Talk about China overtaking United States’ cinema box office within a few years is predicated on the growth rate of the past couple of years continuing in an unbroken upward line. Yet too little attention has been paid to whether growth in multiplexes, screens and seats is outstripping demand for tickets.
Tier 2 City Focus
On-the-ground reports from markets outside of China’s half a dozen Tier 1 cities (Beijing, Shanghai, etc.) are starting to suggest that overbuild has resulted in blockbusters increasingly playing to empty auditoriums. Hangzhou is one such market.
According to Wikipedia, “Hangzhou is classified as a sub-provincial city and forms the core of the Hangzhou Metropolitan Area, the fourth-largest metropolitan area in China,” with Hangzhou prefecture having a registered population of 8.7 million inhabitants. It is considered a Tier 2 City, a group of around three dozen Mainland metropolitan areas increasingly targeted by investors, developers and multinationals in recent years. And as WSJ put it:
When it comes to China, the commonly used term “second-tier cities” is a misnomer, says Robert Lawrence Kuhn, an investment banker and author of How China’s Leaders Think. The so-called “second-tier” cities should actually be called “first-class opportunities,” given that these cities have been growth engines of the Chinese economy, boosted by huge amounts of investment, new infrastructure and an influx of new talent.
Multiplexes are at the forefront of these developments in Tier 2 cities, in some ways epitomising it as they combine entertainment, real estate and retail in one location.
Yet after several years of intensive development and investment, worrying signs of over-supply are starting to emerge, as indicated in the article quoted in Sina.com.cn from Qianjiang Evening News, headlined, “Hangzhou total of 49 cinemas, average of one theater added monthly.”
Hangzhou Cinemas: “Too Dense” – But Still Growing
The article points out that just in the last two months of this year will see the opening of a Jin Yi multiplex, a Wanda multiplex and a Shi Xiang Road multiplex – and this on top of an already saturated market.
The article then points out that in a five kilometer (3.5 miles) area there are five multiplexes, and that with 10 more multiplexes slated for 2015 it will be “too dense” and that next year many cinemas will “barely” get by.