November Had More Blockbusters Than Anyone Could Watch. So Why Was the Box Office Still Bad?

Administrative orders ran against market logic, and left the film business colder than before.

On last year's dazzling box-office chart, November was a minor month. Even so, this November still posted negative growth against it.

This year, "negative growth" is a sad phrase. One reason: the state went to great lengths to rescue the market, even breaking its own quota limits to bring in more imported films, and still could not avoid a box-office defeat. The other: 2016 opened high and closed low. In January the whole industry was ambitiously planning to overtake the United States; by December it was scrambling just to hit a KPI.

This year's failure in the film market, like last year's success, will serve as a case study for a long time to come, and November is the most interesting chapter in it. China's fast-growing film market has never escaped heavy-handed administrative control, and this autumn and winter administrative decrees became the root cause of the box office's decline.

On September 19, Feng Xiaogang's I Am Not Madame Bovary moved to November, traditionally a slow month. Feng had always sold the film on its "artistic breakthrough," but he was confident about its takings too: he wanted to join Ang Lee in "setting the November slot on fire."

This was not just Feng's fantasy. As late as the end of October, many people in the industry expected a November harvest. Their confidence came neither from any improvement in the overall market nor from the domestic film industry maturing overnight, but from the fact that the relevant authorities had loosened the restrictions on imported films.

By October 31, the 2016 box office had not yet reached 39 billion yuan, so the 60-billion-yuan target set in January was plainly a fantasy, and even the "modest goal" of 50 billion looked out of reach. Not long after, Zeng Maojun, president of Wanda Cinema Line, said the year would land at around 47 billion yuan — an admission that something had indeed gone wrong.

Judging development by numeric targets is a familiar habit of mind in China. China's GDP, for instance, grew at a steady 6.7% for three quarters running this year, without the slightest wobble.

Box office is the film market's GDP. Because The Mermaid took 3.39 billion yuan in January, the annual target naturally went to 60 billion. This was not merely a slogan: cinema chains and film companies alike used it as the benchmark for their annual plans. Once the Spring Festival holiday ended, hundreds of film and TV companies were hiring — old studios and new startups, executives and junior staff. Recruitment notices filled Moments and industry group chats, a side view of how optimistic the business felt.

Box office is a target, a political credential, a matter of face, and real money. It was box office that let China take the initiative in negotiations with Hollywood, and even build a Shanghai International Film Festival panel around the theme "China's box office is about to overtake America's," with Ang Lee invited to discuss it.

What is different this time is that the rise and fall of the 2016 box office is now tied directly to the capital markets. Since last year the stock market has crashed, housing prices have risen, and household spending has tightened, leaving entertainment as one of the few consumer sectors still able to grow fast. The film market's 48.7% growth in 2015 also made movies an attractive place to put money. Quite a few films this year were run as financial instruments: the producer packaged a project, drew in outside capital, and collected returns before the film even opened — as with The Mermaid and Ip Man 3.

And capital does not want growth; it wants fast growth. Fast growth can come from two places. One is box office itself, hence the bold talk of 60 billion yuan in January. The other is financial engineering, where investors hope to ride a film's popularity to bigger returns. So in the first half of this year, companies from other industries rushed to set up film divisions, and many announced plans to expand into film and television. Many also began investing in movies directly: the number of venture-investment entities grew by several hundred this year, on top of the existing 1,200.

Financing, leverage, valuation-adjustment agreements — filmmakers have picked up far too much vocabulary that belongs to the finance industry, and they understand better and better that once box office falls, hot money leaves right behind it. For a big company that may mean layoffs; for a small one it is a matter of survival.

With box office as the first principle and the final demand, the state stepped in to rescue the market.

Manipulating release dates is the film authorities' favorite tool, and it is where the "protection month" came from. According to Feng Xiaogang, I Am Not Madame Bovary did not withdraw from the National Day slot voluntarily. The Film Bureau thought too many films were crowding that week, which might hurt takings, and wanted the film moved. So I Am Not Madame Bovary shifted to November 18. Few films had booked November dates at that point, and it looked as though Madame Bovary would have a good slot to itself.

Then Fantastic Beasts and Where to Find Them announced a simultaneous China release, and a slot that had looked like a leisurely stroll turned dangerous. According to the Weibo account "AD 1874," the schedule was adjusted again to clear the way for I Am Not Madame Bovary: Fantastic Beasts was pushed back a week, and Sully two weeks accordingly. Huayi Brothers sent out a letter denying this, but Hollywood clearing a slot for a domestic film has precedent — Captain America: The Winter Soldier was once moved to after that year's May Day holiday because of So Young.

