China will be the world’s largest box office market for the second year running, overturning the decade-long rankings and staying ahead of the North American market as it did in for the first time in 2020.
And, even if “Spider-Man: No Way Home” avoids becoming caught in a web of omicron-related shutdowns to become the highest grossing film of 2021, Chinese movies “The Battle at Lake Changjin” and “Hi, Mom” are certain to account for at least two of the year’s top five.
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Such a new world order has been long anticipated by some in Beijing, though it did not materialize how or when many in China had forecast. In the end, China’s crown was hastened by the two countries’ vastly different responses to the COVID-19 pandemic.
“China will be the highest grossing territory for 2021. It is currently sitting at approximately $7 billion, which represents just over 39% of the 2021 global box office total. They are tracking at 59% above their 2020 result,” says Frank Perikleous, VP movies, APAC & Australia at Comscore. “The U.S. is second at $3.7 billion, which is 21% of the global box office and tracking 42% above 2020.”
If the differing speeds of international economic recovery were evidenced in 2021, the box office story within China was also a tale of a year with two contrasting halves.
The first half was buoyant and propped up by a record Chinese New Year season that included hits “Detective Chinatown 3” ($868 million worldwide) and “Hi Mom” ($822 million worldwide). The first half also included the two successful import titles: Chinese-backed “Godzilla vs. Kong” ($192 million million) and “F9” ($217 million). At the end of June, the $4.29 billion running total was only 10% adrift of 2019’s record.
The second half was markedly slower, with the year expected to finish at in the range of RMB 46-47 billion ($7.19 billion-$7.34 billion), some 27.5% below 2019’s RMB 64.1 billion ($10 billion), according to consultancy Artisan Gateway.
The slowdown reflected the return of localized cinema restrictions due to COVID spikes, and the Chinese authorities’ decision to persist with their traditional local film support month (a.k.a. a “blackout period”) in August. They denied import licenses for major U.S. titles, including “Shang Chi and the Legend of the Ten Rings,” “The Eternals” and “Venom 2,” just as the U.S. appeared to be overcoming the coronavirus and Hollywood movies were returning to international distribution.
Politics over profits
Analysts make it clear that this strategy left money on the table. And that it was a decision that prioritized politics over near-term financial performance.
“China tracked badly through the summer, especially in August, at a time when it shouldn’t have been necessary. Chinese cinemas were open, import titles were available, and so China fell back to over 20% behind its [2017-19] average by the end of August,” says Robert Mitchell at analysis firm Gower Street Analytics.
“China’s full-year result could have been significantly higher if it weren’t for the impact of COVID-19 on cinema closures, the release and marketing of films, and the speed at which the moviegoing audience returned to the cinema experience,” says Rance Pow, principal at Artisan Gateway. “The dearth of import tentpoles, and the mixed performance of those that navigated the gauntlets of COVID and Chinese Communist Party anniversary releases, also left a noticeable echo on 2021’s relative performance to pre-COVID 2019.”
In a report issued mid-December, Gower Street predicted that the North American box office will more than double from a forecasted $4.2 billion in 2021 to $9.2 billion in 2022. According to its calculations, China would slip back to second place with its figures rising from $7.2 billion this year to $8.2 billion in 2022.
But the company notes the fundamental opaqueness and uncertainties of the increasingly politicized China theatrical market. The other analysts predict a close run between China and the North American market in 2022.
“It will be a close race, and potentially China will hold that mantle again in 2022,” says Perikleous. “[Much] depends on how the U.S. manages the next phase of this pandemic. The U.S. has the opportunity to grow much more in 2022, given that 2021 was only 40% of its pre-pandemic result.”
But while the box office focus has been on COVID and related measures, under the surface more tectonic shifts have been taking place. The cinema world may be dividing in to two increasingly separated spheres.
The past year demonstrated that China’s film industry is increasingly influenced by political forces. These decide what films are made, control which films are imported, and determine how many cinemas are to be built — regardless of market forces and in the service of a top-down socialist order.
The theatrical industry in the outside world will be shaped by the tussle between conventional movie studios and the giants of tech and streaming. Some, such as Wall Street analyst Michael Nathanson have predicted that the theatrical industry will peak in 2022 or 2023 and lose ground thereafter. The world may not need so many theaters if they only serve event movies, while indie, specialty and foreign-language films migrate to streaming.
China’s box office success was largely driven by local titles. Only three films (“F9,” “Godzilla vs. Kong” and “Free Guy” in China’s top 20 were of U.S. origin, according to Comscore. Artisan Gateway calculates that market share for all U.S. films stood at just 12.6% by mid-December.
A few years ago, Hollywood typically enjoyed around half of China’s theatrical box office, and Chinese government targets called only for local titles to have a majority share.
The COVID crisis has coincided with China’s privately-owned film studios being directed to deliver patriotic (a.k.a. “main melody”) movies that the government wants. At the same time, China-U.S. diplomatic relations have tumbled to a recent low, which has had direct consequences on the films that are imported.
While nobody seems willing to clearly say that the trio of Marvel titles were denied China releases because of the ongoing Cold War, a recent Global Times editorial, heralding the unbanning of Indian and Korean films in China, makes explicit the link between global politics and access to Chinese movie theaters.
“If they can stop inciting national hostility towards China […] Chinese people will also welcome more cultural communications between the two countries, which might include more Indian films being released in the Chinese mainland. If you are friendly to China, we will be nice to you too,” the influential paper said earlier this month.
A five-year plan, announced in November, cements this approach and explicitly makes feature film a tool of the Communist-led regime. Even at a time when the Chinese industry is grappling with theatrical over-capacity, the plan calls for a further 28% expansion of the exhibition sector, increasing the number of cinemas from 78,000 at present to 100,000. It will ensure that every county has a cinema and a screen dedicated to the “People’s Circuit,” playing propaganda fare.
The plan also requires the production of more films that “eulogize the party, the motherland, the people and heroes, so as to pass on red [Communist] genes and continue [the Party’s] lineage.” Others “should be made to fete important political milestones, such as the ongoing 80th anniversary of the Korean War,” the plan outlines.
Consequences of this may include an acceleration of the box office seasonality that is already underway and a further tilting of Chinese audiences away from the major metropolises. “As local films typically play more powerfully in China’s smaller markets, we expect Chinese-language [titles] in aggregate will continue to outperform import [titles] in the foreseeable future,” says Pow.
While 2021 may go down in history as the year in which China confirmed its hold on the box office crown, it may just as easily be remembered as the year in which the Middle Kingdom decoupled from the global film industry’s releasing system.
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