Chinese box office earnings beat the US in Q1, totaling 20.2 billion yuan, or US $3.17 billion. It's a new revenue record for a single market in one quarter. The US box office garnered only $2.85 billion in the same period, a 2.6% drop from the same period in 2017. The dollar's recent weakening makes the contrast between these figures even sharper.
Originally analysts had predicted that China's box office earnings would surpass the US in 2017. However, that prediction failed to come true after growth slumped in 2016. Some blamed the slump on a dearth of quality films.
But now growth is back on track, with revenue spiking over 39% between January and March of 2018 over 2017 figures. Analysts expect that this level of growth won't be sustainable, but still predict growth levels of 15 to 20% through the rest of the year.
And predictions are rosy far into the future. Market research firm Ent Group expects that China's box office will exceed 90 billion yuan, or US $14.1 billion, by 2022. That's not including revenue from sectors with ties to the movie industry, which they expect to reach values of 200 billion yuan, or US $31.3 billion, in the same time period. Drivers of growth include a boost in spending power amongst urban Chinese, an increase in the number of high-quality domestic releases, and an improved selection of foreign films.
Gary Guo, an analyst with HSBC, pointed to the success of action war film "Operation Red Sea," which won out over Disney's (NYSE: DIS) "Black Panther" to take the number-one spot in China, as an example of the increased interest in movies produced by local studios (in this instance, Bona Film Group, (NASDAQ: BONA)) on the mainland. Blockbuster films like "The Ex-File 3: The Return of the Exes," produced by local movie house Huayi Brothers, have also won out over "Star Wars: The Last Jedi," on opening weekend.
Intellectual property rights will also likely drive the boom in revenue. Guo said, "The expanding number of sequels is one of the key factors behind the enduring success of Hollywood," noting that the same pattern is emerging in China, with domestic franchises like "Monster Hunt," "Wolf Warrior," and "Detective Chinatown" generating valuable intellectual property.
In past years, experts attributed much of the growth to a simple increase in the number of movie theaters built, but they do not expect this will have as strong an effect going forward. Growth in audiences in cities with populations ranked in the third- and fourth-tier are expected to drive growth significantly going forward.
Paul Dergarabedian, senior media analyst at ComScore, noted that the "importance of China as a movie market cannot be overstated."