(WSJ) A slowdown in ticket sales and a drop in Chinese currency have pulled back projections that China would become the world’s No. 1 box-office sometime this year, with a new report finding that the U.S. may keep the top spot through 2021.
In China, already a key market for Hollywood studios, challenging market conditions have depressed what had been torrid growth in the country, according to a new report from PricewaterhouseCoopers LLC.
Anemic box-office growth last year in China depressed projections, and the country is cracking down on box-office fraud believed to have inflated grosses. It is unclear how aggressive those crackdowns will continue to be. The recent fall of the yuan has also thrown projections into flux.
The conditions have grown so opaque and unpredictable that the country may still surpass the U.S. by 2021, but the unknown variables of the market make it impossible to definitively say so, said Matthew Lieberman, advisory marketing leader at PwC. “There are a couple of unknowns that drive us to err on the conservative side,” he said.
One thing is clear: China, which already has more movie theaters than any country in the world, is building more at a rapid clip. The country will have more than 80,000 screens in 2021, nearly twice as many as the U.S. will have, according to PwC’s annual Global Entertainment and Media Outlook report.
“There are hundreds of new cities being built in China, and all have cinemas being built in them,” said Mr. Lieberman. “Where else in the world can you have entirely new cities?”
The screen construction is one of several long-term trends cited by PwC that project the Asia Pacific region as the primary source of growth for the global cinema industry. Box-office grosses in that part of the world are expected to grow faster than any other in the next five years, according to PwC, hitting a projected $20.4 billion in 2021. North American box office is projected to tick up to around $12 billion, from $11.3 billion in 2016.
Latin America is the only other region projected to grow faster than the global average over the next five years. The North American box office, already the most built-out of any part of the world, is expected to grow more slowly than any other region.
Stateside, PwC sees significant growth for the theatrical movie industry’s biggest competitors, such as at-home entertainment options.
The U.S. market for subscription video-on-demand services such as Netflix Inc. will continue to outpace the country’s theatrical movie business, with subscription and video-on-demand rentals hitting $13.6 billion this year and rising to $18.8 billion by 2021, the outlook found. Esports and virtual-reality are also expected to shoot up, said Mr. Lieberman, though they are starting from a tiny base, compared to feature films and VOD.
Any projected growth in U.S. box office is expected to arise almost entirely from increasing ticket prices, said Mr. Lieberman. In China, currently the world’s second-largest box-office market, growth is expected to derive from rising admissions.
One looming question facing China’s prospects is the renegotiation of distribution terms that will dictate how many U.S. releases are imported into the country each year.
IMAX’s growth is benefiting from theater construction in smaller cities, some of which are getting their first theaters, said Cecilia Yau, a partner in the entertainment and media practice at PwC’s Hong Kong Office.
“You can introduce the new technology right away” and train consumers to pay for the more expensive ticket, she said.
Given the sheer scale of the market, the slightest change in consumer habits among China’s 1.4 billion citizens has the potential to cause drastic swings in the box office, said Mr. Lieberman. The average Chinese citizen goes to the movies less than once a year, compared to the average American, who goes more than four times.
“Even if you move that needle a little bit, you’re talking about a huge swing,” he said.
Source: Wall Street Journal by Erich Schwartzel