Chinese Master of Cinema Investment
In 2010, Hollywood movie “Avatar” took the Mainland film market by storm with RMB1.36 bln box office sales, boosting the box office sales of foreign films to RMB4.3 bln, which accounted for 43% of total box office revenue in China. Yin Gang, chief executive officer of Bingo Cinema under Bingo Group, said during an interview with our website, that last year Mainland’s box office sales exceeded RMB10 bln, totaling RMB10.172 bln with number of movie screens reaching 6,256. Box office sales recorded a 125% leap in the past eight years. By conservative estimates, he expected Mainland’s total box office sales in 2011, 2012 and 2013 to surge by over 30% to RMB13 bln, RMB18 bln and RMB25 bln respectively.
The annual growth in Mainland’s box office sales is unmistakably driven by a full-steam engine with the rate surpassing the nation’s GDP growth of 8- 10%. According to an analysis report, the total box office sales in Mainland China will be between RMB100 bln – RMB200 bln in the next ten years to come. The cinema industry developed relatively late in China but there is still plenty of room for growth. This can be partly proved by the box office sales of HK$10.6 bln in South Korea with 40 mln population, of HK$131 bln in the US with a population of 300 mln and of HK$16 bln in India with 1.2 bln population. Production of domestic movies in China has been ever increasing but these films are still far from being able to compete with films from the US and Europe. The cinema industry was not a focus of development in the eleventh five-year plan but there is exciting news from the twelve five-year plan, which indicates the domestic film production, screen number, annual box office growth as well as audience are targeted to be one time, two times, three times and four times of that in the previous five years. This so called “1234” twelve five-year plan is injecting immense confidence into the cinema market.
The cinema industry, which is nurtured by popular culture, confronts challenges despite possessing development potential. Yin felt that whether the market could digest a blossoming of cinemas and movies depends on population quality, disposable income and education level. The development potential in third and fourthtier cites is the greatest as 30 mln Chinese experienced the process of urbanization every single year and it is estimated a theater screen is needed for every 25,000 population. This 30 mln figure already represents the number of the whole population of another country, for example, of Canada, in which 32 mln people live. From Yin’s perspective, a powerful nation not only possesses strong economic strength but also fruitful cultural realm. He stressed China’s efficiency takes the championship in the world; the mass will follow suit as along as authority takes the lead. Therefore, film culture will further blossom. Mainland badly needs an outlet for its capital, Yin said, as revealed by the volatility in the property market. He believed more capital will be flown into film industry if the industry has a promising prospect.
Currently, there are a total of eight Hong Kong firms which built movie theaters in Mainland China. Yin admitted his group is a late comer in terms of movie theaters building but it is capable of surpassing the forerunners. Next year, the group will open 10-12 new cinemas in China, estimating to set up not less than 100 film screens. It is projected the group could rank among the first tenth of cinema providers within five years’ time according to the development pace. Comparing to shooting a film, investing in movie theaters is a move that bears relatively low risks and could be taken as a cash business with stable rate of return. This is, in fact, a spotlight of Yin’s investment. While diners could refuse to pay the bill due to poor food quality, audience at cinemas could not do so as they have to buy the tickets before entering the theatres. No matter the film is good or bad, movies theatres would not refund, Yin joked.