A Blockbuster and Online Fees Juice China's Box Office

By Wayne Ma in Beijing and Erich Schwartzel in Los Angeles Features Dow Jones Newswires

China's box office is on the upswing, owing to accounting changes and one blockbuster success that signals the evolving tastes of the country's massive audience.

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Ticket sales for 2017 in China, the world's second-largest economy, rose by about 22% to 55.31 billion yuan ($8.5 billion) as of Saturday, according to Beijing-based film-research firm EntGroup. China is expected to announce official figures for 2017 in January.

The numbers suggest a bounceback from 2016, when the country's box-office take grew by less than 4% versus an average annual rate of 34% between 2011 and 2015. That growth was fueled by a boom in theater construction, which propelled China's ticket sales to the No. 2 spot behind North America.

But 2017's ticket-sales resurgence has been driven by two factors: the record-breaking success of Chinese action film "Wolf Warrior 2" and Chinese media regulators' decision to include fees from online-ticketing services in the box-office figures for the first time.

Excluding fees, which have an outsize impact in China as many more moviegoers buy tickets online, the country's box office was up by 15% as of Saturday, according to EntGroup. U.S. figures don't include such fees.

China's media regulator, the State Administration of Press, Publication, Radio, Film and Television, didn't respond to a request for comment. In April, it confirmed to The Wall Street Journal that the country's box-office figures now included the surcharges, without elaborating.

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Expected to become the world's No. 1 movie market in the next five years, China is a consideration when greenlighting movies with sizable budgets, studio executives say, especially as Hollywood faces stagnating domestic grosses.

The rare success of Chinese-made action film "Wolf Warrior 2" in the mainland, but nowhere else, occurred after Hollywood spent years trying and failing to co-produce a blockbuster with China that could play well both there and elsewhere, raising questions about efforts to co-produce films that succeed both in China and overseas, say analysts.

Hollywood's last major China-U.S. co-production, "The Great Wall," grossed more than $170 million in China but a disappointing $45 million in the U.S. in 2016.

"Wolf Warrior 2" shattered box-office records to become the highest-grossing film in China. It earned more than $870 million this past summer, putting it in a league with "Avatar" and "Star Wars: The Force Awakens," the two highest-grossing films in the U.S. The Chinese film, about a former Chinese special-forces soldier who fights off rebels and mercenaries in a fictional African country, earned less than $5 million overseas.

"Looking at these numbers, the argument could be made that the incredible earnings power of many Chinese films at home makes expanding their popularity to other parts of the world an unnecessary goal," said comScore media analyst Paul Dergarabedian.

Excluding fees and "Wolf Warrior 2," China's box-office take for the year would be up 3% as of Saturday, compared with a 3% decline in the U.S. to $10.94 billion over nearly the same period. U.S. box-office figures are most recently available as of Friday.

U.S. and Chinese authorities are renegotiating a 2012 agreement for importing foreign films to Chinese theaters. Hollywood studios want more titles allowed in each year and a higher percentage of the ticket sales flowing back to their coffers. Chinese authorities are careful to agree only to deals that give local films an advantage over Hollywood competition, studio executives have said.

Hollywood franchises once again dominated the foreign portion of the box office. Comcast Corp.'s Universal Pictures led with its "Fate of the Furious," which took the No. 2 spot after "Wolf Warrior 2" with more than $400 million in ticket sales, according to EntGroup. The eighth installment of the "Fast & Furious" franchise collected $226 million in North America, one of several major studio releases this year to outperform in China.

The "Furious" franchise hasn't been a known entity in China for as long as it has in other countries, which helped drive ticket sales, said Duncan Clark, president of international distribution at Universal. The first four installments were barely seen in China, he said, allowing the eighth to feel fresher than it might have elsewhere.

Grossing almost $200 million, the success of Indian import "Dangal," based on a true story of a father who coached his two daughters in competitive wrestling, sent a message to Hollywood that it isn't the only place that can churn out foreign hits for China, analysts said.

China's media regulator also surprised the major studios by letting in films for theatrical distribution that might not have been approved in the past, such as Fox's gritty superhero film "Logan" and Universal's Winston Churchill biopic "The Darkest Hour," the latter signaling that authorities are trying to appeal to more sophisticated audiences, an executive close to that studio said.

Write to Wayne Ma at wayne.ma@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com

(END) Dow Jones Newswires

December 31, 2017 07:14 ET (12:14 GMT)