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Screen Test

Movie theaters are struggling to survive amid waves of Covid-19 lockdowns, but analysts say the pandemic has only shed light on preexisting woes – and an industry reshuffle is in order

By Xu Pengyuan , Ni Wei Updated Jul.1

People watch the film Chinese Doctors in a near-empty theater, Taiyuan, Shanxi Province, July 9, 2021

The other shoe has finally dropped. Movie theaters will close as of today,”  

Dong Wenxin, general manager of cinema Palace in Jinan, Shandong Province, posted to her WeChat on March 30. On the same day, the city reported four confirmed Covid-19 cases.  

She told NewsChina that over the past month, her cinema sold less than 10 tickets per day and their monthly revenue does not cover the rent. Dong said some other theaters in the city had it worse, some selling only four tickets per day. “It was no better than being shut down,” Dong said.  

Recent rounds of Omicron in Chinese cities since March have devastated attendances. Data from ticketing app Dengta showed that Chinese box offices raked in 295 million yuan (US$45.4m) over the Labor Day holiday (April 30-May 4), only 17.6 percent of earnings over the same period in 2021. On March 24, China’s box office revenues fell below 10 million yuan (US$1.5m), averaging 50 tickets per theater or 1.8 viewers per movie – the poorest showing in 10 years apart from when cinemas reopened in 2020. 

Empty Theaters 
Beyond the pandemic, analysts blame reduced investment and lack of quality films, which were already issues before the pandemic. Audiences are not only avoiding the pandemic but also poor quality films. This trend has been clear over the past two years. When theaters reopened after Covid-19 first hit, many welcomed their return. This time, there is much less fanfare and enthusiasm.  

Cinemas remained open in 2021, raking in 47.3 billion yuan (US$7.3b), about 74 percent of box office earnings in 2019, according to an industry survey by ticketing app Dengta. During the 24th Shanghai International Film Festival in June 2021, Zeng Maojun, president of Wanda Pictures, told media that 2022 would be a “big year for the movie industry.”  

So far, it has not. Even before Jinan tightened pandemic controls in March, the Palace’s ticket sales were half what they were in 2021. Dong chalked it up to the waning Spring Festival holiday rush and poor film selection. But even during the Spring Festival, box office numbers were abysmal, 23 percent down compared to the same period of the previous year, according to ticketing app Maoyan.  

Theater managers pinned their hopes on Hollywood blockbuster The Batman, scheduled for release on March 18. The same day, the Chinese government announced tightened pandemic controls for cinemas, ordering all theaters in medium- and high-risk areas to close. According to Dengta, less than 50 percent of China’s cinemas were operating in March, the lowest since theaters resumed operation in May 2020.  

Although The Batman received positive reviews and reportedly took in US$677 million globally by mid-April, ticket sales in China were less than 100 million yuan (US$15.4m) in the first week, according to Dengta. Analysts expect the film’s China revenues will not exceed 150 million yuan (US$23.1m). Yu Chao, deputy manager of Beijing Capital Cinema, told NewsChina that despite keeping all its matinees for The Batman, and 22 daily screenings at its branch in the city’s Xidan shopping district, 85 percent of seats remained empty.  

“Nobody thought the market would get to such a low point,” he said. 

Reel Shortages 
The shrinking audiences are partly due to lack of new movies, which also largely stems from pandemic controls. Some analysts warned of the shortage as early as summer 2020 when theaters resumed operation. Although not immediate thanks to the backlog of postponed premieres during the 2020 pandemic, the shortage was obvious in 2021, as many domestic studios refrained from releasing films.  

“We are now very cautious about promoting movies,” said producer Wang Lei, revealing to NewsChina he postponed one of his releases intended for April and many of his peers have done the same. “We’re worried about squandering our money due to recent rounds of controls,” he said.  

According to Dong, most of the hottest movies of 2020 and 2021 were produced before the pandemic. By 2022, almost all postponed releases had been screened, and there were not enough new movies to fill the gap.  

In summer 2021, for example, China’s box office plunged to 7.4 billion yuan (US$1.1b) from 17 billion yuan (US$2.6b) in the same period of 2019, according to industry data website askci.com. There were no summer blockbusters, with the best-performing film earning 1.3 billion yuan (US$200m), onethird of the revenue of previous summer season hits.  

Over the Tomb Sweeping Festival (April 3-5) this year, only two foreign films screened and eight domestic films were removed from the schedule. A similar situation occurred over the Labor Day holiday in early May.  

