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China may let more foreign films shine on silver screen

Cinema glut shifts focus to content, added value as box-office gains slow

Cinema owner Wanda Group is making acquisitions in Hollywood.

DALIAN, China -- The central government may raise the annual cap on foreign movies shown at theaters as domestic filmmakers hone the appeal of their content and seek more international collaborations to combat a damaging cinema glut.

$1 movie tickets

Box-office revenue in China grew only 3.7% in 2016 to 45.51 billion yuan ($6.57 billion), the slimmest increase in over a decade. The slowdown follows soaring revenue gains of 20-50% yearly since 2005, research company EntGroup said.

But moviegoing remains popular in China, as the slowdown resulted mainly from a ticket-price discount war amid intense competition among ubiquitous cinemas. The average per-customer price declined 4.9% to 33.1 yuan last year while the headcount rose 9% to 1.37 billion.

"With tickets so cheap, watching television at home with an air conditioner on would cost more," joked a 29-year-old doctor in Shenyang, Liaoning Province. The doctor said five cinemas have opened within a 10-minute walk from his home over the past few years, and that harsh competition has slashed ticket prices online to less than 10 yuan -- or $1.44.

Many Chinese companies and commercial facilities rode the sharp growth in the market by opening cinemas. Over the five years through 2015, theater screens quintupled in China to about 31,000 -- nine times as many as in Japan.

Cinema operators face no price restrictions in China, so discounting heated up in large cities. In smaller localities, where income levels are lower, tickets must remain affordable to draw customers.

Expectations have dimmed for China replacing North America as the biggest cinema market as soon as this year. Box-office revenue even fell on the year in some months, after a distributor was found in March to be padding sales numbers by purchasing tickets on its own, leading to stricter oversight by authorities.

Jazz it up

Industry giants are responding to the slowdown. Conglomerate Wanda Group, which produces films and operates about 350 cinemas across China, is making acquisitions in Hollywood. The company seeks synergies, such as by showing its films made with U.S. partners only at Wanda-owned cinemas.

South Korean cinema chain CJ CGV is equipping more theaters with the 4DX system, which moves seats based on scenes, part of the company's effort to raise prices.

Alibaba Group Holding unit Alibaba Pictures Group and Huayi Brothers Media are scrambling for rights to produce films based on popular overseas animes and dramas. They also look to boost collaboration with technical talent from Hollywood to produce more blockbusters.

Overseas films are the backbone of the industry, and U.S. movies account for nearly half of the 10 top-grossing titles in China for 2016. Flashy action movies are popular in China, so Hollywood titles often rank high.

The government's annual cap of 34 foreign titles is designed to protect the domestic filmmaking industry. But this limit could be eased given the stronger appeal of Chinese movies, like the 2016 hit "The Mermaid."

The selection of foreign titles is influenced heavily by politics. The Japanese movie "Your Name" was released in China just three months after its debut in Japan. But this apparently became possible because South Korean movies were blocked as Beijing sought to retaliate indirectly against Seoul's decision to deploy the U.S. Terminal High Altitude Area Defense missile defense system.

Wanda Chairman Wang Jianlin said China's movie market will regain double-digit growth in 2017. But the cinema glut will take time to resolve. The market's transition from high growth to steady gains will test industry players.

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