Tag Archives: China

How Endemic Is Box Office Fraud In China?

 China cinema tickets

Is China’s cinema market larger than official figures suggest, due to box office fraud siphoning off 10% or more of its total value? Having looked last week at how micro-channel subsidies are inflating box office takings, it is time to look at box office spend that is collected but never reported.

Last year’s box office in China was reported to be CNY ¥29.64 billion (USD $4.82 billion), but the actual figure is now thought to be at least CNY ¥33 billion (USD $5.30 billion), according to reports in mainstream media. The difference between the two figures is accounted for by shrinkage that occurs when a ticket is sold to a film, but the cinema or employee does not log the sale or report it to the distributor or the relevant tax collecting authorities. The cinema or employee effectively takes 100% of the proceeds in violation of the rental terms of the film.

China Film Distribution and Exhibition Association and the China Film Producers Association have jointly been issuing bulletins that highlight cinema found out and fined for using ticketing software that allows them to divert takings. In 2014 this amounted to 15 cinemas in February, 11 in May and 17 in December. Yet media commentators in China said that it may have only been the tip of the proverbial iceberg.

The then government media body SARFT [now SAPPRFT] began cracking down in ernest on the practice of fraudulent box office in 2005 with the issuing of a “Cinema Ticketing Management System Computer Software Technical Specifications,” that was aimed at ensuring accurate reporting of box office takings. This was followed in 2013 with both a ”Cinema Ticketing Management System Technical Requirements and Methods of Measurement” specification, which was then followed by an “On The Strengthening of Management Practices Movie Ticket Movie Market System Usage Notification.” Yet new cases of fraud continue to be discovered.

The central government has a strong interest in ensuring accurate box office reporting in order to collect tax on tickets sold, thus the effort to stamp out box office fraud. Yet even the introduction of multiple specifications, requirements and notifications has not eliminated the problem.

Read More »

China Cinema Digest – Thursday 12 March 2015 (Price War Special)

Micro-blog China ticket price

First Financial Daily Online looks at how it is possible that two cinema seats next to each other for the same film might cost one person 100 yuan while the other paid less than 10 yuan. Yes, it is our favourite topic of micro-channels (BAT – Baidu, Alibaba and Tencent, plus their smaller competitors) and their cut-throat cinema ticket subsidy competition, which will take up most of this week’s Digest.

An online ticketing site, told reporters that the party subsidies generally into three categories, the first category is the online ticketing website, in order to grab the market they will come up with some subsidies. The second category is the brand partners, such as some banks to promote consumer credit card and other purposes, will come up with ultra low-cost subsidy to buy movie tickets credit card. The third category is the producers took part Xuanfa own expense to online ticketing website to achieve the increase in attendance, thus promoting the theatrical piece purpose of improving the rate of discharge.

In the crazy subsidies, theater listing price of 40 to 100 yuan movie tickets have been reduced to 10 yuan level.

However, this subsidy is difficult to sustain. People familiar with the movie industry are aware of a movie ticket sales can only get 2 to 5 yuan service fee, even if previously occupied Online ticketing area 60% share in the East Guevara, they can not cover the cost of making the service ticket machines labor and operating costs, not to mention such a crazy play.  LINK

China Culture Daily draws an analogy with how 20 years ago Wal-mart and Price Club would sell DVDs for USD $4.99 that cost them $15 to buy from distributors and that this pushed video stores like Tower Record out of the business. “Later, the producers and distributors found that not only had the traditional channels collapsed, but the psychological pricing level expectations of consumers is also reduced. ” CCD also points out that in the US, online cinema tickets are not allowed to be sold below retail cinema price and only a small ‘service fee’ added on top. Good analysis showing that the Chinese industry and media are fully aware of the dangers of unfettered online cinema ticket price wars.

Read More »

Global Box Office 2014: Asia Comes to West’s Rescue

MPAA global growth

The Motion Picture Association of America (MPAA) has released its 2014 Theatrical Market Statistics report, providing an overview of global box office and trends. Overall box office grew year-on-year by just 1% but to a record USD $36.4 billion. However, the underlying trends point to a surging Asia coming to the rescue of the stagnating North American and plateauing European markets.

In 2014 box office in North America (US and Canada) was down by 5% to USD $10.4 billion, with admissions down even more by 6% to 1.27 billion. Ticket price rise was just 1% (or USD $0.04), which was below the rate of inflation, possibly abetted by 3D box office being down 2% from the previous year to 14% of the total box office. Significantly, films released by MPAA members (i.e. the big Hollywood studios) increased for the first time in five years to 136 titles, though non-MPAA films were also up.

In interesting demographic trends the proportion of tickets sold to older patrons (40-49 and 50-59 year olds) were at an all time high, while tickets bought by those 60+ year olds (13%) were the highest they’ve been since 2011. But while there is a distinct ‘greying’ of the North american cinema population, MPAA still notes that demographics remained stable for 2013 to 2014, with “12-17, 18-24 year olds and Hispanics especially continuing to oversample in tickets sold versus their proportion of the population.” However, there was a troubling collapse in movie going by the youngest demographics.

While the situation in Europe was not quite as bad, overall box office fell by 3% for the Europe, Middle East & Africa (EMEA) market as a whole. This was mainly down to a decline in major markets such as Germany (-7%) and the UK (-5%), that were not significantly enough offset by slight growth in territories such as France and growth attributable to many new screens in Eastern Europe, Turkey and the Gulf & Middle East.

Despite this slump, EMEA came out slightly ahead of North America with USD $10.6 billion versus USD $10.4 billion. This means that EMEA has outperformed or equalled the North American market for three of the last five years. With strong growth in Eastern Europe and the Middle East in the coming years, North America could see itself permanently relegated to third place in the global box office ranking in the future, though the currently weakening euro will not help.

Read More »

Exageratting China’s February Box Office Victory Over the U.S.

Dragon Blade

There is an idiom in the English language that states, “Don’t take any wooden nickels”. The phrase sprang up in the United States during the early 20th-century when, during the Great Depression, banks would hand out wooden nickels which could be traded in for prizes. This was practice was designed to attract customers into banks which were seen as unreliable at the time.

The phrase, “Don’t take any wooden nickels” was usually said in parting as a warning not to be duped or cheated by someone who might want to pass off a wooden nickel as legal tender. This same aphorism could also be used to remind us of the circumspect nature required when reviewing specific news media stories, though we already have a more direct recommendation in the saying “Don’t believe everything you read”.

This is certainly true in the rash of articles and posts from media outlets far and wide reporting that motion picture theatrical box office in China during the month of February surpassed that of the United States for the first time ever. While there is no doubt this is true numerically, these news stories were designed to foreshadow the not-so-distant day when China will become the number one movie market in the world, ahead of North America, which presently holds the title. Industry pundits can’t help themselves in writing about every minute step toward this inevitability in their desire to be the first to report when it occurs.

Yet one must look a little deeper than the actual February grosses to understand whether the news is at all significant. There’s an old adage instructing us just how to examine such reports; “Read between the lines”.

For some time now media outlets, specifically trade publications, have been juggling the variables used to report on box office receipts. This leads to a form of what I like to refer to as of “selective exaggeration”. Examples are easy to spot and will usually read something along the lines of, “The debut of ‘Big Blockbuster 2′ sets a new record for the opening of a comedy featuring a talking teddy bear opposite a female lead when bowing on an even numbered Friday on an odd number of screens in November”. These new records take so many categories into account it seems one might have a better shot at a black jack table in Macau than they do of ever coming across a release with comparable attributes.

What many of the news stories about China’s box office triumph did not cover was that February is one of the months with the country’s highest movie attendance thanks to the Lunar New Year holiday. Last February Chinese box office amounted to CNY ¥3.04 billion (USD $482.6 million), compared to CNY ¥4.07 billion (USD $650 million) last month. That’s a noteworthy increase of 35%, keeping the country on track with the 36% growth seen in 2014. The first day of Lunar New Year alone set single-day ticket sales record in China, with theatres raking in CNY ¥360 million (USD $48.9 million), according to the State General Administration of Press, Publication, Radio, Film and Television (SAPPRFT) which tracks such statistics.

Read More »

China Cinema Digest – Thursday 26 February 2015

China Daddy Trip

The box office over Chinese New Year (CNY), traditionally always strong and devoted to domestic blockbusters, was up significantly this year to 350 million yuan (USD $56 million). The reason is attributed to the growth in the number of screens, which is set to cross 25,000 by early March.

Single-day box office close to 350 million yuan of the strongest in the history of blowout

According to the country’s major mainstream cinema to rough statistics, as of 24 o’clock last night, National City theater box office on February 19 of about 330 million yuan; not enough time plus part of the statistics reported missing at the box office and is expected to eventually accessible 350 million Yuan. The current average fare of less than 40 yuan Chinese cinema, which means the country on February 19, about 10 million people into the theater viewing. Day become the country’s largest cultural consumption events. At present, the Chinese New Year holiday is only just beginning; the law in recent years from a historical point of view, last week will be the peak viewing audience and box office visits will be started almost the same output, the seventh day before the expected total audience Visitors reach sixty-seven million.

