In early 1942 the producer Hal B Wallis bought the film rights to a play set in Morocco. He initially assigned the brothers Julius and Philip Epstein to turn it into a screenplay. When they quit to work on another movie, Howard Koch picked up the baton and did a rewrite. Casey Robinson also added his ideas to the mix, before the Epsteins returned to finish the project.
This messy process – which lasted almost five months – resulted in one of the finest films ever made: Casablanca. Moreover the script those four men penned produced some of the most quotable lines in film history.
While most movie lovers remember Humphrey Bogart and Claude Raines delivering the choicest bits of their dialogue, few will know that Koch, Robinson and the Epsteins were the vital cogs churning out the likes of “Maybe not today, maybe not tomorrow, but soon”. Yes, the role of the scriptwriter has long been a somewhat thankless and anonymous one.
That is especially true in China, where WiC has reported in the past on screenwriter complaints about their low pay and lack of recognition. But if professional scriptwriters in China thought their lot couldn’t get any worse, they had a rude awakening at the weekend when Alibaba Pictures said it would dispense with their services altogether.
The Jack Ma-owned company proposed a radical new strategy during a panel at an industry forum. One of its top executives Xu Yuanxiang said the studio had devised “a completely subversive method and we will not hire professional writers from now on”. Instead Alibaba Pictures said it will select a dozen young writers from online forums, and in a gladiatorial process have them compete and eliminate each other as they work collectively on a script. The last person writing will then receive a prize.
Predictably the reaction from seasoned scriptwriters was not positive. China Daily described them as “deeply offended” and “riled”, while screenwriter Yu Fei lambasted the Alibaba plan as “using capital to enslave online writers”. Xiduorui Media, a firm that represents 70 scriptwriters, said it will not work with Alibaba until it abandons the plan to ditch old-school screenwriters.
Once again China’s most high-profile company is seeking to shake up yet another industry. But could it be onto something? Alibaba estimates that 85% of Chinese cinemagoers are aged between 19 and 29, and that older scriptwriters are out of touch with the sorts of plots that appeal to this demographic.
Alibaba, like its major rival Wanda, knows the stakes are high when it comes to putting those bums-on-seats. That’s because 2015 has seen another year of explosive growth in the domestic box office. In fact, the cinema industry looks to be one of the contrarian bright spots in China’s slowing economy.
Big screen promise?
HSBC recently published a report on the cinema industry in China, specifically focusing on the theatres showing the movies rather than the studios making them. The data is striking. “China has become a land of moviegoers,” the report begins, “with box office takings growing 36% last year, five times faster than GDP, to nearly $5 billion. This trend is set to continue with the number of cinemas expected to overtake the US total by 2017, driven by screen expansion in smaller cities.”
Local media concur that the growth of Chinese cinema has been nothing short of phenomenal. Huaxi Metropolis Daily points out that in 2002 the local box office generated just Rmb950 million. By 2013 that figure had surged to Rmb21.5 billion, an increase of 22 times. As of last week this year’s box office stood at Rmb38.6 billion ($6.1 billion), with Huaxi Metropolis Daily describing it as a “virtual certainty” that 2015 will break through Rmb40 billion and achieve 40% growth.
“It is estimated that by 2018 China will overtake the US as the largest box office market,” the Sichuan-based newspaper adds.
HSBC points out that the growth numbers signal that – in spite of worries about slowing GDP data – Chinese consumers are flocking to multiplexes: “A single number tells the story – 55 million people went to the movies during the Golden Week holiday in October this year. Box office receipts for the week totalled Rmb1.9 billion, up 70% on the corresponding period a year earlier.”
HSBC estimates that the total box office will grow a further 38% next year and in 2017. What is driving that? New cinemas is the answer – particularly those opening in the third and fourth tier cities. In 2003 China had just 2,285 cinema screens; by 2014 that had risen to 24,317; by 2017 the bank estimates the figure will touch 45,000.
Such stellar growth is thanks to the rapid urbanisation of smaller cities (China has 337 cities). First-tier cities like Beijing and Shanghai are already somewhat saturated with cinemas – the population per screen is 49,000. In fourth-tier cities the equivalent ratio is 80,000, suggesting the potential for the number of screens to almost double.
And as inland urban incomes begin to catch up with coastal areas there is major potential for increased cinema-going. Currently Beijing has the most frequent moviegoers (of all provinces and municipalities): its citizens watching 3.7 movies on average annually. Compare that to bottom-ranked Guizhou where the locals average just 0.2 flicks per year.
The major beneficiaries?
The single biggest theatre operator in China is Wanda Cinema, a unit of property conglomerate Wanda Group (also the owner of the American cinema chain AMC). By June it had 191 venues with 1,694 screens, mostly in city centres and concentrated in its parent firm’s shopping malls. It has been growing rapidly too: it only had 83 cinemas in 2011.
