China’s Demand Influences Hollywood Products

November 18, 2019
China’s Demand Influences Hollywood Products

China’s movie theater business is booming, and will likely be the largest in the world by next year.

China’s take at the box office passed up that of the U.S. in early 2018.  This shift means Hollywood is paying closer attention to what it films and how it will be received in the Chinese market, where some content is still subject to censure if it isn’t in line with what China’s government wants to allow into the country.

In the bigger picture, over 70 percent of a blockbuster film’s revenue now comes from outside the U.S., so keeping content in line with international viewer preferences has become at least as important as pleasing audiences at home.

Video Spotlight: How China is changing Hollywood | CNBC Reports

This post is based on the CNBC article, China’s box office is expected to surpass the US in 2020. That’s good news for Hollywood, by Uptin saiidi, November 5, 2019, and the YouTube video, How China is changing Hollywood | CNBC Reports, by CNBC International, October 31, 2019. Image source: D. Hurst / Alamy

Discussion Questions:

1. What location planning issues arise for Hollywood, given the growth of China’s movie market, and the overall increase in audiences outside the U.S.?

Guidance: At the global and regional levels of location planning, location of markets as well as socio-cultural and governmental differences can play a key role in decision-making. Even though Hollywood may not have physical locations choices to make abroad, it has to consider where its supply chain ends with the final consumer of its products.

Hollywood must forecast future demand and revenue streams, and it seeks scripts and storylines that will be box office hits.  That involves keeping in mind market preferences, differences in government systems, degrees of freedom versus censorship, and ethical and religious concerns in various markets around the world.

The Chinese government has limited the number of foreign films allowed into the country to around 40 or so a year. Hollywood has a vested interest in making sure it designs movies “worthy” of selection by Chinese decision makers.  Sometimes this affects which actors or producers are chosen as well.  China may even pressure Hollywood to favor some types of films over others, by offering or withholding financing for films.

China helped Hollywood foot the bill for many of the most popular movies in the last few years. It has also opened up the largest movie studio in the world back at home to try to develop its own industry.

2. How has demand for cinema movies differed in the U.S. versus China?  How has this affected capacity planning?

Guidance: In the U.S., alternate sources of movies, such as Hulu and Netflix, have decreased visits to the cinema for many Americans.  Hollywood has struggled to maintain customer interest in going to theaters for the “big screen” experience.

At the same time, movie theaters are experimenting with ways to bring viewers back and improve capacity utilization. Their efforts include introducing more “luxurious” seating or offering monthly fees for unlimited movies.

In contrast, China has built an astounding number of theater locations in recent years. In 2017, China added about 25 new cinema screens a day, eventually surpassing the number in the U.S.  The most recent statistics available in November 2019 indicate that in the current year, China has added over 9000 more.  Similar to how many manufacturers of tangible goods have found market demand in China, moviegoers there are rapidly becoming avid consumers of Hollywood productions.


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