What happens when the Chinese Film Market Overtakes the United States?

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Photo Courtesy of the Associated Press | Ng Han Guan

The population in China is 1.4 billion people.  The population in India is 1.4 billion people.  The population in the United States of America is nearly 329 million people.  With developing and growing economies in China and India, not to mention the communist versus democratic versus representative governments and economies in each country, it was arguably only a matter of time that the population in China would pass the United States in annual box office spending

According to PricewaterhouseCoopers (PwC), for 2019 the U.S. box office is likely to reach $12.11 billion in comparison to $11.05 billion in China.  Those numbers are expected to grow in 2020, with the United States and China switching places as the leader in box office spending.  There are three possible consequences/reactions to the Chinese consumer potentially outspending the American consumer in 2020 and beyond. 

The New [Continued] Frontier

The truth is, Netflix and other streamers and studios have tried to break into the Chinese market for years.  It is a difficult dealmaking situation to navigate because of the communist government and its controls over the consumer, content, and distribution.  That control affects production and distribution both ways (as seen by Google/YouTube employees who did not appreciate the censorship controls parent company Alphabet, Inc. was allowing Chinese officials to require/implement) and for actually gaining traction with the Chinese consumer.  Chinese consumers cannot currently be reached without the Chinese government’s blessing.  India, by comparison, has been much more accommodating with their love for content through Bollywood.  The aforementioned does not mention another key component in this, specifically that existing entertainment companies in China like Tencent are favored by the Chinese government.   

Needless to say, as spending and profits grow in the East, entertainment companies in the West will continue their pursuit of reaching consumers in that part of the world.

Influence

Similarly, as profits grow in the East, entertainment companies in West will want to and possibly be influenced to create and distribute local and non-American based content.  There is proof that this is already happening with Netflix’s investment in India, Google’s/YouTube’s attempts at breaking into the Chinese market, and Comcast’s purchase of Sky in the United Kingdom.  Interestingly, and importantly, foreign-based content will likely also be available to American consumers to consume, particularly where streamers are concerned.    

Headquarters

American and Japanese companies in entertainment and beyond have for years utilized each other’s geography to invest and have local headquarters (Sony is the most obvious example).  American companies like studio Lionsgate, NBCUniversal, and others have international offices in London.  If all is fair in love and war, American entertainment companies would be wise to get boots on the ground in mainland China to begin developing relationships and implementing the strategy for dealmaking.  Chinese investment in entertainment has already occurred in the United States to some extent, which makes sense for an open and capitalist economy. It is expected. History has shown that content can have an effect on relationships between countries and consumers, so in addition to more content there could also be some broader dealmaking.    

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