Thanks to its operating efficiency and brand Wanda Cinema earns the highest revenue per screen (Rmb2.5 million) of the country’s top 10 operators (by comparison the 10th ranked China Film Digital makes just Rmb700,000 per screen).
After its Shenzhen listing in January this year Wanda Cinema’s market capitalisation has since climbed nearly five times to Rmb110 billion. It is now seeking to grow both organically and via acquisitions, purchasing, for example, Shimao Theatre and its 122 screens. The company has also benefited disproportionately from another trend: a tendency among younger Chinese to favour higher margin formats like IMAX.
Indeed, IMAX looks to be among the big winners from a burgeoning box office. In 2010 there were just 10 IMAX screens in China. Last year there were 234. HSBC says that in the first three quarters of this year a further 42 were installed and in this quarter it expects at least 30 more. IMAX’s management hopes that it will have 1,000 screens in the country by 2020 and will benefit from the termination in 2017 of China’s imported film quota (which currently limits Hollywood to screening 34 individual films per year).
HSBC adds that IMAX screens enjoy revenues five times higher than standard screens and IMAX estimates that this year it will generate 20% higher revenues from its screens in China versus the US. “The utilisation rate of IMAX screens in China is 30% higher than that of the US, which is forceful evidence that IMAX is more popular with Chinese than US consumers,” write the HSBC report’s authors John Liu and Chi Tsang.
Thanks to its technical superiority and ability to source films IMAX enjoys premium pricing versus Chinese competitors X-Land and China Giant Screens.
HSBC estimates that the IMAX version of local blockbuster Monster Hunt (see WiC291) contributed as much as 20% of the year’s box office so far – a result of the format’s ability to charge higher ticket prices.
Some less impressive statistics…
When it comes to building overcapacity China has shown form in a variety of industries. And the construction of cinemas may not be immune either.
Of the current stock of 5,000 cinemas about 60% are making a loss, reckons HSBC – an assessment that implies there are quite a lot of struggling cinemas. These have either been built too close to rivals or serve populations less able to afford frequent theatre visits. Growing disposable incomes might improve the latter situation, although the forecast increase in the number of screens may worsen the oversupply problem in the next couple of years. So paradoxically while the overall box office take looks set to continue to rise, many cinemas will remain barely viable.
HSBC predicts industry consolidation with bigger players such as Wanda, Shanghai United and Xingmei buying smaller chains.
21CN Business Herald believes Wanda is the most likely of the chains to buy and to thrive. It’s best placed to raise additional revenues too from advertising, merchandise sales and on-site dining. 21CN says its acquisition of Movie Media will enable it to sweat its existing assets more effectively too. A big data company, Movie Media has been able to capture audience preferences in different parts of the country. This information on regional characteristics means Wanda will be able to optimise the scheduling and screenings at individual cinemas, predicting which films will be hits with local audiences.
Other disruptive influences?
Regular readers of this publication will be fairly familiar with LeTV, which sells a set-top box able to stream TV content. WiC has been unable to decide whether this company is a ‘gamechanger’ or just very good at making lots of noise (for example, in its spats with Xiaomi and Qihoo, and in its announcement of a push into electric cars).
This month LeTV was grabbing headlines again, as well as upsetting cinema bosses. A new blockbuster Vanished Murderer, produced by the filmmaking unit of LeTV, was planned to debut on November 26. But days before its premiere, news began to emerge that LeTV’s premium subscribers could pay to watch the thriller – before it had even shown on a single Chinese cinema screen.
This would have been the first instance of an online media firm disrupting the usual order of things in which a top film is released exclusively for the big screen, only to later be accessible through the small screen and the web.
In a last-minute twist – three hours before Vanished Murderer was due to air – LeTV sent an apology to its subscribers saying it had been cancelled. Local media reports that the embarrassing volte face was the result of a potential boycott from major cinema chains. LeTV was told that the theatres would either suspend showing Vanished Murderer, or reduce the number of screens it would appear on, thus denting its box office.
The chains took this drastic action to “safeguard the interest of cinemas”, Chinese media says, with iDoNews explaining that the chains were anxious not to let LeTV set a precedent with its new service. The fear: that LeTV’s proposed business model might start draining audiences from theatres into living rooms – posing a major threat to cinema box offices, especially in the case of films less reliant on special effects and the lure of the big screen.
This episode shows two things. First, when it comes to the marriage of internet distribution and media, China is pioneering new models more rapidly than the US or Europe. But it also demonstrates that the big theatre chains still retain the market clout to thwart the ambitions of upstarts like LeTV…
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