China Box Office Finishes Summer up 16 Percent, but Hollywood Revenue Slips

"We're witnessing the differences between U.S. and Chinese film tastes in real-time commercial terms," says an analyst of the season, which saw big gains in terms of North American ticket sales but a drop for U.S. titles in the Middle Kingdom.

As the summer movie season officially came to a close last week, China's box office was up a strong 16 percent for the year to date. But unlike nearly every other period of the past decade, the boom times haven't been shared by all in 2018.

During the first eight months of this year, ticket revenue for imported foreign films — the vast majority of which are Hollywood blockbusters — fell 18.1 percent.

Imported titles had earned 18.77 billion RMB by the end of summer in 2017 ($2.74 billion at current exchange rates), but they have taken only 15.36 billion RMB ($2.25 billion) during that period this year. A weakening of the Chinese currency in 2018 will mean that the Hollywood studios bring home even less once revenue is converted into U.S. dollars and repatriated.

If the downward trend continues throughout the remaining third of 2018, it will mark the first time in over a decade that Hollywood hasn't notched a full year of robust growth in the world's most populous nation.

Meanwhile, Chinese domestic films are on the rise. From January to August, local titles earned 30.42 billion RMB ($4.45 billion), a 46 percent increase over the 20.82 billion ($3.04 billion) pulled in by Chinese films during that stretch in 2017.

The shift in the Chinese market's receptivity to Hollywood fare would appear to be driven by tastes rather than a decline in product quality. After all, the U.S. studios are having a banner year at the North American box office, where ticket sales surged 9.6 percent, year over year, in the first half of 2018. The good news only grew over the summer: final numbers won't be tallied until later today, but comScore is predicting an uptick of 14.4 percent for summer 2018, the best summer-over-summer increase in North America in at least 20 years.

Chinese studios, meanwhile, are growing more confident in meeting their own audience's appetites. Two Chinese films have cleared the half-billion-dollar mark at the local box office this year — Bona's Operation Red Sea ($576 million) and Wanda's Detective Chinatown 2 ($541 million) — while three more have earned more than $350 million: Beijing Culture's Dying to Survive ($454 million), Mahua FunAge's Hello Mr. Billionaire ($368 million) and Edko Films' Monster Hunt 2 ($356 million).

Hollywood has had just three titles crack China's 2018 top ten so far: Disney and Marvel's Avengers: Infinity War ($360 million), Jurassic World: Fallen Kingdom ($261 million) and Steven Spielberg's Ready Player One ($219 million) for Warner Bros, which struck a strong chord with China's legions of gamers.

One factor that could explain some of the downshift, according to analysts, is that China, a mostly homogenous nation, isn't as excited by the themes of diversity and inclusion that are currently lighting up the U.S. box office. Black Panther, for example — which started 2018 with a roar in North America, earning $700 million — brought in a respectable but non-historic $105 million in China (for a deeper dive on the unique perceptions of Black Panther in China, see here).

Warner Bros.' female-driven Ocean's 8 never landed a Chinese release, and the studio's all-Asian August breakout, Crazy Rich Asians, doesn't have a date yet. Assuming Crazy Rich Asians does score a release (one worry is that China's censors might balk at the film's celebration of conspicuous consumption, because of Xi Jinping's ongoing crackdown on corruption and decadence), speculation is rife in the Chinese industry over whether the local audience will embrace the film on racial grounds or view the characters foremost as American and Singaporean, and thus not having much to do with life in China (which isn't to say they won't enjoy the widely praised film on its own merits; it just might not get a boost from any potently felt enthusiasm over its Asian representation factor — or so the argument goes).

"There’s definitely some truth in the statement that diversity and inclusion as current issues aren’t resonating in the same ways in China as they do in North America," notes Rance Pow, president of the Shanghai-based cinema consulting firm Artisan Gateway.

Hollywood's recent preoccupation with edgy subversions of the usual superhero mold also hasn't found a place in China because of censorship: Deadpool 2 (North America's fifth biggest title this year at $318 million), like its predecessor, never got past the censors. And the country's notorious disinterest in Star Wars took on a new potency with the release of Solo: A Star Wars Story, which earned $214 million in North America but just $16 million in the Middle Kingdom (see more on where that leaves Lucasfilm here).

Animation also has failed to catch fire in China this year. See, for example, Incredibles 2 at $602 million in North America and just $51 million in China.

"We’re witnessing some of the differences between U.S. and Chinese audience film tastes in real-time commercial terms," adds Pow.

One thing 2018 has delivered is that most elusive of box-office beasts: the smash-hit U.S.-China co-production. Warner Bros' giant shark flick The Meg, co-produced with Beijing-based Gravity Pictures and co-starring Li Bingbing alongside Jason Statham, is arguably the first co-pro to go blockbuster in both markets, with $144 million to date in China and $123 million in North America.

Although overall growth was robust, if not barnstorming, at China's box office throughout the summer — year-on-year growth from June to August clocked in at 6.7 percent — the market offered plenty of reminders of how uneven, if not baffling, it tends to be.

Fantasy epic Asura, boasting the biggest budget of any Chinese film ever made ($113 million), bombed in its opening weekend with just $7 million, prompting the producers to panic and make the unprecedented move of pulling the film from release (they promised revisions and a re-release, but no updates have followed).

Beijing Culture's Dying to Survive, meanwhile, earned so much during its pre-release previews that producers opted to open the movie early. The film's ripped-from-the-headlines story, about a real-life, small-town trader who broke the law to import generic cancer drugs from India to save hundreds of lives, was viewed as a test of China's censors, but it eventually inspired the government to revise some drug import policies.

Other hotly anticipated films from high-profile filmmakers mysteriously failed to break through, despite garnering strong reviews. Chinese screen legend Jiang Wen's period action sequel Hidden Man earned a sizable $85 million, but many had thought it would do better (one of the film's predecessors, Let the Bullets Fly, made $104 million in 2012, at a time when China's box office was far smaller). Rising director Han Yan's Japanese comic book adaptation Animal World, co-starring Michael Douglas, similarly sputtered, even though world of mouth was strong.

Other surprises included the record $15 million earned by Japanese Palme d'Or winner Shoplifters — an unprecedentedly strong performance for an imported pure arthouse drama.

"Local filmgoers are increasingly discriminating for all films, Chinese, Hollywood, and other imports," explains Pow. "The Asura flop is a case in point — the Chinese audience is not judging films based on origin."