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China's Film Industry Grinds to a Halt Amid Coronavirus Epidemic

Jan 29, 2020

 By Patrick Brzesk, Pamela McClintock   January 28, 2020

Global box office may take a $1 billion-plus hit as the world's second-biggest market shutters 70,000 screens while grappling to contain the outbreak.

Despite a fraught 2019 at the North American box office, when revenue slipped 4 percent to $11.4 billion, the film business could take solace in the fact that worldwide grosses hit an all-time high of $42.5 billion last year. The global uptick was due to a spike in key markets, with China turning in $9.2 billion. Now, in the wake of a coronavirus outbreak that has infected thousands and claimed more than 100 lives in China, the movie industry is grappling with the unthinkable: Nearly every cinema in the country, totaling about 70,000 screens, has shut down.

As concerns mount that Beijing's efforts to contain the virus are falling short, there is growing awareness that the economic damage wrought by the epidemic could spread far beyond China's borders, while potentially driving down 2020 global box office revenue by $1 billion to $2 billion. And with public activity in the world's most populous nation — controlled by the Xi Jinping-run Communist Party — grinding to a halt, other growing entertainment sectors (stage theater, television production, theme parks and esports) also are taking a hit. In its Jan. 28 earnings call, Apple CEO Tim Cook cited "wider than usual revenue range" during the next quarter "due to greater uncertainty" amid the outbreak.

So far, most of the movie industry damage has been borne by Chinese companies. But Imax, which operates more than 680 theaters in China, is one North American film entity reeling alongside its Middle Kingdom peers. Shares in the large-format theater company's China subsidiary, which is listed in Hong Kong, were down 17.5 percent on Jan. 28, compared with 12 days earlier. "Their first quarter is totally blown up now," notes analyst Eric Handler. "In the first quarter of last year, half of all revenue came from the Chinese New Year week."

As public health experts have noted, the timing of the coronavirus epidemic — on the eve of China's Lunar New Year holiday, as hundreds of millions of people began fanning out across the country to visit their hometowns — was an epidemiologist's worst nightmare. It also couldn't have come at a worse time for the local film industry. Over the past decade, mass moviegoing has emerged as China's pastime of choice during the weeklong holiday, known as Spring Festival.

In February 2019, China set a record for the most box office revenue ever generated by one country in a single month, eclipsing the $1.6 billion in ticket sales there a year earlier. Both totals were vastly more than North America's best-ever month in July 2011 ($1.4 billion, not adjusted for inflation). In 2019, the Chinese New Year also served as the launchpad for the country's first bona fide sci-fi blockbuster, The Wandering Earth, which opened to $298 million and ultimately earned $690 million. Although this year's slate of holiday tentpoles was thought to be stronger than ever, Chinese film executives are contending with the possibility that total box office in late January through February will be next to nil.

A man wears a protective mask as he walks in a large empty shopping area that would usually be busy during the Chinese New Year and Spring Festival holiday on January 28, 2020 in Beijing, China.

As the severity of the coronavirus crisis became apparent Jan. 20, medical officials began warning the Chinese populace to avoid congregating in crowded places. Realizing that such guidance likely applied to cinemas, China's leading studios said Jan. 23 that they would indefinitely postpone the release of their six biggest Lunar New Year films: Wanda's Detective Chinatown 3, Huanxi Media's comedy sequel Lost in Russia, the Peter Chan sports drama Leap, Dante Lam's $90 million action flick The Rescue, Jackie Chan's Vanguard and the family animation Boonie Bears: The Wild Life — all of which had been scheduled to storm the country Jan. 25.

Those cinemas that managed to stay open over the Jan. 24-26 weekend turned in a combined $2 million, according to local box office consultancy Artisan Gateway. That compares with $507 million generated over the first three days of last year's break — a holiday record that, before the outbreak, most analysts expected would be smashed this year. Notes Handler: "Who knows how long this epidemic will last? China is essentially quarantining itself. You can't fault the country."

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