Lights，Camera，Action

　　China’s total box office reached a new record of21.77 billion yuan ($3.6 billion) in 2013， up 28 percent on2012， according to the official figures recently released bythe Film Bureau under the State General Administration ofPress， Publication， Radio， Film and Television (the State FilmBureau).

　　With this new box office high， China has again taken itsplace as the world’s second largest movie market， a positionit has held since 2012. Accounting for 10 percent of theworld’s total box office， China’s staggering domestic achievementtrails only the United States， which raked in $10.9billion in 2013.

　　“China’s entertainment industry has been growing rapidlyin recent years. In particular， the film industry has takena lead，” Zhu Yuqing， a veteran Chinese filmmaker， said toChina National Radio.

　　“We have reached an age of consumption， in whichpeople are more and more willing to spend their money onleisure activities. Cinemas have become a major entertainmentvenue for city-siders. For young people， eager to getout of the house， films have become their favorite form ofentertainment. Furthermore， IMAX and 3D technology havehelped boost the number of Chinese cinemagoers，” Zhusaid. “It has been predicted that China’s box office growthwill continue for many years to come.”

　　Homegrown victory

　　Like previous years， domestic films and Hollywood productionsdominated China’s box office in 2013. What distinguished2013， however， was that homegrown films prevailedover Hollywood productions in box office earnings with agross of 12.77 billion yuan ($2.1 billion) during the year.

　　Homegrown films accounted for 58.6 percent of boxoffice earnings in 2013， compared to 48.46 percent in 2012.Hollywood， the mightiest movie empire in the world， tookthe second largest share of China’s box office， claimingaround 45 percent， a slip down from 51 percent in 2012.

　　Among the 10 highest-grossing films shown in Chinesecinemas during 2013， seven were made domestically andonly three came from Hollywood. This is a sharp reversalfrom 2012 when Hollywood movies captured more thanhalf of all ticket sales and only three local movies made itinto the top 10.

　　Outside of Hollywood， no other foreign film industrymanaged to make a major impact on the Chinese box office.For example， South Korean blockbuster The Thieves earnedonly 22 million yuan ($3.6 million) in China last year.

　　The boom in domestic films is an encouraging sign fordomestic filmmakers， Zhu said， identifying two main reasonsfor homegrown films surpassing Hollywood.

　　“On one hand， the quality of domestic movies hasimproved a lot in terms of both storytelling and technology.

　　The market plays a decisive role in pushing filmmakerstoward improvement. Though local films cannot competewith Hollywood in terms of technology， Chinese cinemagoersprefer to see local stories and stars，” Zhu explained.

　　Comedy and romance were the two most popular genresfor domestic cinemagoers， accounting for 16 percentof the total box office revenue for domestic films. The year’shighest-grossing film， fantasy adventure-comedy Journey tothe West： Conquering the Demons， directed by Hong Kong’sStephen Chow， amassed 1.25 billion yuan ($205 million) atthe domestic box office during the 2013 Spring Festival.The Spring Festival period is usually the hottest seasonfor the Chinese box office， with couples and families flockingto the cinemas during the holiday period. Comedy， again，proved to be the biggest box-office draw during this time.

　　“On the other hand， Chinese cinemagoers have tiredof too many Hollywood big-budget films featuring specialeffects and CGI (computer-generated imagery) technology.While they may be dazzling， these pictures are failing to satisfyChinese cinemagoers. Their tastes have diversified andthey are looking for films that provide a deeper reflection ofculture，” Zhu said.

　　Last year’s box office returns have also shown filmmakerswhat sorts of films resonate with Chinese audiences，Zhu said. The Hollywood films that performed best at thedomestic box office were those that included Chinese elements.

　　For example， Iron Man 3 took 768 million yuan ($124.06million)， ranking second at the Chinese box office. Fourminutes of additional footage， featuring Chinese actors FanBingbing and Wang Xueqi， was added to the Chinese releasein order to boost its popularity with local audiences.Another U.S. blockbuster， Pacific Rim， collected $114.32million at the Chinese box office， a considerably larger sumthan it earned in the United States. Similarly， much of Grav-China’s burgeoning box office has caught the attentionof many Hollywood filmmakers who have attempted tocash-in on the unstoppable growth of the Chinese market.Films such as Iron Man 3 and the upcoming Transformers4 often pander to local audiences by including Chineseelements. This explains why many Hollywood stars and directors，such as Leonardo DiCaprio， Nicole Kidman， MichaelBay and Alfonso Cuarón， have recently made trips to China，hoping to drum up business.

　　“Chinese faces and settings will definitely be highlightedin more Hollywood productions，” said Zhu.