Fantastic Beasts and Where to Find Them was one of the Hollywood blockbusters imported in a dense cluster in November, itself an emergency measure by the people who make these decisions. When the box-office slump first showed in April and May, several blockbusters were brought in that June, a shot of adrenaline for the market. November was the same tune played again.

On October 22, five Hollywood revenue-sharing films locked in dates. Twentieth Century Fox's Keeping Up with the Joneses and Miss Peregrine's Home for Peculiar Children took November 8 and December 2; Paramount's Allied (November 23), Disney's Moana (November 25) and Warner's Sully (November 29) followed one after another (Sully was later delayed by two weeks). The result was something we had never seen: eight revenue-sharing films released across a single November, nearly two a week, with Miss Peregrine's Home for Peculiar Children and Your Name. still playing into December's New Year season.

Because Hollywood is so strong, using administrative means to hold it back and lift the domestic share of the box office has been consistent policy for years. But under box-office pressure the authorities had to open the gates and let the once-feared "Hollywood tigers" carry the load, rescue the market, and deliver the annual number.

November came and went, and even Zeng Maojun's apparently conservative forecast now looks too optimistic.

The month took in about 2.54 billion yuan, nearly 100 million below the 2.622 billion of a year earlier. This was the sixth monthly decline on the mainland in 2016, and the third in a row since September.

In earlier months the decline came from a shortage of blockbusters big enough to carry the box office. November was different. Doctor Strange (750 million yuan), Fantastic Beasts and Where to Find Them (370 million) and I Am Not Madame Bovary (360 million) were November's top three, and each stood far above its counterpart in November 2015. The imported blockbusters did not let anyone down.

But those blockbusters brought in money without pulling the market with them. From fourth place down, every 2016 film fell short of the film at the same rank in 2015, and that is what dragged the month's total under. This was not blockbusters failing, nor a shortage of good films. Market order had broken down.

The state's rescue policy, like the 40-billion-yuan campaign of a few years ago, ended up disturbing that order instead.

On the day I Am Not Madame Bovary changed its date, a staffer at its publicity agency knew at once that she would not sleep that night. The promotional materials were already out: posters and standees in cinemas, posters across bus shelters, press releases ready, media appearances and roadshows booked — all of it the product of round-the-clock overtime.

Now it was back to zero. Within 24 hours the release date had disappeared from the posters, replaced by phrases like "coming soon," and the press releases had gone out to the inboxes of the major outlets.

"By the late stages our publicity plan was scheduled in half-days, even hours," the staffer told QDaily. "Now it isn't just the wasted materials. We have to build the whole publicity plan again. Everything we did is useless."

By the standard publicity timeline, I Am Not Madame Bovary had already reached the stage of driving the audience into theaters. As someone in Hollywood put it, "A film's marketing campaign is a lot like a political campaign: you don't just have to persuade people to support the candidate, you have to get them out of the house to vote on election day." That final stage matters most and eats a large share of the budget — roadshows alone routinely cost more than a million yuan over two or three weeks.

Another person in the industry estimated the loss from this one date change, counting only materials and partnerships, at "between 3 million and 5 million yuan." That excludes the extra cost of the rushed rework that followed, let alone whatever box office the move cost.

An unsettled release date is one of the worst headaches a marketer has. In North America a film's date is fixed before shooting begins, and the marketing strategy unrolls from there, exposing the film in different ways at different stages. That approach does not work in China. For a Hollywood blockbuster, no amount of marketing matters if the film never gets imported. For a domestic film, the date can be locked in about six months ahead at most, and even then it can move at any time.

QDaily has written before about what a release date means for a film; one industry insider estimated that "the date accounts for at least 20-30% of a film's box office."

By October 22, most films set for November had entered their final publicity stage. Importing a wave of Hollywood films at that moment was bound to wreck their plans. A heavyweight like I Am Not Madame Bovary could shove Fantastic Beasts aside; many small and mid-budget films had nowhere left to hide and had to take the hit head-on.

Soon after Grandpa's Prime at 38《外公芳龄 38》locked in November 11, Billy Lynn's Long Halftime Walk took the same date. At the time the film's team could still tell themselves that the heat around Billy Lynn might lift the whole market and earn them a little extra. Before long One Piece Film: Gold opened that day too, squeezing their screenings and their takings further. In the end a film its producers had once expected to make 100 million to 200 million yuan limped to 60 million — and even so it finished tenth on November's chart.

