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A Brief Intro to China’s Cinema Circuits and Cinemas

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China’s box office is souring from ¥0.92 billion in 2003 to ¥10 billion in 2010 and in 2013, it is expected to reach over ¥20 billion. The Chinese audience is going back to the cinema: in 1980s, local admissions was 29.7 billion per year. The dramatic boom in the new millennium should be attributed to the joint improvement of production, distribution, marketing and the emergence of a local cinema circuit system and a nationwide construction of cinema infrastructure, etc.

Before 2002, the cinema circuit system was non-existent and it prevented the film industry to go any further. As the country was opening up as a market economy, this industry also found its chance to climb. State-owned studios and film companies no longer stood still, but attempted re-structuring, diversified business models and operation. Private ones also started to sprout, like Huayi Brothers and Bona. Meanwhile, new policies gave foreign investments permission to participate in building cinemas in China: Time Warner, UME, Broadway, CGV CJ and MegaBox are the pioneer players.

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The above charts show the huge potential of Chinese cinema construction: as long as people gradually take film going a regular entertainment and the average movie going per year keeps increasing, the current number of cinemas is far from enough to satisfy the public’s need to have fun. This article combs through the basic cinema circuit system and top and special cinemas in China, and attempts to reveal possible business opportunities to the interested investors.

I. Cinema circuit: an ownership classification.

To classify cinema circuit in terms of ownership, like that of other companies in China, there are 2 major groups: state-owned and private; by and by, joint venture cinemas can also be found.

The most profitable state-owned circuits include China Film Stellar Theater Chain, Shanghai United Circuit and China Film South Cinema Circuit.

China Film Stellar is the undisputable leading circuit invested by the almighty China Film Group Corporation and powerful Stellar Megamedia Group Co., LTD. In the past years, its box office revenue remains top 3 in the nation. Its cinema not only secures first tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, but also spreads wide into those less developed provinces like Qinghai and Ningxia. By the end of 2012, it owns 1,043 screens, among which 676 are 3D screens and made¥1.72 billion in box office.

Shanghai United Circuit was once a five-year champion in box office. As a wing of Shanghai Film Group Corporation, which has every link of the film industry requires and thus provides Shanghai United a lot more resources to explore the market. Its cooperation with Jack Chan-Sparkle Roll International Cinemas Management Co. and with Orange Sky Golden Harvest has generated tangible growth. Based in the Yangtze River Delta and reaching over 20 provinces in the nation, promoting animation film is one of its features.

In the Pearl River Delta lies China Film South Cinema Circuit, whose proximity to Hong Kong brings it both outstanding film sources and innovative approaches.

As to private circuits, Wanda Cinema Line is built upon solid support from the commercial real estate magnate Wanda Group, whose boss is just crowned the richest person in China. In building an integrated HOPSCA (hotel, office, parking, shopping mall, convention and apartment), Wanda Squares in different cities are becoming the center of each city, like Beijing, Dalian and Wuhan. The square is a commercial hub where people can go to restaurants, hotels, shopping malls and cinemas that are in a constant interaction, producing endless traffic and trade. Wanda Cinema Line ranked 37 in the nation in its birth year 2005 and now has be the paramount for 3 years.

Strong financial investment and advanced management systems can go a long way: soaring growth, dominating market share and higher profitability rate per screen are some of its ruling representations. Besides the cinemas’ posh art deco and strict standardized service in each part of the country, Wanda Cinema Line started to run an online site in 2011 and now has about 10 million registered users. In the first four months in 2013, this site alone earned box office as high as ¥0.12 billion. The whole cinema line expects to obtain ¥3.2 billion of box office in 2013, thanks to its born competitive edge in cinema construction and learned application of database guided by advice from influential global consulting firms.

The rise of Wanda Cinema Line poses an unprecedented challenge to its Chinese peers: now they feel an urgent need to renovate its infrastructure, to update its service and to start a customer-friendly e-commerce platform. Wanda works with RealD and IMAX to ensure enjoyable viewing experience: up to June 2013, Wanda has already had 73 IMAX screens and it announced an agreement with IMAX to build up to 120 more theaters in China. Also, online ticketing saves viewers the trouble of queuing, a big deal in the populous nation. Movie-goers also find it more convenient than other cinema line as Wanda could offer enough or better parking space. All in all, wealth, vision and strategy make Wanda Cinema Line currently undefeatable.

Guangdong Dadi Cinema Circuit is, on the other hand, a more grass-root circuit that aims to provide affordable tickets to the masses. It mainly expands in second, third or even fourth tier cities, a sort of guerilla move to first conquer numerous populated developing regions – virgin cinema territories that have been neglected by its rivals for years. This move proves smart and efficient: Dadi becomes one of the highest growing cinema circuits in recent 3 years. It insists building only 2K digital projection since the very beginning, a shrewd decision that saves a fortune to renovate equipment. It gives analysis and tech support on negotiation, ticketing and promotion to those who want to join the franchise and open more cinemas. To top it all, Dadi’s average ticket price is ¥4 less than the national average – a decisive factor for people in smaller cities whether or not to go to the movies.