After the seventh day, as some people go to work, there are some cities in the return of the road, the market heat will be reduced, but the Chinese New Year holiday to go to the fifteenth day after will be completely finished. So even after the seventh day trips Pujiang half the audience, to the fifteenth day before there would have been two or three million, add up to a hundred million.  LINK

Chinese New Year cinema

CNY is like a combination of Thanksgiving and Christmas, so it is an opportunity for families to spend time together – in silence in the cinema. Micro-channels providers were quick to offer impossibly cheap cinema ticket deals.

Tencent also launched “Please watch the movie universe” campaign, users can spend 188 yuan to buy a movie ticket prices, which contains 12 movie coupon, then like red envelopes will generally share this package to my circle of friends, or micro-channel group inside. Baidu also launched the “stand by 20 yuan,” online discount. After the user through the phone Baidu search for “movie tickets”, you will go directly to the page and the next one after purchase, minus $ 10, if paid in Baidu wallet, you can minus 10 yuan.

“Micro-channel supplier of low-fare passenger seemingly led the theater, but also to a certain extent, to mislead the consumer.” Hangzhou Golden Elephant cinema Weng Liping, general manager, told reporters that the general movie tickets cost 25 yuan to 35 between the yuan, too low prices make consumers think that the normal fare but became unreasonable.

Weng Liping believes that the Internet cheap tickets compress the cinema’s own space operations in the face of these ridiculously low fares, cinema launch membership immediately lost its appeal, is not conducive to get sticky customers.  LINK

Read More »

Wanda Cinemas Announces 2014 Figures & AAM Tech Deal

Wanda logo

Wanda Cinemas has published its first post-IPO figures for they whole of 2014 and they show overall growth in the number of screens and box office, though the exhibitor’s market share has slipped somewhat.

Win Business Network reports that:

Wanda Cinema’s 2014 box office revenue was 4.21 billion yuan [USD $674 million], an increase of 33.1%, with audiences 102 million patrons, an increase of 30.8%; Up to December 31, 2014, the company has already opened in 182 theaters, with 1,616 screens.

The corresponding data in January 2015 Wanda Cinema is realized grossed 380 million yuan [USD $60.8 million], an increase of 44.1%, with audiences 8,990,000 patrons, an increase of 36.6%, has been opened in 183 theaters, 1,624 screens.

However, Wanda Cinemas’ overall marketshare slipped slightly, after having grown for the previous three years.

In January this year, the State Press and Publication Administration of Radio Film Board has already grossed Chinese film last year had informed: 29.639 billion yuan [USD $4.75 million], an increase of 36.15%. This makes it possible to calculate the Wanda Cinema last year accounted for about 14.2 percent of the market.

Wanda Cinema’s market share data with the previous two years or less. According to the prospectus of the data Wanda Cinema, 2011 to 2013, Wanda Cinema’s market share was 13.61%, 14.49% and 14.52%, both the market first.

It is difficult to compare the figures and total takings with previous years accurately due to tax reforms in the past year that have impacted cinemas’ revenue. This is due to the total box-office deduction of 5% which goes to the “special movie fund”, and then there is a further 3.3% of the tax deduction, and only then do we get the net box office.

Wanda Cinemas continues to benefit financially – and enjoy an advantage over competitors – because of the close ties between Wanda Cinema and Wanda Plaza real-estate. This means that Wanda Cinemas are shielded from rising rents costs that affect other theatres.

However, this sort of arrangement only continue for as long as the real-estate market is strong and Wanda Plaza can afford to play corporate sugar daddy to Wanda Cinemas.

Now that both companies are listed companies there could be questions about this type of arrangement if the fortunes of the two companies start diverting. Though with the majority shares of both companies firmly controlled the Wang family, there is not much other shareholders can do to alter this cosy arrangement.

Read More »

Cinema in China Is Still Headed for Crash – Five Trends Show Why

Taking of Tiger Mountain

With Wanda Cinema’s IPO imminent we thought it would be a good to revisit the article ‘China’s Multiplexes Are Headed For a Crash – Statistics Show Why‘ that we published last April. With another year of strong box office growth in China and no large scale cinemas going bust in the Mainland, were we wrong?

