What's Behind China's First Scary Box-Office Slump

The world's second-largest film market experienced its first year-over-year decline in more than half a decade, with ticket sales dropping 18 percent for the month of July.

The Chinese box office is suffering its first big ticket-buying slump since the Mainland market exploded five years ago — and Hollywood is trying to figure out whether to be alarmed. During the second quarter, the market shrank 4.6 percent compared with 2015 after a steady 50 percent growth rate. It marked the first year-over-year decline in more than half a decade. July wasn't better: Box office dropped to $679 million, down 18 percent from a year earlier. Industry watchers cite a confluence of reasons for the slide, the central factor being a weak crop of films.

The biggest earners from April to August were Legendary's Warcraft ($221 million) and Captain America: Civil War ($190.4 million), as well as the homegrown Skiptrace ($133 million). Compare those with summer 2015's Furious 7 ($391 million) and Avengers: Age of Ultron ($240.1 million). Another factor: fewer discounts because of a crackdown on distributors buying large amounts of unsold tickets for marketing purposes. The drop has left analysts wondering if this is a one-time blip or a troubling reversal in a market poised to surpass the U.S. in 2017. Says Jimmy Wu, chairman of Chinese cinema chain Lumiere Pavilions, "It will take time for our industry to become more stable and professionalized, but eventually box office will grow to be double or even three times its current size."

This story first appeared in the Aug. 26 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.