II. Different investment flowing into cinema construction and management.

When China joined WTO and promised to allow foreign companies to invest in theaters in China as a joint venture, Time Warner was the first to make a calculated advancement and built cinemas in cities like Shanghai and Nanjing. However, due to a change of policy to stricter restrictions at the end of 2005, Time Warner quit its cinema business in China in 2006 and sold them to Shanghai Film Group and China Film Group with almost no profit. The Chinese film market further growth in recent years again lures Time Warner once again: this June, it announced a comeback, by establishing a strategic partnership with China Media Capital (CMC), the investment fund behind promising projects like Fortune Star and Oriental DreamWorks.

Ultimate Movie Experience (UME) was initiated by Hong Kong film producer See-Yuen Ng. In as early as 2002, the first UME opened its business in Zhongguancun, Beijing, the Chinese Silicon Valley. Certified as the first five-star cinema by SARFT, UME gave Beijing audience an elegant place to watch films, was the first to equipped with IMAX, and is still one of the Top 10 most profitable cinemas in China. UME is one of a kind as it integrates café, a book store, souvenir stands and cinema as a whole package; also, it was the first to build VIP cinemas in China.

The number of Korean MegaBox seems a lot more than UME cinemas, less elaborate but more accessible. It made its entry into the Chinese cinema market through its parent company, Orion Confectionery, one of the top three food companies in South Korea. Showbox, another entertainment arm of the Orion Group, distributed films like The Battle of the Red CliffWelcome to Dongmakgol, and Taegukgi. MegaBox thrives upon its agreeable terms like allowing take-away food into the cinema and unconditional refund before the film starts, as well as friendly prices.

Besides the above overseas investment, one of the top local private film companies Bona also builds its own cinemas in a dozen cities, a deployment to sharpen its born edge on film distribution and to spread regional coverage. Huayi Brothers, another local giant, with a full-fledged business structure in film production and distribution, has made several cinemas and will go further into cultural tourism.

Top 10 most profitable cinemas in 2012

III. A recent debate over the Shanghai Pilot Free Trade Zone negative list

The newly-established China (Shanghai) Pilot Free Trade Zone, which says foreign capital is banned from cinema investment in this zone, a decision that professional from assorted backgrounds have different views about.

Yin Gang, CEO of Time Antaeus Group and Bingo Group Holdings Limited, thinks this policy unconvincing. In his opinion, China has survived various invasions while Chinese culture, at least the language is still at daily use, so such a preventive act to open up space for cinema investment in the free trade zone is arbitrary and unnecessary. Biodiversity and competition can boost the vitality of certain ecology: without wolf, the sheep might get lazy and degenerate. An expert in cinema design, Yin is the brains behind a row of highly profitable cinemas like Beijing Sparkle Roll Jackie Chan International Cineplex. He believes to allow foreign investment in the cinema arena is a triple-win for investors, local cinemas and audiences.

Huang Wei, General Manager of Beijing Bona International Cineplex Investment and Management Co.,Ltd. has a different say: this decision is hardly controversial as first of all, the free trade zone is too small; also, the reason why authorities set such a zone is probably to free those sections with stricter restrictions like finance; meanwhile, the current film industry (a ¥20 billion) is a too small industry compared with other industries in the GDP composition. Huang thus thinks to make profits, foreign investment have a lot more other areas to dive into.

A recent report suggests Warner is now making attempts to come back to the cinema business in China. How does it dance with the shackles of the restrictions is still yet to reveal. But in a land that almost each real estate company is trying to build its own cinemas, fiercer competition might not be an agreeable test to local players.

IV. Future directions  

By mid-2013, China already has 15,000 screens with a steady growing rate of 12.5 screens per day. The number of 3D screens now reaches about 12,000 and the fastest increase comes from third and fourth tier cities, at a yearly rate of 40%. The interesting thing is, when the first 3D Hollywood film was imported to China in 2007, there were merely 82 3D screens but to embrace the screening of Avatar, cinemas hurriedly purchase 3D equipment and 3D screens amounted to over 600 at the end of 2009.

2012 saw a series of new opportunities for foreign film companies as well as local cinemas: China signed an agreement with the United States to open up the imported films market a bit more: 14 3D or large-format films could be imported each year besides the previous annual quota of 20 foreign films, what Walt Disney CEO Robert A. Iger called “a significant opportunity to provide Chinese audiences increased access to our films.”

The coming years will witness more 3D screens and tailored cinemas on the rise. In the 2nd Annual China Digital Cinema and Film-tech Expansion Summit organized by Noppen in Beijing this October, came company heads specializing in data protection and big data management, in electronics, in quick food service and in cinema design, etc. While 3D is still taken as a novelty, YAOX5D surprised the attenders with its already blossoming 4D technology and full range potential to spread. Its Creative Director Jill Wu drew a picture of 4D cinema not only in science museums and theme parks, but more importantly, in the cinema just around the corner.

YAOX5D is making an effort to establish cooperation with adventurous cinemas after designing for both China Pavilion and Taiwan Pavilion in 2010 Shanghai Expo. Imagine one day that one could experience simulated rain, snow, lighting, fog, smoke, wind and scent inside theater while watching films in a regular cinema. In this sense, maybe cinema is not truly dying, at least not in China.


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