The rise of China's film industry

• Author: Emma Barraclough
• Position: Freelance writer

Fortunately for movie executives, Yang was overly pessimistic. Instead, the story of the rise of China’s film industry is something of a success story. The plot takes in a battle with pirates, a technological revolution and dedicated empire builders, weaving together three story lines that help explain how China’s film industry was saved from sellers of pirated DVDs and, along the way, took on a very different shape.

Movie ticket sales surge

The first story line centers on the growing popularity of movie-going among China’s young urbanites and its burgeoning middle classes. Last year the Chinese spent more than USD6.5 billion on movie tickets – up almost 50 percent on the year before – according to the State Administration of Press, Publication, Radio, Film and Television, with more than 20 cinema screens opening every day to service the demand. If China’s box office revenues grow at their current rate, they will top USD11.9 billion by the end of 2017, overtaking the United States.

Chinese films accounted for just over 60 percent of those box office revenues, with home-grown action adventure movies Monster Hunt and Mojin: The Lost Legend and the comedy Lost in Hong Kong making the list of top five grossing films along with US blockbusters Furious 7 and Avengers: Age of Ultron.

China’s film industry makes more than 80 percent of its revenue from the box office, according to Amy Liu of EntGroup, a film industry data consultancy. In contrast, filmmakers in the US make as much money from selling DVDs, broadcast rights and merchandising as they do from ticket sales. But with double-digit growth rates and a population approximately four times that of the US, which remains largely untapped, the Chinese film sector still has huge scope for growth, suggests Qiaowei Shen, Professor of Marketing at Wharton, University of Pennsylvania. While Chinese filmmakers, like their counterparts elsewhere, continue to face problems of counterfeiting, DVD piracy and illegal streaming of content, things are looking up, says Liu. “Until recently China wasn’t able to build brands around its own films in the same way as Hollywood. Now we are starting to see the development of franchise movies and co-branding deals with local companies.” Chinese filmmakers are starting to tap into consumer demand for film-related merchandise. Last year, Beijing-based online movie ticketing company, Mtime, struck a deal with China’s biggest cinema chain, Wanda, which will see it install...