Citi Research just dropped a huge note on the future of China’s internet, commerce and media markets.
A key insight is that the Chinese moveie market is set to be the world’s biggest in the next couple of years, thanks to incredible growth in the last decade.
More and more Chinese people are becoming big fans of going to the movies, and in a market as huge as China’s that means lots of money, and big growth.
Between 2003-2010, the peak years of double figure growth for the country, box office receipts had compound annual growth of about 40%. That has now slowed to 29%, but the boom in Chinese people going to the movies means that it will become the biggest market for films (in terms of box office receipts) by 2017.
Films in China are expected to make about RMB632 billion (£6.5 billion; $US10 billion) per year by 2017. This will put it right alongside the US as joint biggest market in the world, and as growth continues, China will take the lead.
Here’s Citi’s chart:
Compare that to the pretty stagnant box office numbers in the USA:
Box office receipts are now mainly going up because of the booming desire for cinemas in Tier 2 cities, smaller cities like Nanjing, Ningbo and Jinan. The cities are not as big or wealthy as places like Shanghai and Beijing, but are experiencing quicker growth. Jinan, for example, grew it’s GDP by 12.7% last year.
As these cities grow, cinemas are being built at a higher rate, helping fuel the box office boom. Citi’s chart shows this:
Earlier this month, Business Insider spoke to Chinese entrepreneur and media producer Johnny Hon, who sees the number of Chinese people now going to the cinema as an investment opportunity for Westerners.
Hon’s projections for the Chinese box office are a little more optimistic than Citi’s and he says that “in half a year China will overtake the US as number one in the world.” He thinks that Western investment could help both the West and China in making better films which could attract crowds around the world.
“We may be able to make movies but we don’t necessarily have the right expertise or the special effects experience like in Hollywood to push entertainment to the next level. That’s why we need Western companies to come over and partner with us to make worldwide hits.” Hon said.
Johnny Hon’s argument has some weight given that Chinese movies make up more than half of box office sales already. If Western companies did invest in Chinese movies, it seems like the rewards could be pretty big.
Here’s Citi again: