The 2018 Summer Box Office Slowed Again. Is Chinese Cinema About to Hit Its Ceiling?

This time it's the audience's numbers and habits that set the industry's ceiling.

For an industry that has grown fast for more than a decade, the ceiling can arrive at any moment. Judging by the summer season that just ended, this is exactly the question Chinese cinema now has to start asking.

Hollywood usually dates the summer season from May — a habit Jaws and Star Wars established in the late 1970s. In China, the summer season means something else: the stretch from late June to late August, when students are out of school and have plenty of time to watch movies.

QDaily tallied the box office for the past five summer seasons, counting from the last full weekend of June to the last full weekend before September. Over those 66 days, the 2018 summer season took in about 13.8 billion yuan after the theater's cut — roughly 10% more than last year, and double the figure of five years ago, in 2014.

The trouble is that in some recent years summer box office grew by more than 30%, which makes 10% look thin. And because ticket prices rose slightly, admissions grew even more slowly than revenue — only about 7%. As in 2016, growth in the film market has slowed sharply again.

The two slowdowns have different causes, though. Two years ago the blame fell on the movies themselves. That summer's lineup included the "epically" bad League of Gods and the incoherent, badly acted Sweet Sixteen《夏有乔木，雅望天堂》. Even Time Raiders, the summer's highest-grossing film, scored only 4.7 on Douban. Paying for a ticket and getting a thoroughly unpleasant experience in return was seen as the main reason audiences stayed away from theaters.

This year the problem does not lie with the people making the movies. Dying to Survive, The Island and Hello Mr. Billionaire scored 9.0, 7.3 and 6.7 on Douban; even The Meg — a Chinese-American co-production, a category that had never produced a success before — landed right on the 6.0 passing line. When film quality is basically solid and still cannot pull more people into theaters, the conclusion is hard to avoid: Chinese cinema's ceiling is close. And this time the height of that ceiling is set by the people who watch the movies.

Have third- and fourth-tier cities hit saturation?

One of the main reasons admissions rose over the past decade is the expansion of theater chains. At the end of 2009 China had 4,723 screens; by the end of May 2018 there were 56,343, more than a tenfold increase.

Many of the new theaters went up in third- and fourth-tier cities that had no cinema before, and gradually taught residents of those cities to go to the movies. Data show that from 2014 to 2017, admissions grew at a compound annual rate of 19% in first-tier cities, and 27% and 35% in third- and fourth-tier cities. For a while the industry came to believe that whoever wins over small-town youth wins everything.

But this summer suggests that third- and fourth-tier cities, which came to moviegoing late, are showing the same signs of saturation as first- and second-tier ones. Calculations from Maoyan Pro data show that third- and fourth-tier cities supplied 38.84% of summer box office in 2017, and that the share slipped 0.1 percentage point in 2018 — the first decline in their summer share since 2015. These cities can no longer hand the Chinese film market the growth they once did.

The hopes the industry pinned on small-town youth have collapsed. Their spending habits may explain why. Aurora Mobile's August 2018 report on small-town youth consumption surveyed exactly that.

Among entertainment options that included mobile games, video sites and karaoke bars, movies were the only one where small-town youth differed sharply from young people in first- and second-tier cities. Only 49.5% of small-town youth said they had been to a cinema in the past six months, against 63.8% in first- and second-tier cities. They also go less often and spend less when they do.

Habits like these do not change quickly. Aurora Mobile found that with entertainment such as mobile games and online video, small-town youth were far likelier than their big-city peers to refuse to pay at all: 31.5% of them thought paying for online video was reasonable, against 37.5% in first- and second-tier cities.

Next to other kinds of entertainment, the movies are not cheap. Maoyan Pro data show that in third- and fourth-tier cities the average ticket price for every film this summer was above 30 yuan. That money buys two months of a video-site membership, several hours in an internet cafe, or unlimited time playing Honor of Kings. It may be why moviegoing is not a popular pastime among small-town youth.

Can theaters keep expanding?

If lower-tier cities want fewer movies than the industry assumed, theaters themselves will take the first blow.

Over the two months of the 2018 summer season, each screen took in an average of 243,500 yuan, down from 273,500 yuan last year and from 344,800 yuan in 2014. Every chain felt it: in July 2018 Wanda's per-screen box office rose about 16% from a year earlier, while its total box office for the month rose 37%.

Theaters are back in the news for the wrong reasons. This July, the cash-strapped Xingmei chain fell far behind on rent. Perfect World, the game company that bought Jindian Cinemas, was reported to have closed 21 of its theaters in a little over a year — about 10% of the total.

The wave of theater mergers at the end of 2016 seems to be repeating. Shanghai Film Group sold off one theater after another in the second half of last year; Beijing Culture, which produced Wolf Warrior 2, sold the theater chain it held to Evergrande founder Hui Ka Yan; Wanda Film took on Alibaba as a new shareholder.

Going from expansion to consolidation means the growth model the industry has lived on — build more theaters — has run into trouble. At the very least, finding more moviegoers is no longer something a few more cinemas can solve.

Can good movies bring in more people?

However fiercely people argued about the film itself, no one denies that Wolf Warrior 2 revived Chinese audiences' interest in going to the movies. Add the films that beat expectations in 2017 — Paths of the Soul, Dangal, Coco — and the conclusion looks simple: people will come out for a good movie.

Look at the whole industry, though, and the high box office of good films does not lift the overall total. Even with all those surprises in 2017, the year's entire increase over 2016 came to roughly the 5.3 billion yuan that Wolf Warrior 2 alone earned after the theater's cut.

Moviegoing habits decide this. The research firm Fanying reported at the end of 2017 that the average moviegoer's cinema visits per year had fallen from 7.36 to 5.8. Audiences now mostly go once a film has already been praised, so well-reviewed films are pushed higher still, while films that never build word of mouth fall far short of expectations.

The 2018 summer season showed the habit strengthening. It has an upside: films like L.O.R.D 2 and Asura either pulled their release dates or were withdrawn days after opening, an early round of filtering.

iPartment is the clearest case. Trading on the audience's fondness for its own youth, it sold more than 160 million yuan in advance tickets, and its opening-day box office after the theater's cut passed 280 million yuan. Then came the criticism — the plot was a mess, a Time Raiders movie made under the iPartment name — and the box office fell away fast. By the third day it was down to 55 million yuan. By the following weekend the film had all but vanished from theaters. It may be the fastest box-office collapse in the history of Chinese film.

Sometimes, though, this attention to word of mouth swings to the other extreme: audiences are not so much demanding as stubborn. Animal World and Detective Dee: The Four Heavenly Kings were the summer's two real breakthroughs in filmmaking craft. The first, adapted from the Japanese manga Kaiji, has no obvious holes in its plot, and its costumes, makeup and sets are good. Detective Dee showed the best visual effects Chinese film can currently manage, along with a reasonably complete mystery script.

Neither film built much word of mouth with the general public, and both fell short at the box office. Detective Dee cost 350 million yuan and took only 575 million after the theater's cut; Animal World cost close to 300 million and took 477 million. Recovering their costs is all but impossible for either one. In today's market, films like these end up in an awkward spot.

The more serious problem is that audience taste appears to be hardening. Two films from the same Mahua FunAge team, Hello Mr. Billionaire and Never Say Die, both cleared 2 billion yuan. Rampage, a monster movie like The Meg, likewise landed a little above 900 million. Marvel's Ant-Man and the Wasp and last year's Thor: Ragnarok both sit around 750 million.

What kind of film will earn what kind of box office is easier and easier to predict. Which also means the industry finds it harder and harder to manufacture a hit: pulling extra people into theaters now takes more than making a good movie. That does not help blockbusters grow as a group. This summer's reviews were much better than 2017's, and admissions still did not rise to match.

Some films' final numbers even came in below the optimistic early forecasts. After the summer's champion, Dying to Survive, finished its opening weekend, industry figures, ticketing platforms and media all predicted from early sales that its combined total would pass 4 billion yuan. So far the figure is 3.098 billion.

Will China's film market end up like North America's?

If China's audience cannot grow any larger, and hardened habits keep people from going more often, then what the 2018 summer season looked like may be what China's box office looks like for some time.

It resembles Hollywood after the mid-1990s. In that period Hollywood finished its move from film to digital, computer effects took over, and the audience changed with them: teenagers became the main moviegoers. The annual box office champion went from 1980s films such as Beverly Hills Cop, Three Men and a Baby and Rain Man to Harry Potter, Spider-Man and The Lord of the Rings.

Hollywood knew what it was aiming at and kept handing its audience similar products. From 1998 on, admissions held roughly steady, peaking at 1.575 billion in 2002. After that they fell year by year. Only a film with real invention behind it, such as Avatar or The Avengers, or a piece of nostalgia such as Star Wars: The Force Awakens, brought them back up.

The comparison to Wolf Warrior 2 in 2017 comes easily. In craft terms it was an innovation for Chinese film, and the patriotism it called on counts as a kind of nostalgia in China. Chinese audiences, like American ones, appear to want filmmakers to keep giving them new kinds of films.

In the end, Chinese audiences also tire of the old and reach for the new. The main-melody blockbuster that Wolf Warrior 2 invented had a successor this Spring Festival, Operation Red Sea. Even with the holiday behind it, that film took nearly 2 billion yuan less than its predecessor. Dangal set off a run of Indian films, yet the most recent one, Toilet: A Love Story, took less than 90 million yuan after the theater's cut. What will the next hit genre be? No one can answer that.

At the current pace, China's total box office after the theater's cut should clear 60 billion yuan in 2018, well above 52.3 billion in 2017. But note that the box office from January to July 2017 was still carrying 2016's slump; it was Wolf Warrior 2 that revived the market, which led to the hot 2018 Spring Festival season and more than 42 billion yuan in the first eight months of this year.

Take the end of July 2017, when Wolf Warrior 2 opened, as the start of a cycle, though, and follow Chinese film from there, and this summer season has not in fact produced growth anyone would call satisfying. Look closely at moviegoing habits — the total number of people who go, and how often they go — and Chinese cinema's ceiling is already faintly visible.

If China's total box office levels off where North America's is, around 11 billion US dollars, then, without a global market, Chinese film will not be able to afford the productions North America routinely funds at more than 100 million US dollars each. Films like Animal World and Detective Dee: The Four Heavenly Kings, both budgeted above 300 million yuan, may become the kind of project many production companies decide to stay away from.

Taken as a whole, though, even a ceiling close at hand is unlikely to do serious damage to the industry as it now stands. The 2016 slump already finished off a set of production companies chasing quick money; the market weeded them out.

And the 2018 summer season was varied. Dying to Survive, built on a live social issue, won the season. Huang Bo's The Island, less a comedy than a social parable, took more than 1.2 billion yuan after the theater's cut. The Meg, the Chinese-American co-production, is a competent B movie. Take My Brother Away is not perfect, but its 280 million yuan can be read as the market rewarding an attempt at a new film genre adapted from comics.

This may be what a healthy film market looks like.

Charts: Zheng Shuya

All other images are from Douban Movie.