Why Walt Disney, IMAX, and DreamWorks Are Working to Win in China

By Markets Fool.com

The Chinese movie and media industry is exploding, with box office revenues up 3,500% in the last decade. It's no wonder companieslike WaltDisneyare making so much revenue there, with plans to plant their characters and products there even further. Here are a few incredible facts to show just how important Chinese media industry growth is.

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  • Chinese box office revenues have grown 30% per year for the past decade.
  • There are about 14 new movie screens added in China each day. The total number of movie screens in China should surpass that of the U.S. by 2020.
  • The Chinese movie industry is expected to reach $6.5 billion in 2017, double what it was in 2012.
  • By 2017, Chinese box office revenues are expected surpass those of the U.S, and double them by 2025.

An expanding middle class, especially an upper middle class, is a bullish sign for leisure and entertainment companies that depend on Chinese families having discretionary income they can spend at the movies or on media-themed products. Due to the sheer size of the population in China and how many citizens are moving into that middle class, the media industry there will likely continue this incredible growth for years to come. And it's not just box office growth, but spending on media products and even theme park travel as well. Here are three companies seeking major gains on this market now.

3 ways to play this booming industry

Photo: Disney

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1. Walt Disney
Disney has been one company already making huge gains early in China. Its worldwide brand appeal has not been lost on China, and its movies have already done well there. Disney's most recent hit was Cinderella, which topped the Chinese box office during its opening weekend and made over $53 million there in its first 10 days. (Since its March 13 release, Cinderella has made $167 million at the U.S. box office and $230 million in foreign theaters.)

But China is not just a market for Disney's movies. Instead, Disney is making a major bet on the long term of being a major supporter of the industry there, even co-creating a program in 2011 with the Chinese government to spur more growth in animation talent inthecountry.

Now, Disney is making its biggest bet on Mainland China yet with a new Disney Resort slated to open near Shanghai in early 2016.Disneyland Hong Kong has alreadybeen a success for thecompany,with growingattendance andrecent talk of the park. The new park on Mainland China is expected to have more guests in its first year (25 million) than Disney's Magic Kingdom in Orlando (less than 20 million).

Logo: Oriental DreamWorks

2. DreamWorks Animation
While DreamWorks Animation struggles in the U.S., thecompany could be looking at a hugelysuccessful joint venture in China, of which itowns a 45% stake. DreamWorks has partnered with Shanghai Media Group and three other local entertainment companies to createOriental Dreamworks,a joint venture with multiple Chinese partners.

The Chinese venture already has important projects in development such asKung Fu Panda 3, as well as a theme-park-like set of studios and attractions called DreamCenter, also outside of Shanghai, likely to open in 2017.

DreamWorks Animation has not had the most successful few years in the U.S., and major writedowns for under-performing films have left the company needing to cut headcount and production, which it did earlier this year, letting 500 employees go and releasing just one movie in 2015, planning for two movies a year after that. While the company's operations are strained now, China could be a bright spot for the company as it continues to invest in the high-growth market there for future returns.

3. IMAX
One company that is not on the content creation side but rather the content viewing side is IMAX . The giant movie screens that have made IMAX famous have become a hit in China. "In China, we generate 15%-20% of a film's box office from less than 1% of its screens," said IMAX CEO Richard Gelfond during a recent interview with Forbes.

Imax's global expansion ramped up in 2013, and it now has more than 930 theaters in over 60 countries, 25% of which are in China. And the company is working to increase its presence in China, including its sale last year of a 20% stake of Imax China to a Chinese private equity firm for $80 million. The move was aimed athelping Imax continue its China expansion and bolster government and industry relationships there.

Imax has also been busy making other deals in China, including a deal with Dalian Wanda Group, a booming media and real estate company, to create an IMAX research center just for researching and enhancing the technology and performance of the giant-screen technology.Imax has inked another deal with the same group to build 210 large-format theaters in China by 2021.

It won't be easy, but it'll be worth it
It's not going to be an easy task of just dropping some movies, screens, and theme parks into China and waiting for returns. These three companies look promising as Chinese media market winners due to the fact that each of them has made such significant investments into the country, along with having important partnerships to navigate local market needs and legal restrictions.

For Disney, DreamWorks, and IMAX, these investments are already paying off and it looks like for investors in these companies, the major boom from these operations is still yet to come.

The article Why Walt Disney, IMAX, and DreamWorks Are Working to Win in China originally appeared on Fool.com.

Bradley Seth McNew owns shares of Walt Disney. The Motley Fool recommends DreamWorks Animation, Imax, and Walt Disney. The Motley Fool owns shares of Imax and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.