1 December 2024 - There's been less interest/focus on the Chinese cinema market since it effectively de-coupled from Hollywood post-Covid and talk of it overtaking the US died down. The Chinese cinema industry nevertheless remains the world's second largest and finds itself at a critical juncture in 2024, facing challenges that mirror global theatrical exhibition trends while grappling with unique market dynamics. Recent data and industry developments, highlighted in two detailed articles (here and here) paint a picture of a sector struggling to maintain its footing in an increasingly fragmented entertainment landscape.
The Numbers Tell a Sobering Story
The gravity of the situation becomes clear when examining the latest financial data to be published about the Mainland cinema sector (Hong Kong SAR has its own dynamics). According to Hengdian Film and Television's third-quarter report, the Chinese box office recorded total revenues of 34.633 billion yuan [USD $4.78 billion] for the first three quarters of 2024, marking a significant 24% year-on-year decline. More worryingly, attendance figures have plummeted from 1.071 billion in 2023 to 813 million, indicating a fundamental shift in consumer behaviour that cannot be attributed solely to content quality or pricing strategies.
This decline has sent shockwaves through the Chinese cinema industry's listed entities, with major players including Bona Film Group, Perfect World, Wanda Film, and China Film all reporting net profit declines exceeding 50% year-on-year. These figures aren't merely statistical anomalies; they represent a structural challenge to the industry's traditional business model.
The Empty Seats Phenomenon
Perhaps most telling is the granular data from individual cinemas. Recent reporting from Poster News reveals a troubling pattern even during peak viewing hours. In a survey of cinemas in Jinan, even successful films like "The Winner" - boasting an impressive Maoyan (China's Rotten Tomato) audience rating of 9.3 - struggled to fill seats. During prime weekend slots, most surveyed venues reported less than 10 viewers per screening, with some shows playing to completely empty houses. This "empty seats phenomenon" is particularly concerning given these observations were made during traditional peak periods.
Content Quality vs. Distribution Challenges
The China Film Association and Lighthouse Research Institute's "2024 China Film Audience Change Trend Report" highlights some interesting paradoxes in the market. While high-quality content remains capable of drawing audiences to cinemas, the market shows increasing concentration around specific genres and holiday periods. As Mu Chen, director of Alibaba Pictures Lighthouse Research Institute, notes, "the potential of diversified content needs to be further released."
The industry has begun experimenting with split-line distribution strategies, introducing films like the re-release of the entire Harry Potter series (which was a success) and various domestic productions through differentiated distribution channels. This approach, as explained by Xie Shiming of Guangzhou Jinyi Pearl River Cinema Line, aims to "meet the diverse viewing needs of different audience groups" while giving theaters greater operational flexibility.
The Digital Disruption Factor
The elephant in the room is the explosive growth of digital entertainment alternatives. The China Internet Audiovisual Association reports that the smartphone micro-short drama market alone (think TikTok-style soap operas and comedies) is projected to reach 50.44 billion yuan (USD $6.96 billion) in 2024, showing a robust 34.9% year-on-year growth. This stark contrast with cinema's declining numbers suggests a fundamental shift in Chinese consumer entertainment preferences.
Looking Forward: The Industry Response
China's industry veterans are not taking these challenges lying down. Recent public appeals by both director Zhang Yimou and director/actor/producer/stunt legend Jackie Chan urging audiences to return to cinemas highlight the industry's recognition of its predicament. However, as online commentators have pointed out, such appeals may need to be accompanied by structural changes, including potential adjustments to talent compensation (not just an issue in Hollywood) to allow for greater investment in production values and storytelling.
Fu Ruoqing, chairman of China Film Co., Ltd., acknowledges that while market fluctuations are normal, the current situation stems from "the weakening of the driving effect of the top films on the market." This suggests a need for fundamental improvements in both domestic and imported film supply, which could be good news for Hollywood, but also European, Indian and other Asian film producers.
The Path Forward
The future of Chinese cinema likely lies in embracing what Professor Zhi Fina of the Chinese Academy of Arts describes as "sophisticated differentiated competition." This could involve developing more nuanced distribution strategies, cultivating distinct cinema identities (similar to the Japanese model referenced by documentary director Ryo Takeuchi, a Japanese director living and making films in China), and creating more compelling reasons for audiences to choose theatrical viewing over digital alternatives.
For 2024 and beyond, the Chinese industry's success may depend on its ability to:
- Develop more sophisticated audience segmentation strategies;
- Implement flexible pricing models that reflect viewing patterns;
- Create unique theatrical experiences that cannot be replicated at home;
- Balance blockbuster releases with diverse content offerings;
- Leverage data analytics to better understand and respond to audience preferences.
The Chinese cinema industry's current challenges represent not just a cyclical downturn but a structural shift in entertainment consumption patterns. How the industry adapts to these changes in the coming months will likely determine its role in China's entertainment landscape for years to come, as well as its impact on the global cinema industry. Hollywood may not be looking to China the way it once did, but China still drives everything from Cinema LED screen adoption to increased efforts to export its films globally.
This analysis is based on reporting from multiple Chinese media sources and industry reports from 2024, in addition to the two quoted above, with standard disclaimer for the translation.
China's Cinema Sector: At the Crossroads of Digital Disruption and Market Evolution