Chinese Moviegoers Prefer Local Films to Hollywood's

     A recent article on Bloomberg Business Week titled “Chinese Moviegoers Prefer Local Films to Hollywood's” discusses three different market supply curves: theaters, local films, and foreign films.  As one could guess, theaters are compliments to both local and foreign films.  However, local and foreign films are substitutes.  The article noted that since 2008 theaters supplied to rural areas has tripled, hence shifting the market supply curve for theaters to the right.  Was this a smart move?  It appears so.  In 2013 alone there was a 45.8 percent increase in revenue and box office receipts.  This would mean the demand curve also shifted to the right for theaters.  The question then to ask would be, “Which market capitalized on this demand increase, local or foreign films?”  Of the 45.8 revenue increase in 2013, 42 percent was in local films while 3.8 percent was in foreign films. 
     Why did local films capitalize on so much of the new demand?  The author is underneath the opinion that the demand shift for local films is due in part to rural Chinese citizens preferring to view local films rather than foreign films.  This makes sense since local film makers understand their culture better than foreigners and can capitalize more on Chinese humor and culture while making their movies.  They also don’t have to deal with language barriers as do foreign films.  The author also indicates that any foreign films shown in China have to be approved by Chinese officials.  This could become a lengthy process and could create additional costs to Hollywood.  This bias by Chinese officials may also result in poorer quality movie than anticipated and could create lower demand for foreign films.
     The first sentence of the article also mentions that new regulation had taken effect in China that Chinese officials would now accept more foreign films into their country than before.  This new regulation has the potential of shifting the supply curve to the right for foreign films.  The question to ask would be, “Should Hollywood take advantage of this new regulation?”  To help answer that question Hollywood should find out if there would be a sufficient enough shift in the demand curve for foreign films to justify supplying more movies, or if they would supply more at a lower price.  With that being said, “What do you think?” 
Source: Palmeri, Christopher. Chinese Moviegoers Prefer Local Films to Hollywood’s. Bloomberg Business Week. Oct. 24, 2013. http://www.businessweek.com/articles/2013-10-24/chinese-moviegoers-prefer-local-films-to-hollywoods.


Dave Tufte said...

Paulo: 100/100

Paulo: what does "underneath the opinion" mean?

I think there are two things that Hollywood needs to think about. One is getting their existing movies and greenlighted projects into Chinese theaters. The second is whether to create more movies targeted primarily at the Chinese market.

I heard over the summer that Pacific Rim was intentionally targeted at the Asian market, and in particular the market in China.

Bomber said...

I agree that the United States should try to take advantage of growth in the Chinese film industry. According to The Guardian, the Chinese film market is already the 2nd largest in the world, and looks to pass the United States by 2020. "The nation is due to build 25,000 cinema screens over the next five years to cope with demand from an increasingly wealthy population." Currently, 34 foreign films are released each year, still up 20% from last year. If these growth facts are accurate, the United States should find ways to connect with Chinese culture in future films.

Emma182 said...

As an avid moviegoer this article instantly caught my eye. First, I agree with Paulo’s assessment of the new regulation shifting the supply curve to the right for foreign films in China. Second, how would Hollywood “supply more [movies] at a lower price” if there is a regulation of only allowing 34 films into the country?

Dave Tufte said...

Emma182: 50/50
Bomber: 50/50

Bomber: Hmmm. The article doesn't say much about profitability of getting movies into China. So why are you so sure this is a good idea?

Emma182: It doesn't say that there's a fixed limit of 34 films per year. Also, I tend to think if you took the 34 biggest films in the U.S. each year, that you'd cover over 90% of the market. So this doesn't seem to critical to me.

Emma182 said...

In the main article it states, “A year ago the Chinese government raised the number of foreign films allowed into the country to 34 from 20 per year.” I think a key overlook is the idea that only 34 “foreign” films are allowed. This encompuses more than American made films. Furthermore, according to TimeWorld, “ ‘Competition has never been tougher,’ … brand new American-made films [sell] for five RMB apiece (the equivalent of about 60 cents) on Huaihai Street in central Shanghai”. With this in mind, why should the U.S target more films to the chinese when they can walk down the street and buy a new pirated movie for 60 cents?


Dave Tufte said...

Emma182: 44/50 (chinese needs to be capitalized, "encompasses" not "encompuses")

I'm not sure that a manager would agree with either position in this post.

Isn't 34 openings better than 20, since there was foreign competition both before and after?

And, yes, the pirating is unfortunate, but are you going to not sell the product for a profit when you can just because someone is taking some on the side? That sounds like "cutting off your nose to spite your face".