At the time we wrote that “It is too early to say whether Chinese cinema exhibitors are in for a hard crash or a soft landing, but a correction is now becoming overdue.” It increasingly seems like 2015 will be the year that the correction is due, with several troubling indicators making themselves felt.

We will not re-hash the arguments from the original article, which remain valid, so we urge anyone not familiar with it to read it first. We will instead look at some new factors that we did not highlight back then.

It is also worth noting that at the time overall growth in China was slipping below 8% and now it has fallen even more. For the third year running China has missed its export target and as the FT reports,

The missed target comes as China prepares to release annual gross domestic product figures next week that will show growth in the world’s largest economy (in purchasing power terms) came in below the government’s annual target for the first time since 1998.

This is the macroeconomic picture to keep in the back of the mind when discussing the cinema market in China.

In broad strokes, the five trends can be summarised as follows:

  1. Mistaken belief in a demographic cinema dividend;
  2. Unsustainable price-war in micro-blog ticket services;
  3. Inability of Hollywood films to fill a post-quota gap;
  4. Failure of Chinese film production due to censorship;
  5. A ‘hidden’ decline in the growth rate of the box office.

1 – The demographic cinema dividend fallacy

Wanda Cinema is very confidant about the future growth of the China cinema market, as stated in its IPO document, which begins with the bold claim “The company’s main business is the cinema industry, [and] the [cinema] industry has always come out on top”:

Our cinema industry in the future continue to benefit from the rapid growth of the film industry

In recent years, China’s film market continues to maintain a rapid development momentum, the movie industry revenue is expected to usher in the 2015-2016 phase of explosive growth. We believe that our large population, the urban population has a number of screens compared with Europe and other developed countries, a big gap under the background of the geographical distribution of the theater, the per capita number of screens there is a large room for improvement, the cinema industry will continue to maintain a high level of development.

This is a refrain often heard in discussions about Chinese cinema: that the country is under-screened compared to markets in Europe or that cinema attendance is low compared to that in the US. As the market matures it will continue to grow, is the belief.

Read More »

China Cinema Digest – Friday 9 January 2015

away with bullets

China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has taken note of the danger to the cinema experience if films are shown in poor conditions, such as insufficient brightness (particularly for 3D) and poor audio. It has therefor put cinemas in notice, as well as giving audiences a way to complain (call Tel: 010-82024005 13901121804). If only other countries film and cinema bodies (France’s CST notwithstanding) were as forward looking. The first paragraph ought to be gold plated.

Bulletin

[If] film screenings technical quality can not be effectively guaranteed, it will harm the legitimate interests of moviegoers and film copyright holders, and film digitization has brought technological achievements do not match the long run, is not conducive to the sustainable development of the film industry, and will lead to the theater in market lost credibility. In order to further improve the quality of film screenings, are hereby notified of the following matters:

First, the film shows the vitality of the quality of films, the movie business is a concrete manifestation of good faith, must lead to radio and television departments at all levels and industry associations, cinema, cinemas highly valued, not for any reason reduce film screening criteria.

Second, each company must immediately cinema this notice will be forwarded to the respective theater, and the organization of specialized personnel to show the quality of the census, for the existence of film screenings quality is not up to the standard of the phenomenon must be promptly corrected. Each theater should seriously organize self, responsibility to the people, for the presence of screening quality problems, to identify the reasons for immediate rectification.  LINK

Wanda Group

Photo credit: Caixin Online

Are the wheels starting to come off the Wanda bandwagon even before the cinema IPO? In an article titled ‘Hong Kong-Listed Wanda No Longer Boy Wonder’ by Beijing-based Caixin Online it is pointed out that the Dalian Wanda Commercial Property IPO was expected to raise USD $5 billion to $6 billion but only $3.71 billion. Yet it is the anecdotal evidence that indicates that all is not well with the cinema portfolio either:

A recent business trip experience for a Hong Kong investment banker, who chose not to be named, highlights oft-heard concerns about Wanda’s future. The banker traveled to a Wanda resort in the seaside city of Sanya, in the island province of Hainan, with plans to stay three nights.

But the banker checked out after just one night at the Wanda Culture Center at Haitang Bay because, he said, the place was as lonely as a ghost town. Moreover, he said, in Sanya he saw an upscale, Wanda-owned movie theater that seemed much too remote to draw cinema-goers.

