China's New Year Box-Office Boom Hides a Twist

(Bloomberg Gadfly) -- When it comes to Hollywood movies, I refuse to watch unless they get ratings of at least 60 percent on Rotten Tomatoes. Call me stubborn and closed-minded, but it seems I'm representative of my people: China's moviegoers are becoming more discriminating.

That's why investors shouldn't get too excited by the surge in ticket sales this Lunar New Year. Box-office takings in mainland China jumped 52 percent from a year earlier to 5.4 billion yuan ($850 million) over the seven-day period, according to data provider Maoyan. More than 120 million moviegoers, a record, crammed into theaters to see three blockbuster domestic releases timed for the holiday: "Detective Chinatown II," "Monster Hunt II" and "Operation Red Sea," which each grossed more than 1 billion yuan.

Those ready to conclude that it's back to boom times for China's movie industry should stay for the late plot twist, though. Look more closely at the numbers and there's reason to doubt the durability of the improvement.

The figures are certainly mouthwatering. “Detective Chinatown 2,” an action-comedy produced by billionaire Wang Jianlin’s Wanda Pictures, took in 1.9 billion yuan, while “Monster Hunt 2,” a sequel to China’s box-office record holder for 2015, grossed 1.7 billion yuan. 

Both, in other words, generated more in ticket sales so far than the $263 million in takings chalked up by Hollywood smash "Black Panther," the Walt Disney Co. superhero movie that set a record for a February opening in the U.S.

China's New Year Box-Office Boom Hides a Twist

The trouble is that Chinese moviegoers are also quick to desert a film once word gets around that it's not up to scratch, and we can see this happening. After a week, Monster Hunt II has lost momentum and Operation Red Sea is edging up to be the top seller.

China's New Year Box-Office Boom Hides a Twist

The original Monster Hunt was the fourth-highest-grossing movie in Chinese history, with 2.7 billion yuan in box-office takings, so it was no surprise that the sequel was popular when it opened on Feb. 16. But it has been poorly reviewed, garnering a rating of only 5.2 on Douban, a Chinese equivalent of Rotten Tomatoes. By contrast, Operation Red Sea has a rave score of 8.5, while Detective Chinatown II gets 7.2.

It's just one more example of moviegoers becoming more discerning. In another, the critically acclaimed Indian film "Secret Superstar" has become a surprise hit in China. The tale of a Muslim teenage girl who dreams of becoming a famous singer has already made 746 million yuan in the nation, according to Maoyan, and is on its way to becoming one of the most profitable films ever.

IMAX China Holding Inc. jumped 10 percent when Hong Kong's stock market opened after the holiday on Tuesday, while Beijing Enlight Media Co., which produced and distributed Monster Hunt II, soared as much as 8.4 percent as mainland exchanges resumed on Thursday.

China's New Year Box-Office Boom Hides a Twist

The headline new year box-office takings are certainly a relief after mediocre growth in the past two years drove down shares of movie-related companies. Still, Monster Hunt's short-lived ascendancy shows that success can't be taken for granted.

The moral of the story? China has become a society of solid middle-class consumers who care about quality. Make good films, and they will come.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Shuli Ren is a Bloomberg Gadfly columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.

To contact the author of this story: Shuli Ren in Hong Kong at sren38@bloomberg.net.

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