity of China’s creative economy.
Organized by the Chaoyang Museum of Urban Planning 3D Experience Center and the Beijing Film Academy, the event is held in purpose built converted gas factory. It has a 250 seat 3D cinema, a 40 seats 4D cinema and a digital sand table. Apart from the 3D Expo there is a permanent exhibition and a series of smaller events relating to the 3D industry, training and public relations activites will complement the 3D Expo on an ongoing basis during the year. Chaoyang is the largest district in Beijing, spanning from the Beijing International Airport to the Birds Nest, including the CBD (Central Business District), in which the headquarters of CCTV / BTV are and which guarantees that all these important institutions are behind this showcase event. Chaoyang is the largest district in China with 4,3m people, the richest with a GDP of 327 billion CNY (US$ 52 bn) and probably the most influential for the Culture Industry.