“Labor Day couldn’t even be considered a holiday season this year since many theaters were shut down and few new movies opened,” Chen Dan, a director at the Suzhou Motion Picture Association, told financial portal Caijing.  

“Cinemas are among the worst hit by the pandemic,” Dong said. “Every time a new outbreak comes, movie theaters are the first to close and the last to open... It has convinced people it’s very risky to go into a theater,” she added.  

“If the six-month shutdown [in 2020] was a minor wound, today’s shortage of new movies is an internal injury that is hard to heal,” Wang said. “Even if all theaters remain open, they would not have enough movies to screen and they would have seen very low attendance.” 

Pictured is the shuttered Guang’anmen Cinema in Xicheng District, Beijing, October 30, 2021. The district ordered all movie theaters in the district to close from October 30 to November 14, 2021

Slim Selection 
He Si, a movie buff in Beijing, said the low attendance rates in theaters are not because of the lack of new movies, but the lack of good movies.  

“I used to go to the movies nearly every week, but since this year’s Spring Festival, I rarely watch movies in the theater, because few interest me and tickets are so expensive,” he said.  

“Movies on offer in theaters are not diverse enough in content or style... and those we discuss in fan groups were not approved for screening. Is there any reason for us to go to a theater?” he said, adding he would rather go to screenings of classic films, since they are worth watching and cheaper.  

The lack of variety is clear. Five of the top- 10 most successful films of 2020-2021 were patriotic or promoted social rules and mainstream values. None were fantasy or tackled social issues. In contrast, the top-10 titles of 2018-2019 included domestic and imported films that covered genres from fantasy and comedy to rom-coms and sci-fi.  

A 2021 survey of 4,000 moviegoers conducted by the Movie and Arts Center under The China Federation of Literacy and Art Circles showed that crime thrillers and movies about social issues are the most popular genres. Many respondents agreed that what the Chinese market lacks most is fantasy, sci-fi, mystery, crime and war movies. The survey also showed that most moviegoers are older and more financially secure, while younger people prefer online platforms for their diverse catalogs of movies, TV and originals. Less than 10 percent of respondents said they watched over 10 films in 2021, citing “no good movies” as the major reason.  

Also deterring audiences is higher ticket price as film producers seek to recoup losses. Data from the National Film Industry Development Fund showed that in 2021, China’s average ticket price was 40.5 yuan (US$6), 8.9 percent higher than 2020. Although the 2020 box office rebounded to 74 percent of 2019’s total, theaters only saw 67.5 percent of 2019’s attendance. 

Ticket prices increased again in 2022, with some exceeding 100 yuan (US$15) during the Spring Festival in February, doubling 2021 and tripling 2018 prices. The price hikes have affected attendance numbers.  

“Two people have to spend 300-400 yuan (US$46-62) to watch a mediocre movie. How many people are willing to do that,” He Si told NewsChina. “I hope ticket prices get back to normal. Watching a movie shouldn’t be a luxury form of entertainment.”  

Dong Wenxin of Palace in Jinan justified the price increase. “Restaurants also increased their prices because of the decrease in customers. How else can they survive?” she said.  

But Dong and Yu Chao worry a vicious cycle is emerging, where lack of selection and increasing prices drive away audiences, poor box office performances discourage studios from investment, which further increases ticket prices to cover losses. 

People line up for a screening of Avatar, China National Film Museum, Beijing, January 10, 2010

Disappearing Act 
Yang Qifeng, a film producer who previously managed 60 movie theaters nationwide, told NewsChina he has shifted his investments to short videos. He cites how sci-fi hit The Wandering Earth, a 2019 movie adapted from The Three-Body Problem by author Liu Cixin, made breakthroughs in special effects, but Yang said funding shortages stopped this industry trend short.  

“It’s without a doubt a terrible time for film investing,” Fang Li, producer and president of Laurel Films, told NewsChina. “The hot money is gone, especially from investors seeking quick returns. The market is not as extensive and investors have more concerns and care more about fixed returns.”  

According to Wang Changtian, president of Enlighten Media, the decline started in the latter half of 2018 after the central government targeted China’s bloated film industry following reports of astronomical fees for actors and rampant tax evasion. Media reports exposed an industry flush with money from pig breeders and vegetable growers, steel producers and firework makers. In 2018, 73 real estate enterprises reportedly launched movie studios.  

Seeking a quick profit, investors produced low-budget, low-quality movies in droves. The atmosphere turned speculative.  

