Hollywood looks East to revive its flagging fortunes

After experiencing slower growth in 2016, China's movie industry received a remarkable boost last year.

Box-office revenue reached 55.9 billion yuan ($8.7 billion) in 2017, up 13.45 percent year-on-year and handily surpassing the 3.7 percent growth in 2016.

The latter rate would be considered healthy growth in mature markets like the United States, but it was a dramatic slowdown for China, where the market had expanded by an astounding 48.7 percent in 2015.

Chinese moviegoers have been pushing the industry to achieve average growth of 35 percent per year for more than a decade.

Data from the State Administration of Press, Publication, Radio, Film and Television, or SAPPRFT, show visits to urban theaters rose 18 percent to 1.62 billion visits last year, up from 1.37 billion in 2016.

A big reason for the rapid growth might be the sheer number of screens across the country. Last year alone, some 1,612 new cinemas were built and 9,597 new screens installed.

Now with 50,776 screens, China has more than any other country in the world. The US comes in second with 40,759 screens but still remains the world's largest film market.

With plenty of movie theaters and eager audiences, China is poised to overtake the US for this title. But what exactly are Chinese audiences flocking to see?

Last year, domestic productions earned 30.1 billion yuan, accounting for 53.84 percent of the annual total revenue.

Wolf Warrior 2, a domestic action flick, became China's highest-grossing film ever and a great contributor to the 2017 box office. It raked in 5.7 billion yuan, more than twice the 2.7 billion yuan earned by The Fate of the Furious, the year's top-ranked foreign film and second highest-grossing picture overall.

With Chinese moviegoers supporting the domestic industry, their enthusiasm shows no sign of abating.

"The rapid development of the film industry has been a big bright spot for China's culture industry," Zhang Hongsen, vice-minister of SAPPRFT, said in October on the sidelines of the 19th National Congress of the Communist Party of China in Beijing.

"We have been sticking to a direction that centers on people in creating (films)," Zhang said.

Foreign films made up 41.7 percent of total ticket revenue in China in 2016, up from 38.4 percent in 2015. The impressive revenues have made Chinese audiences a saving grace for Hollywood films.

When Transformers: The Last Knight pulled in just $69 million in the US during its opening weekend in June, it hit a low for the franchise. But it made up for the dismal showing with a $123.4 million opening at the Chinese box office-a hefty portion of the action film's $265.3 million global debut.

The first three installments of the Transformers franchise experienced massive success in the Chinese mainland. The 2007 original grossed $45 million, the 2009 sequel raked in $72 million, and the third film in 2011 took in $172 million. The fourth release in 2014 became the highest grossing movie in China at the time (now sixth) by hauling in $297 million.

Warcraft is another franchise that can boast a "big in China" claim. The 2016 movie adaptation of the titular series of video games and novels made $156 million in its first five days in China alone, despite dismal numbers elsewhere. Not bad for a film made on a budget of $160 million.

Movies like Pacific Rim ($114.3 million in China, $101.8 million in North America), Kung Fu Panda 3 ($154.3 million in China, $143.5 million in North America), Now You See Me 2 ($97 million in China, $65 million in North America), The Expendables 3 ($72.8 million in China, $39.3 million in North America) also have Chinese moviegoers to thank for good profits.

"That's the beauty of a global network, there is a chance that an audience elsewhere could breathe new life into stale intellectual property," said Po Hou, a media and entertainment managing partner with consultancy Deloitte China.

"Studios and filmmakers have already recognized that, and they also realize that they need to throw in elements or versions that will suit Chinese audiences."

It makes sense for Hollywood to do that, especially if its slice of the Chinese moviegoer pie continues to increase.

In 2016, China's regulators padded out the release schedule with extra Hollywood films, bringing the total that year up to 39 imported titles from the usual 34.

Since 2012, China has accepted 34 foreign films each year, with a caveat that 14 of those are 3-D or large-format movies.

Observers are predicting an expansion of China's foreign film quota and a bigger share of profits for Hollywood distributors. That number may increase by a dozen or so.

The share of box-office revenue that US distributors are entitled to is also expected to increase from the current 25 percent and inch closer toward the international average of 40 percent.

"Certainly, the trend has been to slowly increase the number of the film quota year by year," said Hou. "Besides pressure from the World Trade Organization, there is also growing domestic demand for content.

"But first, they need to appease the Chinese censorship board. Then, they also need to make these special cuts that will endear them to Chinese viewers who love seeing something familiar appear on screen," Hou added.

A special China cut of Iron Man 3 (2013) featured bonus footage and scenes of Chinese actress Fan Bingbing. Disneys Zootopia (2016) adopted a similar strategy by adding a panda newscaster in the Chinese version of its movie.