(Bloomberg) – With the expectation that box office revenues in China will return in 2021 to levels close to those before the covid-19 pandemic, the world’s largest film market has become more attractive, and also more complicated , for Hollywood studios.
Ticket sales in China, which has largely managed to contain coronavirus infections, could rise to 60 billion yuan ($ 9 billion) this year, according to Rance Pow, founder of consultancy Artisan Gateway, approaching the record in 2019 of 64,000 million yuan. By contrast, in the United States, with outbreaks still rampant, cinemas would generate about a third of that number, Wedbush Securities estimates, highlighting the growing dependence of Hollywood studios on the Asian country.
Last year, China overtook the United States to become the top film market, as the pandemic shut down American theaters for longer than their Chinese peers. But the growing dependency comes as Chinese viewers show a predilection for local language films and a heightened sensitivity to depictions of China and its people in Western culture, amid latent geopolitical tensions with the US.
In addition to pressure on studios, the bilateral pact that required China to import a minimum number of American films each year has expired.
“The Chinese market has become critical to any major release,” said Aynne Kokas, a professor of media studies at the University of Virginia. “Declining market share presents a troubling outlook for Hollywood studios” which may have been relying on China to recoup their blockbuster budgets, he said.
The share of foreign films in Chinese tickets, including Hollywood ones, was down 16% in 2020 from 36% a year earlier, according to ticketing platform Maoyan Entertainment. Fewer foreign films were released in China last year as school curricula failed because of the pandemic.
The legal framework for Hollywood studios to introduce their films to China has also become more uncertain. In 2017, the agreement with the United States in which China imported at least 34 films a year expired and has not been renewed or renegotiated. While the Chinese government has continued to allow US films in, it could prevent access at any time, especially if it decides to use it as diplomatic leverage with the new US president, Joe Biden.
“The expiration of the US-China film deal represents a serious challenge for Hollywood studios,” Kokas said. It is not clear when the new US Administration will renegotiate this pact, given “the competing priorities they face in relation to China.”
With new cases of Covid-19 reduced to a handful per day, Chinese viewers are returning to theaters in droves. While January 1 recorded the highest New Years box office gross in China, Lunar New Year February 12 recorded the highest one-day gross. Ticket sales for the first four days of the Lunar New Year holiday surpassed 2019 levels to touch 4.5 billion yuan, according to Maoyan, with Chinese movies emerging as the top contributors.