China-US Trade War Creeps Through Hollywood
Hollywood and independent films that used to rely on China for box office returns have now been feeling the impact of the ongoing China-US trade war.
An agreement on the number of foreign films to be allowed release in the Asian powerhouse should have been renewed since last year. Discussions regarding this arrangement, however, have stalled since the start of this year, according to sources who spoke with The Wall Street Journal.
Apart from the trade tensions, Chinese regulators have separately been investigating tax evasions among entertainment companies and celebrities. This makes the whole foreign entertainment industry be at a standstill. On top of these all, the local government has also been wary about capitals flowing out of the country as authorities believed massive capital outflow would directly impact the Chinese economy as a whole.
Since the Chinese government has cut the number of mainstream and independent films being imported from the United States, it became apparent to Hollywood that China is "too big of a market to be ignored," WSJ noted.
The current situated continue to unfold as China's box office continues to rise to become the number 1 in the world.
A 2017 report from PwC's Global Entertainment and media outlook stated that China's total number of cinema screens now surpassed those of the United States. In 2016, China has 41,056 cinema screens while the US has only 40,928. By 2021, China is expected to have more than 80,000 screens which could already be double the number of what the US may have at the time, the report from PwC said.
More so, China is also expected to position itself as the number 1 in the world to have the largest number of IMAX 3D Screens by 2021. PwC estimated that the Asian powerhouse will have 575 IMAX 3D screens by 2021 from merely 296 in 2016.
China was also the world's second largest box office market, next to the United States, with revenue of $6.2 billion according to PwC.
All these figures suggest that China continues to be a massive market for films, particularly that the film industry in the country is expected to grow at 11.6 percent CAGR from $6.2 billion to $10.7 billion by 2021.
Amid the slowing film imports made by China, Hollywood may still remain hopeful in the fact that the Asian powerhouse may not turn its back from the revenue generated from big-budget films or the likes released by Walt Disney, and Sony Picture Entertainment. For one, the "Avengers: Infinity War" grossed nearly $400 million in China while "Venom" grossed $262 million in its first month in the country.
Nevertheless, the future still looks bleak for independent films such as the ones produced by TriCoast.
The media company told WSJ that Chinese buyers used to purchase 20 distribution deals. Since 2017, however, that number declined. During the American Film Market 2018, TriCoast was only able to close three distribution deals with Chinese companies.