2016/6/14 11:08:00 (Beijing Time) Source:THR By:Patrick Brzeski

With the huge local success of Legendary Entertainment's Warcraft, the Chinese movie merchandising business may finally be taking flight.

Beijing-based media and marketing company Mtime says it sold more than $10 million in Warcraft merchandise prior to the film’s record-breaking opening last week. Selected by Legendary as an exclusive merchandising partner in China, Mtime staged 20 large-scale interactive Warcraft exhibitions in upscale shopping malls across the country in the weeks leading up to the pic's release. The company also has been pushing a wide array of custom-produced Warcraft-themed products through its mobile e-commerce platforms and at the 130 movie specialty stores it has built in Chinese cinemas and shopping outlets over the past year and a half.

Warcraft debuted to a phenomenal $46 million last Wednesday. On the film's opening night, Mtime set up over 150 large pop-up merchandising stands in top Chinese theaters. Moviegoers were given a 15 percent discount if they presented a Warcraft ticket stub; the company says it sold more than $1 million in goods that night alone.

A representative for Mtime said 60 percent of its Warcraft goods have since sold out during the pic's opening week, and “factories are humming to keep up.” As of Sunday, Warcraft had grossed an astonishing $156 million over five days.

China is expected to top North America as the world's largest theatrical box office in 2017, but many areas of the country's film industry continue to lag behind — none more so than the movie merchandising and licensing business. In North America, ticket sales are generally understood to make up just 30 percent of all movie-related revenue, with the rest coming from derivative products and licensing deals. Last year, China's box office expanded by more than 50 percent to hit $6.8 billion, but licensing and derivatives are believed to have contributed as little as 10 percent of movie revenue.

Mtime has spent the past three years laying the groundwork for a bold bet that the merchandising business is poised to follow the same explosive growth trajectory experienced by the Chinese box office.

"Merchandising is finally happening,” says Mtime's founder and CEO Kelvin Hou, a former Microsoft executive. “We're witnessing what happened in the U.S. in the late 1970s and 80s after Star Wars — that's taking place in China as we speak.”

Launched in 2005, Mtime began as a humble movie listings site, but the company has steadily expanded its offerings, becoming something like China's answer to Fandango, IMDb and Rotten Tomatoes all rolled into one. One of the country’s top movie sites, it is a film reviews aggregator, a social community of loyal film fans, an entertainment news portal, a mobile ticketing platform and a movie database with information on every film screened in China since 1930. The company claims 170 million unique visitors per month — “mainly people who are passionate about movies,” Hou adds.

Mtime has been a discreet marketing partner to Hollywood studios for years, leveraging its platforms and local market intel to promote foreign films in China, as well as domestic productions.

"Ten years ago when we started, there was still so much movie piracy, it was difficult to make a production or distribution business,” says Hou. “So we thought, OK, let's just build a foundation of movie services first.”

Hou now believes that the same forces that made film piracy essentially negligible in the Middle Kingdom — a sustained official crackdown and a middle-class consumer base that prefers high-quality, legitimate products and services — will drive the boom in the merchandising sector.

Last year, Mtime launched an e-commerce arm on its online and mobile site. The company also began building its brick-and-mortar kiosks in cinemas across the country, laying the groundwork for an ambitious online-to-offline retail model.

Before these sales operations went online, Mtime had already hired a team of over 40 international designers to develop merchandise in-house from its partners' IP, as well as establishing factories and logistical operations to manufacture and deliver the goods.

Disney was an early partner, with Mtime selling over 300 official items tied to the China release of The Avengers: Age of Ultron in June 2015.

In December, the company unveiled the Mtime PRO mobile app, a business-to-business tool that allows cinema chain owners and managers to review upcoming movie merchandise from Mtime's Hollywood and Chinese licensing partners, select the items for purchase, pay via mobile and then have the goods shipped directly to their theater locations. In keeping with Mtime’s consumer sites, the app also provides theater owners with movie information that is generally useful to them, such as same-day box-office data, screen allocation information and regional comparisons.

Mtime says about 90 percent of all Chinese cinema chains have become regular users, and it also has begun distributing products for Funko, Hasbro, Mattel and other international merchandisers. “Our aim is to produce 20 percent of the product ourselves, and leave 80 percent to other partners who use our platform,” Hou says.

In late May, Mtime announced the next stage in its expansion plan, making the Mtime PRO app and its B2B sales and distribution services available to conventional retailers, not just cinema chains.

Mtime remains a private company, but Hou says its revenue has grown 500 percent since the official rollout of the Mtime PRO app in December.

"Previously, our revenue growth was about 80 percent quarter to quarter — merchandising has become our main driver,” he adds.