“The industry was like gambling,” Song Wen, founder of FIRST International Film Festival, which promotes the work of young producers and directors, told NewsChina. “When someone earns 3 billion yuan (US$461.5m) on 100 million-yuan (US$15.4m) investment. Who wouldn’t be envious? If you had 1 million yuan lying around, what would you do?” Song said.  

With the 2018 industry crackdown came sweeping tax audits and tightened supervision of film enterprises. “Many companies couldn’t list on the stock market, so they couldn’t get financing. It led many investors to suffer from a broken capital chain,” Wang Changtian told media during the 2021 Shanghai International Film Festival.  

In an interview with Southern People Weekly in August 2021, director Lu Chuan described the industry after 2018 as “a land full of sufferers.” He was forced to put up his own money to finish a movie after his investor backed out in July 2019. Without funding, his team could not fully resume production until May 2021. 

Better Odds 
Others see the withdrawal of hot money as positive, arguing the industry can mature and concentrate on producing quality content.  

“Good movies stand a better chance in a smaller market,” Fang Li said. “As long as we have good ideas, we could get more people to make quality movies. We would rather take a smaller share. It’s also a good time to concentrate talent,” he added.  

Song Wen said FIRST has seen an increase of submitted screenplays during their annual project scouting in recent years, from 732 in 2019 to 916 in 2021. Even in 2020, they received 857 submissions. “This year’s number is a record high,” Song Wen told NewsChina. “I’ve found that young people are really producing a lot of screenplays right now, which makes it a good time for storing up work and fostering talent. It’s good news.”  

Song said four studios have turned to him for young directors to make movies since Spring Festival, but all of them already have work. “They’re in a prolific period. Even the pandemic can’t hold them back,” he said.  

The pandemic also encouraged producers and investors to reevaluate their choices in projects. For example, many studios bet heavily on light-hearted comedies. Director Cai Chengjie told NewsChina he now chooses more touching human stories and said he has mentally prepared himself for low profits.  

Song Wen hopes younger directors take on more social issues. “Some producers and directors are trying to avoid realistic topics and make lowbrow slapstick or historical comedies, but this leads audiences to believe that theaters aren’t places for serious cinema,” he said. Also, many in the industry mistakenly believed that young audiences preferred escapism at the cinema. Song pointed to 2020 drama Dying to Survive, which tackled the issue of high-priced leukemia drugs, saying the movie’s 3 billion yuan (US$461.5m) box office earnings revealed strong demand for movies that tackle social issues.  

“Audiences may unexpectedly welcome such films after the theaters fully resume,” he said.  
Theaters are exploring ways to increase attendance beyond government stimulus and tax reductions. Fang Li has called for theaters to move out of shopping malls, a strategy started by real estate giant and film company Wanda 20 years earlier. Fang argued that the high rents shopping malls charge unnecessarily pressured theaters. “Movies should not supplement shopping,” he said, adding theaters should open near residential communities and operate around the clock.  

Others suggested theaters distinguish themselves with curation rather than display all available options like supermarket shelves. An insider told NewsChina he hoped authorities would give theaters more freedom to choose what movies they screen, including classic movies, and allow them to launch their own film festivals.  

Some theaters have taken measures to attract audiences. Beijing Capital Cinema, for example, holds comedy performances and concerts, its monthly crosstalk shows drawing an average of 200 people. Although still falling short of recouping lost movie revenues, Yu Chao said their efforts have other value. “It might be a turning point to encourage additional revenue streams,” he said.  

Although some predict theaters will keep losing viewers to internet platforms, many analysts believe theaters will always be the first window of the movie industry and provide a good chance for real social interaction.  

“Movies cover public issues and sentiments, which are connected by public theaters,” Dai Jinhua, a professor who studies cinema at Peking University, told NewsChina.  

Despite the paltry box office numbers during the Labor Day holiday, analysts chalked it up as a success, considering cities like Beijing and Shanghai had closed all cinemas because of the pandemic. According to Maoyan, the top two movies over Labor Day were new releases. Romance Stay with Me earned an 8.6/10 rating on the app, while US animated feature The Bad Guys received a 9.1. A cinema manager in Zhejiang Province surnamed Tao told Caijing magazine that there are excellent films waiting in the wings, postponed because of the pandemic.  

Though the Palace is closed, Dong is still doing her part for the film industry. She posts regularly to followers on WeChat about movies like The Batman. She said she remains confident that audiences will return. “As long as the pandemic is under control, audiences will be back as soon as there’s a good movie to see,” she said.

A theater employee sterilizes seats, Bingo Cinema, Shengyang, Liaoning Province, March 25, 2020