Date
20 November 2018
The growing popularity of streaming services such as Netflix is among the factors that are posing a severe challenge to traditional movie studios and theatre chains. Photo: Bloomberg
The growing popularity of streaming services such as Netflix is among the factors that are posing a severe challenge to traditional movie studios and theatre chains. Photo: Bloomberg

Global movie industry facing crisis

In 2017, North America, the world’s largest movie market, saw the box office revenue drop by nearly 3 percent to below US$11 billion. And the movie attendance figure stood at 1.58 billion, 20 percent lower than the peak seen in 2002.

By contrast, China’s movie market has been expanding at an annual pace of 30 percent between 2005 and 2015. That has lured a bunch of Chinese conglomerates such as Wanda, Alibaba and Tencent into the sector. Foreign investors are also pouring money into China market.

China already had more theaters than US in 2016, but the growth clip of nationwide box office sales slowed to 3.6 percent that year. Last year, the growth rate picked up to 13 percent, partly due to one-off factor like the inclusion of online handling fee in the calculation.

The global film industry, as a matter of fact, is mired in an unprecedented crisis. That has already been reflected in the stock market.

Walt Disney Co. saw its share price peak at US$122 in 2015 before sliding to the current levels of around US$106. Meanwhile, Netflix’s share price has more than doubled to US$280 from around US$120 in early 2015. The company now has a market capitalization of US$120 billion, nor far from that of Walt Disney’s US$160 billion.

In China, the share price of Wanda Film Holdings, the domestic film and movie arm of Wanda Group, hit a peak of 131 yuan in 2015, with a market value exceeding 100 billion yuan back then.

However, the share price later plunged to 52 yuan. Now the counter has been in suspension since last July pending a restructuring.

The film industry as a whole is facing a crisis similar to that experienced by the music industry two decades ago.

From CD, to downloads, to streaming (eg. Spotify, QQ), making money from music is becoming increasingly hard, except for concerts, which is now the most lucrative business format. For the movie industry, grave challenges from online streaming platforms like Netflix, which have fundamentally disrupted the TV business, is a key issue.

With no license requirement and less regulation, Netflix has attracted big movie stars and directors and churned out popular TV dramas such as House of Cards and Westworld.

In response, Hollywood has changed its strategy amid the intensifying competition. It used to target audiences aged between 18 and 35, but now the focus is more on the younger audience aged between 9 and 16. However, even young children are fed up with Spiderman and Star War movies.

As a result, it’s been trying to shift the focus to China market.

Chinese investors have substantially increased their investments in Hollywood, pouring nearly US$4.8 billion in 2016, up from just US$2 million 2013.

But the new capital has also brought some negative impact. It is said that the influx of Chinese money has greatly affected the scripts, casting and even dialogue of Hollywood movies, leading to mediocre productions with weak stories.

The full article appeared in the Hong Kong Economic Journal on Feb 20

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Eddie Tam is the founder and CEO of Central Asset Investments.

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