Hollywood cares about dates just as much, if not more, and fights over them break out regularly. Sometimes two films are chasing the same age group, the same gender, the same crowd; open them together and the audience splits, while television advertising — Hollywood's most common tool — leaves viewers unable to tell the two films apart. Each film's audience shrinks, and total admissions can fall as well.

A head-on collision is avoided whenever possible. Batman v Superman: Dawn of Justice and Captain America: Civil War had both planned to open on the first weekend of May; in the end Warner gave way and moved Batman v Superman to late March, and both did decent numbers. Negotiating dates face to face would violate US antitrust law, of course, but the studios always find ways to leak information internally for the others to work with, and an unspoken understanding forms.

China has its own version of that understanding, and head-on clashes are usually avoided here too. The rule of thumb is that the bigger the film, the earlier it fixes its date, giving everyone else a reference point and holding basic market order together. Last year Surprise《万万没想到》held large-scale previews a week early, and some said it had "broken the rules," because it took screenings and dates that belonged to other films; that mistaken preview strategy was a major reason it eventually failed at the box office.

Rules built by the invisible hand cannot survive an iron fist. December's New Year season was already too crowded, and going there meant getting bloodied, so November became many films' last chance to open this year. They walked into a tiger's den.

Sacrificing small and mid-budget films and betting the year's box office on blockbusters is the behavior of a gambler. Steven Spielberg's famous worry about Hollywood was exactly this: distrust of the blockbuster model, and fear that a big-budget failure could bring the whole system down. That worry hangs over every Hollywood filmmaker, which is why they keep extending the value chain and shrinking box office's share of revenue. Today a film can underperform in theaters and the studio still survives, as long as it can develop merchandise and spin-offs.

Quite a few large Chinese film companies are now studying that strategy, which is where the buzzword "IP" came from. But the strategy requires a mature consumer entertainment market, which naturally includes a mature film market — one that does not swing wildly on the fortunes of a few films but stays relatively steady.

From any angle, gambling does nothing to build a steady market.

Film is a business no one can predict — otherwise Spielberg would not worry, and his own film this year, The BFG, would not have lost close to $100 million. November counts as an off-peak slot, one that can hold perhaps a single blockbuster per weekend: Doctor Strange, Billy Lynn's Long Halftime Walk, I Am Not Madame Bovary and Fantastic Beasts and Where to Find Them. To win this bet, all four had to win.

Doctor Strange and Fantastic Beasts held steady. Marvel already has a fixed audience that keeps its films above a floor, but for the same reason Marvel films struggle to pull new viewers into theaters, and Fantastic Beasts is no different. What they did was bring existing moviegoers back, which secured the base of November's box office.

Billy Lynn's Long Halftime Walk and I Am Not Madame Bovary, both of which had hoped to break out, missed, and that became a major factor in November's decline. Both fell well short of earlier projections, and the shortfall skewed how the month's box office was distributed. The weekends those two films opened were clearly weaker than the other two, and Billy Lynn never even took the week's number-one spot.

We have written plenty about the problems with these films themselves. And a film missing its projections is ordinary, not strange. But when roughly half of a month's bet rides on two films, something ordinary becomes the straw that breaks the camel's back.

On October 13, Film Bureau director Zhang Hongsen used logic close to "adversity strengthens a nation" to rebut the theory that Chinese film had hit a turning point, speaking at the Changchun Film Festival: "The move from 2015's peak to 2016's turbulence is a rare and valuable baptism for Chinese cinema. But almost every indicator shows that the fundamentals of the Chinese film market remain sound!"

You know what happened next: imported films locked in dates en masse, and November and December alike became impossibly crowded.

From the early "charge at 60 billion yuan" to today's "just beat last year," Chinese cinema has had a bitter and faintly ridiculous year. Whether it is a domestic-film protection month or an "imported-film protection month," using administrative decree to force supply and demand into shape has never been the way to build a sound film industry. It is easy to imagine what comes after this year: capital leaving in bulk, film companies cutting staff or closing, filmmakers changing careers, a hard stretch for the business. But only when the tide goes out do we get the chance to patch the holes it was covering.

And the first step toward solving a problem is admitting that it exists.

Cover image credit: a still from Billy Lynn's Long Halftime Walk, a still from Fantastic Beasts and Where to Find Them