It has been a sluggish summer at the box office in China as ticket discounts evaporated and blockbuster movies were in short supply in a season when sales normally heat up.
After years of steady growth, box-office receipts for the past three months came in at 12.43 billion yuan ($1.86 billion), compared with 12.47 billion yuan last summer, according to Beijing-based film-research company EntGroup
Hurting sales was a phaseout of generous subsidies from online-ticketing platforms trying to build market share. Those discounts helped attract record audiences over the past few years.
An absence of runaway hits also damped demand. None of the 100 summer releases this year—14 more than last year—rivaled the ticket sales of last summer’s biggest film, “Monster Hunt,” which pulled in more than 2.4 billion yuan. China’s top-grossing movie this summer was Hollywood flop “Warcraft,” which brought in 1.47 billion yuan, thanks to heavy marketing by the film’s Chinese partners.
Foreign movies did better than domestic ones over the summer, with 18 imported titles accounting for 48% of the box office.
Ticket sales in China grew by nearly half for all of last year, far outpacing the 8% growth in North America, stoking expectations that the country would overtake Hollywood in 2017 as the world’s largest film market. But slowing growth has lowered expectations. In July, ticket sales dropped 18% from a year earlier, the first decline in that month in five years.
The slowdown is likely to have significant reverberations in Hollywood, where appealing to the market has become central to studios deciding which big-budget features to produce. The number of foreign releases allowed into the country is limited to 34 each year, at least on the most favorable terms, a quota that U.S. studios have lobbied to increase.
Movies like “Warcraft” and “Now You See Me 2” collected bigger grosses in China than in North America this summer, and several major features due out in the first quarter of next year like “The Great Wall,” “God Particle” and “Kong: Skull Island” will be looking to reap major returns in the market. Several sequels like “Pacific Rim 2” have been given the green light at studios because their predecessors performed well in China. The slowdown this year means the success of those movies in production is not a sure bet.
The slowdown in China has burned local investors who paid big money for distribution rights to a few highly anticipated films. Such investments, in which outside backers pay a film’s producers for a share of the take based on projected box-office receipts, have gained popularity recently, largely due to the success of Hehe Pictures.
The film company, which is affiliated with state-run China Minmetals Group, set up a private-equity fund to secure the distribution rights to Stephen Chow’s “The Mermaid.” The movie ended up being China’s highest-grossing film ever.
But this summer, major local productions missed their targets, according to executives of the studios involved. Investors including Hehe Pictures and the film arm of internet giant Alibaba Group Holding Ltd. paid more than 300 million yuan to Talent International Film Co., the Beijing-based producer of the Jackie Chan film "Skiptrace,” for Chinese theatrical distribution rights, Talent said. But the film’s box-office receipts fell short of its one-billion yuan target, taking in only around 889 million yuan.
"We didn’t expect this year’s market to be so bad,” said Esmond Ren, Talent’s president. “This film would have grossed more if it had been released last year.”
A spokeswoman for Alibaba Pictures said the film’s box-office performance still exceeded adjusted industry expectations in the sluggish market. A spokesman for Hehe said that the company wouldn’t make fundamental changes based on the performance of one or two films.
Talent’s Mr. Ren also blamed excessive summer rains in large parts of China for keeping moviegoers away. “My colleagues in Wuhan told me that people were busy pouring out water from their houses,” said Mr. Ren, referring to the flooding in the central Chinese megacity in July when the film opened. “How would they have time to watch a film?”
Some in the film industry say the slowdown won’t damp investors’ zeal for the big screen.
"Chinese companies’ passion to invest in films oftentimes cannot be explained and is somewhat irrational,” said Dai Jinhua, professor with Peking University and a prominent film critic.
Talent’s Mr. Ren said the company won’t adjust its strategy because of the summer slump. “The market will keep growing in the long term,” he said.