“It’s hard to imagine movie-goers going there because taxi drivers refuse to take you unless you pay a higher fare,” he said.  LINK

Read More »

Number of New Cinemas in China is Up – But so is Box-office Fraud

China box office fraud

Last week saw the publication of two reports, both of which pointed to upward trends in the Chinese exhibition industry. But while the first pointed to a growth in the number of new screens, the second pointed to an increase in the instances of box office fraud.

report by Yi En Consulting has shown that as of 30 November, the total number of cinemas and multiplexes in China amounted to 5,540 with a total of 23,349 screens. This has led to a lot of end-of-year analysis and prognostication, coming as it does also close to the re-filing of the Wanda Cinemas IPO prospectus.

The number of new cinemas in Mainland China doubled in January-November 2014 to 957 compared to 476 in the same period last year. Beijing Daily looks at the key players (Wanda, Poly, Bono, etc.) and the dynamics shaping this market, where more players are looking to follow Wanda’s IPO lead.

Beijing Daily reporter learned that this year, in addition to already listed Wanda Cinema, the other cinema companies are also in preparation or wait listed. The first is the original plan and Wanda Cinema accept China Securities Regulatory Commission reviewed the same day in Guangzhou Jinyi Film and Television Media Co., Ltd., but the presence of a false prospectus of the eligibility conditions have been canceled. At the same time, the industry ranked second in the Shanghai Film Co., previously disclosed on April 18 prospectus, to be listed on the Shanghai Stock Exchange, while China Film Corp. also announced June 16 the prospectus, and most raised Uses of funds are investment projects cinema. In addition, the industry said, ranked fourth in the Guangdong market, the earth also has the listing.

The role of 3D and Imax/PLF (premium large format) films has also been significant in 2014.

According to public information, as of the end of October this year, the country released 52 million at the box office over the movie, 26 movie for 3D movie, half of the total box office revenue, 3D movies have occupied half of China’s film market. With such a huge market demand, the theater in order to attract customers have increased construction of 3D auditoriums. A film industry insider talking to Beijing Daily, told reporters: “Look at the Beijing movie theaters, an average ticket 2D movie ticket is 50 yuan, and a 3D movie ticket fares usually more than 100 yuan, the theater in order to the difference will be considered to improve the middle by large screen IMAX auditorium box office. ”  LINK

In the second article, turning its attention to the future, the focus is on the growth in the Tier Two and Tier Four cities.

Read More »

China Cinema Digest – Wednesday 17 December 2014

Imax China 200 screens

Imax has crossed 200 screens in Mainland China following the latest deal announced with Wanda Cinemas.

IMAX and Wanda Cinema, announced today that the company, along with Wanda Plaza is located in Hangzhou Gongshu Wanda IMAX theater opened, IMAX theater in China’s total reached 200. Wanda Cinema is one of the first partners to IMAX theaters in China. Currently, Wanda Cinema has become the company’s largest IMAX cinema partners in the international market, the commitment to build a total of 210 IMAX theaters.

In 2001, China’s first IMAX theater opened in Shanghai Science and Education, which marks the formal entry into the Chinese market IMAX Corporation. In 2004, IMAX company opened its first commercial IMAX theater in China. At present, China has become the world’s second largest IMAX market, a total of more than 400 IMAX commercial theaters, 179 of which have been opened. After all screens installed, IMAX theater network will cover commercial 122 cities in 30 provinces of China.  LINK

Luxe RealD
RealD announced at CineAsia a three-screen deal with Broadway Cinema for its Luxe PLF brand. This is the first deal in China and heats up the competition with Imax, China Giant Screen and own-brand PLF operations.

Global 3D and visual technology company RealD Inc. (NYSE: RLD) and leading Hong Kong and Chinese theatrical exhibitor Broadway Circuit announced today an agreement to install 3 “LUXE: A RealD Experience” (LUXE) auditoriums in Broadway’s cinema locations in mainland China. Introduced by RealD in 2013 as a new Premium Large Format (PLF) initiative, LUXE auditoriums will be installed at Broadway locations in Tianjing, Chengdu and Guangzhou, with the Tianjin location expected to open in May 2015. All 3 LUXE auditoriums opened at Broadway locations will feature RealD 3D projection and a RealD Precision White Screen.

“As a leading circuit in the rapidly growing and highly competitive China market, we have been looking for the best possible cinema setting for our moviegoers,” said Tessa Lau, CEO of Broadway Circuit. “We find LUXE a perfect match. We see it as an initiative to define our 2D and 3D premium offering. We are pleased to partner with RealD to jointly provide our audiences a unique, fully immersive experience.”  LINK

Read More »