　　But Chinese cinemagoers are hard to predict. Tiny Times，directed by Guo Jingming and based on his own novel，hit $79.12 million. The film courted controversy due to itssuperficial values and ostentatious displays of luxury. Yet， despiteits poor critical reception， teenagers across the countryflocked to cinemas to see the film. Guo said the success ofthe movie could be attributed to his millions of young fans.

　　A 2012 deal brokered between China and the UnitedStates has allowed Chinese cinemas to show more Hollywoodproductions each year， with the quota increased to34 films annually.

　　But more Hollywood films launching in China has led tointensified competition. Many Hollywood blockbusters haveto compete against each other in the Chinese market. Forinstance， last November， four Hollywood blockbusters， Thor：The Dark World， Gravity， Escape Plan and The Hunger Games：Catching Fire， all crowded into China’s cinemas one afteranother， at almost the same time.

　　Investing in film

　　More and more investors have been enticed by the substantialreturns offered by the booming film industry. In the pastthree years， the number of Chinese filmmaking companieshas grown rapidly， with statistics from the State Film Bureausuggesting that the total is now in excess of 1，000 companies.However， homegrown films are facing increasingly fiercecompetition from each other. Last year China produced 638films， of which no more than half reached theaters. Despiterising box office grosses， most domestic films and filmmakersstill failed to break even. Film producers have realizedthat they need to exercise market discipline. Thus， producershave cut down on redundant projects and focused theirattention on a smaller number of films.

　　China Film Group Corp. (CFGC)， a state-owned film giant，remains one of the largest corporations in the Chinesefilm industry. In 2013， the 25 films that CFGC produced orreleased earned over 20 million yuan ($3.3 million) each atthe domestic box office. CFGC took a total of 5.9 billion yuan($974.7 million)， nearly one third of last year’s total box officegain.

　　Yet many private companies have proven themselvesto be powerful players in the film industry. Huayi BrothersMedia Corp. (H. Brothers)， the largest domestic private filmproduction company， was China’s second highest box officeearner in 2013， collecting 3 billion yuan ($495.6 million).LeTV is the dark horse of the Chinese film industry. In thethree years since it began its business， LeTV has shot intothe top three private film companies， with nine films and 1billion yuan ($165 million) earned at the box office in 2013.Tiny Times was one of LeTV’s highest performing productions.

　　Zhang Zhao， President of LeTV， has pioneered the O2O(online to offline) business model since the company wasfounded. LeTV has developed into an industry heavyweightby releasing films both in theaters and via online video-ondemand.In Zhang’s opinion， the Chinese film market has not establisheda mature chain of production， from film productionto marketing.

　　“The Chinese film market is highly competitive. Every daythere are new film companies emerging and many goingbust. Filmmakers and investors are like gold miners. But veryfew of them really understand the market，” Zhang said toChina Newsweek. “We need to better understand our audiencesand better target our marketing.”

　　“Last year， all film companies felt the huge pressure ofmarket competition. Producers are likely to face equal levelsof stress this coming year，” Zhang said.

　　The cinematic gamble

　　For most domestic film companies， box office receipts aretheir major， if not their only source of revenue. Thus， everyfilm is a gamble for producers and investors.

　　Jessica Kam， a veteran Hong Kong film producer， said thissingle-profit model is chiefly responsible for the high risksinvolved in the Chinese film industry.

　　Kam has a wealth of Hollywood experience. Hollywoodfilm companies earn around 70 percent of their revenuefrom film merchandise and other distribution channels.Only 30 percent of revenue comes from the box office. Incontrast， box office receipts are responsible for as much as90 percent of Chinese film companies’ revenue， Kam toldEntgroup， a research company focusing on the Chineseentertainment industry， in a recent interview.

　　Furthermore， film release dates frequently change，often spoiling the plans of film companies. Thus， box officerevenue is always unpredictable. This reveals the immaturityof the Chinese film market， Kam said.

　　In Hollywood， many films with low box office earningshave the opportunity to bounce back via the distributionof Internet copyright and DVD sales， as well as toys andeven theme park rides. Hollywood producers protect theirbottom lines by developing various sideline projects andproducts to accompany their films.

　　For example， the U.S. film giant The Walt Disney Co. has9，000 employees working on film productions， but in itssubsidiary corporation Disney Consumer Products， thereare 40，000 employees creating sideline products for Disneyfilms， Kam said.

　　Many domestic film companies are beginning to realizethis problem and they have made efforts to diversify theirbusinesses and expand their range of film products. Forexample， on the heels of the September release of YoungDetective Dee： Rise of the Sea Dragon， the H. Brotherslaunched a mobile phone game in order to supplement thefilm’s box office revenue. The company is establishing anintegrated industry chain that includes films， distribution，sideline products and games.