Empty movie theater Photo: iStock

No business is more tricky than the Chinese movie box office. On the surface, it is a sunrise industry with an ever-growing number of screens in what is already the world’s largest film market. But in reality, the industry is in trouble.

Consider Linfen, a prefecture-level city in the southwest of Shanxi province. The city with a population of 4.4 million has no fewer than 36 theaters from major players such as Wanda, Bona Film, Central Pictures and Heng Dian. In Linfen, many cinema screenings are attracting audiences measurable in single figures.

According to Securities Journal, cinemas in rural mainland cities are averaging only six paying customers per show, compared to the already-low number of 16 customers attending screenings in far bigger, regional powerhouses such as Beijing, Shanghai, Guangdong and Shenzhen.

In other words, the theory about “when you build it, they will come” does not really work in China.

In 2018, the total number of screens in China reached 60,079, up 18% over the previous year. This meant that more than 9,000 screens were added in 2018. So far this year, the trend has continued, with the building of 511 additional cinemas boasting over 3,200 screens.

One newly-opened movie complex in Chongqin recorded only 240 attendees at nearly 500 movie screenings. This means that each screening averaged audiences of only 0.48 ticket-buyers, and that the average revenue per movie shown was about 12.56 yuan (US$1.87). Sustainable business model? Probably not.

In 2017 China surpassed the United States as the nation with the most cinemas in the world. This year, Chinese media was awash with stories about the sales triumph that was the sci-fi movie “The Wandering Earth”, due to its record-breaking box office takings of 4.6 billion yuan (US$685 million) over the Chinese New Year.

However, the bigger picture is far less positive. In the first quarter this year, total box office takings dropped 8% to 18.61 billion yuan.

Total tickets sold reached 406 million for 31.4 million screenings, at an average ticket price of 38.8 yuan ($5.77).

A powerful factor behind the leap in Chinese box office sales over the last five years has been subsidies offered by online movie ticket platforms such as Maoyan.com and Taopiaopiao.com. They attracted customers with ticket prices as low as 9.9 yuan, discounted heavily from the face value of 30 to 50 yuan. Perhaps unknown to customers attracted by bargain prices, the online platforms used discounted tickets to build a customer information database. With this information, the platforms can put an exaggerated spin on their market base to raise funds.

Film makers have also had to bear part of the cost of such subsidies, and Chinese directors have been heard complaining loudly that the cost of subsidizing audiences can exceed a movie’s production budget.

The trend also explained why many movies that saw strong box office results in mainland China received poor attendances in Hong Kong cinemas, where a ticket costs about HK$80 (US$10.20).

Last October, the China Film Administration announced that it was forbidding online ticket sellers from subsidizing ticket prices, declaring that subsidies are hurting the movie industry by swallowing large percentages of film production budgets.

Since then, things have gone back to where they were, with most customers put off by high ticket prices. Internet discussions are full of talk from people who say that 9.9 yuan tickets might attract them to enjoy a sleep in a cinema’s air conditioning, but that prices of 30 to 50 yuan were way out of their league.

Now the central government is faced with possibly of having to regulate the national oversupply of cinemas, as the tale of the booming mainland movie market has turned out to be just like the plots of some of the movies they show. Unbelievable.

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