Does Hollywood Still Need China at the Box Office? ‘Avatar 2’ May Be the Final Test | Charts – Yahoo Entertainment

After a decade which saw Hollywood viewing Chinese box office as a path to fortune and glory, with a rapidly expanding marketplace providing a boost to overall grosses for their biggest franchise-friendly blockbusters, the last three years have seen a reversal of fortune which may leave China’s moviegoing industry struggling to justify its value to Tinseltown. Enter “Avatar: The Way of Water.”
James Cameron’s 3-D sequel just won approval for release on Dec. 16, the same day the sequel opens in most territories, including the U.S. The global success of the original “Avatar” — which earned a then-record $200 million when it opened in China in early 2010 (a 2021 re-release earned an additional $57 million) — helped convince Hollywood to focus on the Middle Kingdom as a growing movie market. However, Lightstorm and 20th Century Studios’ sequel is one of the last, best chances the superpower will have to show that Hollywood should still bother with a territory that has proven fickle in recent years.
“’Avatar: The Way of Water” presents a much-needed opportunity,” Comscore Senior Media Analyist Paul Dergarabedian said. “China must again show that it can generate the kind of box office horsepower that will grab the attention of studios and again make the country an essential destination for their blockbuster films.”
The success of the original “Avatar” paved the way for a Hollywood invasion, with U.S.-made films accounting for as much as 45% of all ticket sales in China in 2012. As recently as five years ago, Hollywood was raking in big bucks in China — a record $3.3 billion in 2017 — as the country expanded the number of movie theaters and helped subsidize moviegoing as an activity for its burgeoning middle class.
But that windfall has disappeared as China has ramped up the production of homegrown tentpoles — and cracked down on Hollywood imports. The number of U.S.-made films getting approval for release in China has dropped from 73 in 2018 to just 28 expected this year. And Hollywood’s share of the Chinese market share has dropped from 45% a decade ago to just 8% so far this year (a percentage that could increase if “The Way of Water” makes big waves at the Chinese box office).
Worse, after years of comparatively high grosses for U.S.-made tentpoles like 2014’s “Transformers: Age of Extinction” (which set its entire third act in Hong Kong and earned $300 million out of $1.105 billion in China) and 2016’s “Warcraft” (which earned nearly half its $441 million worldwide gross in China), many Hollywood films have been underperforming in China. Universal’s “Minions: The Rise of Gru” earned just $35 million this summer — a fraction of the $153 million that “Despicable Me 3” grossed in the country in 2017. Warner Bros./DC’s “The Batman” managed just $20 million — a far cry from the $298 million that “Aquaman” collected four years ago.
Only a handful of recent Hollywood films have connected with Chinese audiences. However, “Free Guy” ($94 million in China out of $335 million worldwide), “Godzilla vs. Kong” ($189 million/$469 million), “F9: The Fast Saga” ($215 million/$721 million), all released in 2021, have become the exception rather than the rule.
Even this year’s biggest Hollywood grosser in China, Universal’s “Jurassic World Dominion,” which earned $161 million out of $1 billion worldwide, fell far short of the $261 million China total “Jurassic World: Fallen Kingdom” in 2018 and the $228 million Chinese cume of “Jurassic World” in 2015.
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At the same time, studios have scored huge global ticket sales from several blockbusters without a penny from China. Paramount reaped $1.5 billion worldwide from “Top Gun: Maverick” — and even restored a Taiwanese flag on Tom Cruise’s jacket on the film’s poster after being denied a China release. Sony’s “Spider-Man: No Way Home” grossed $1.9 billion worldwide despite China’s rejection for playing the film there (reportedly for too many shots of the Statue of Liberty). Both films broke the recent “no Chinese box office” global record set by Warner Bros.’ “Joker” ($1.1 billion in 2019).
“As seen from declining revenues from Hollywood movies in Chinese theaters as well as strong grosses for Hollywood films without a need for China,” Case Western Reserve University of Asian Studies Professor Deepak Sarma told TheWrap, “the North American film industry is now in a position of treating China as a luxury as opposed to a requirement.”
What’s more, there are signs that China may need Hollywood product more than the other way around. Ticket sales in China fell 38% in the first half of 2022 and grosses around Oct. 1’s National Day — normally a big driver of Chinese box office — plummeted 67% compared to last year.
While China has been producing its own homegrown blockbusters since at least 2015, when “Monster Hunt” tied “Furious 7” with a $390 million gross in China, the country is not yet producing enough of those films to make up for the relative dearth of overseas hits allowed into its theaters. Native blockbusters like 2017’s “Wolf Warrior II” ($754 million) and 2019’s “The Wandering Earth” ($699 million) aren’t crossing the border: The $200 million Korean War actioner “The Battle at Lake Changjin” topped $900 million last year almost entirely via Chinese earnings; the same is true of this year’s megahits “The Battle at Lake Changjin 2” ($610 million) and “Moon Man” ($460 million).
Thanks to global cinema closures and pandemic restrictions, China managed to win the global market share of movie ticket sales in 2020 ($3.1 billion versus $2.1 billion in North America) and 2021 ($7.4 billion versus $4.5 billion). But the country lags behind North America so far this year as international cinemas have reopened in force.
“It has been a difficult year for exhibitors in China,” Imax CEO Rich Gelfond told TheWrap. “So ‘Avatar: The Way of Water’ will be a big help to the overall industry. There is an even higher demand for the return trip to Pandora.”
Schuyler Moore, a partner at the law firm Greenberg Glusker who’s handled multiple Hollywood-China deals, believes that China is less concerned about declining market share or lower overall theatrical revenues. Even a Chinese theatrical release for “Avatar: The Way of Water,” he argued, is merely “doing the bare minimum to feign compliance with the World Trade Organization rules.”
Several insiders have confirmed that some studios no longer consider China to be a major factor when scheduling tentpoles, or even in the greenlight stage. After two years of (mostly) underperforming tentpoles and a soft ban on Marvel titles, including both Disney’s “Doctor Strange in the Multiverse of Madness” and Sony’s “Venom: Let There Be Carnage,” Chinese box office has become the opposite of reliable.
Moore believes that China’s rulers couldn’t care less about lost revenue and declining market share. “They came and stole (Hollywood’s) expertise” to make their own blockbusters, he said. “The last thing China wants is to help Hollywood or the U.S. by allowing U.S. films into China.”
However, Sarma argues that “China has much to lose” if Hollywood studios deprioritize the Chinese market, in terms of both an expanding movie marketplace and how entertainment works as a central focal point for related economic activity. “We’ve already seen Apple drifting toward India,” Sarma said. “Will India be the next target for Hollywood? If Hollywood turns its attention elsewhere (like South Korea or Japan), that could be a symbolic defeat.”
The Chinese film industry may yet recover. Sequels to “The Wandering Earth” on Chinese New Year in January and “The Meg” (still the only big-budget Hollywood/China co-production that was a success worldwide) next summer could help turn the tide. However, if the Chinese government is willing to sacrifice overall theatrical revenue and market share to prioritize its own culturally specific film projects, Hollywood executives and Chinese moviegoers have little say in the matter.
For now, China seems to be looking out for itself. “China’s policies have nothing to do with money,” Moore said, “and everything to do with power.”
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