New Era of China's Film Industry

Deloitte Perspective

2016 (Volume V)

With box office revenues reaching RMB 44 billion in 2015, today China is the fastest growing film market in the world. By 2020, China's box office revenues are expected to reach RMB 200 billion, at which point it will overtake North America as the world's largest market for cinema, both in terms of number of movie-goers and revenue. How did this happen? And what can we expect of the film and entertainment industry in the future?

Three main developments in the entertainment industry have made this breakneck growth possible. A concerted government policy to encourage the growth of the culture and entertainment industry, the spectacular growth of the Internet and Internet related services, and fresh injections of capital from new investors in particular, Internet giants, led by BAT (Baidu, Alibaba, Tencent), and real estate developers such as Wanda. These `new players’ have used their scale and capital advantages to gradually penetrate the entertainment industry and build an ecosystem. For instance, Wanda Group, a Chinese property developer, has merged its culture and property resources, taking advantage of its commercial property to build movie theatres, and expanded into the upstream film industry. Since its acquisition of AMC Entertainment Holdings Inc. (AMC), Wanda Group has become the largest cinema chain operator in the world. In early 2015, Wanda Cinema was listed on the SME Board of the Shenzhen Stock Exchange, and became the first cinema chain stock to list on the domestic stock market. Competition between the `new players’ and industry stalwarts has led to this dynamic growth within the film industry.

Faced with a rapidly evolving situation both inside and outside of the industry, the traditional film industry stalwarts have embraced change too, particularly Internet Plus-based change and comprehensive industry chain restructuring. For example, with Disney as its model, Huayi Brothers have launched a "de-cinematic" strategy that integrates the traditional film business, Internet entertainment, and location-based entertainment, and expands into upstream and downstream industry chains to alleviate dependence on the film industry.

In the next five years, China's culture and entertainment industry will develop rapidly. Mainstream forms of entertainment such as film, online videos, and TV will prosper; competition between new entrants and industry stalwarts will become fiercer; cross-industry cooperation and competition will continuously come into play and the industry chain will be re-shuffled and transformed.

Here are seven key trends to watch for.

Po Hou
Deloitte China Partner | National Technology, Media & Telecommunications Industry Leader

Roger Chung
Technology, Media & Telecommunications Industry Researcher

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