There are more than 400 giant screens in the mainland. The market distribution is close to the "28th" and is gradually showing positive results

In 2010, when Avatar was released, the "giant screen market" in mainland China consisted of only 14 IMAX screens. In the best six years of China's films, mainland giant screen theaters have also been rushing forward, the number of theaters has increased to 400, and the competitive landscape has become a competition between IMAX and China giant screen.

recently, China Film Corporation Limited publicly disclosed its A-share stock prospectus for the first time. In this material, the theater giant screen market in China's film industry provides a glimpse into the truth.

According to the prospectus, as of the end of 2014, there were 78 giant screens in China across the country, and China Film Corporation directly owned 41 giant screen systems, of which 12 giant screen systems were sold in 2014. Previously, Chen Jingmin, general manager of China Film Digital Giant Screen (Beijing) Co., Ltd., said in an interview with reporters,"As of the end of 2015, the number of giant screen screens in China has exceeded 100."

At the same time, IMAX China, which has been listed on Hong Kong stocks, released its 2016 mid-year report. During the earnings reporting period, IMAX China recorded a net profit of US$17.742 million, turning a deficit into a profit. In addition, IMAX China announced that in the first half of this year, the number of IMAX theaters in mainland China reached 306, a year-on-year increase of 38.5%.

In 2010, when Avatar was released, the "giant screen market" in mainland China consisted of only 14 IMAX screens. In the best six years of China's films, mainland giant screen theaters have also been rushing forward, the number of theaters has increased to 400, and the competitive landscape has become a competition between IMAX and China giant screen.

Not just selling screens

In 2011, China Film Corporation cooperated with scientific research institutions to develop the "China Giant Screen System." Fu Ruoqing, then deputy general manager of China Film Group, said at the time,"IMAX's monopoly has been broken, and 'China Giant Screen' is our national giant screen brand."

However, in actual operation, China's giant screen is only a small piece of China Film Corporation's grand landscape, belonging to the film and television service business of China Film and Television Paper Production, Film Distribution, Film Screening and Film and Television Services.

According to the prospectus, China Film's total operating income in 2014 was 5.895 billion yuan, of which the sales revenue of China Giant Screen Systems was 25.0632 million yuan, accounting for only 0.43% of the total revenue. Under the sub-sector of film and television services, China's giant screen is also a "small man", contributing only 5.32% of the sector's revenue. However, the year-on-year growth rate of 113.82%, is one of the fastest-growing businesses among China Film Corporation's various business lines.

Compared with China's giant screen's profit model, IMAX China has more possibilities with giant screen as its core.

At present, IMAX China's business can be divided into theater business and film business. In addition to the sales and maintenance of IMAX theater systems, the theater business also includes the box office share of IMAX theaters; the film business refers to IMAX China converting films into IMAX format and participating in distribution through DMR algorithm.

It is worth noting that, as an equipment supplier, IMAX China can intervene in the box office division process due to the innovation of its business model. In order to reduce the film conversion cost of IMAX films of more than US$100,000, IMAX China proposed the strategy of "free conversion and commission to get 1/8 of the box office"; the same is true for theaters, which upgraded the movie theater by prepaying US$150,000 in renovation fees. The price is to pay 20% of the IMAX movie box office in exchange, which greatly reduces the original one-time investment cost of more than one million US dollars.

Judging from the financial report, this strategy has strongly supported IMAX China's profits. In the first half of 2016, IMAX's China theater business revenue was US$39.14 million, an increase of 36%, accounting for 70% of total revenue. Among them, the film's revenue share was US$16.767 million, which was higher than the US$16.257 million generated by IMAX system sales, and the gross profit margin was an astonishing 62.3%.

The development of the giant screen market is accelerating

and aside the differences in business, China Film and IMAX China have stepped up their efforts to develop the giant screen system market.

Of the 4.66 billion yuan fundraising plan listed in China Film's prospectus, 370 million yuan will be used to promote the China Giant Screen System-it plans to spend 350 million yuan to purchase 100 sets of China Giant Screen Systems within three years. North China and East China will launch 23 sets and 20 sets respectively, becoming key investment areas. South China, where Guangzhou and Shenzhen are located, only plans to launch 9 sets of giant curtain systems, ranks last together with the Northwest region.

IMAX China is equally ambitious for the mainland market. At the end of 2013, IMAX CEO Richard. Gelfang said that it would "significantly expand" in China and planned to increase the number of domestic IMAX screens from 150 at that time to 400 within five years.

Now it seems that five years is a bit conservative, and the number of IMAX theaters has doubled in two and a half years. IMAX's expansion is even accelerating. According to financial reports, IMAX China plans to increase its installation target for 2016 from the original 100 to 115.

It is worth noting that although the market seems to be booming, the hidden concerns of the entire film market have emerged. The first to bear the brunt is the prediction that "China film market may have peaked."

In the first half of 2016, the box office of China films was 24.582 billion yuan, with a growth rate of 21.38% reaching a five-year low. In the second quarter that just passed, the box office showed a year-on-year decline. What followed was that the growth rates of several major film companies also slowed down simultaneously. Among them, Huayi Brothers even issued a forecast that net profit would fall by 25% to 50%.

For a long time, due to the imperfect domestic intellectual property mechanism, box office revenue is almost the only source of income for China's film market. China Film Corporation stated in its prospectus that "more than 90% of the revenue of my country's film industry comes from box office revenue generated by film screenings, and the revenue from copyright operating markets such as audio-visual products, TV broadcasting, online on-demand, advertising and derivative sales is relatively less."

Once the expectation of continued rapid box office growth is no longer expected, the investment of nearly 10 million yuan in IMAX theaters and the cost of more than 2 million yuan in China's giant screens will no longer be an easily acceptable number for theaters. According to the prospectus of China Film Corporation, as of 2013, there were only 679 theaters with annual box office exceeding 10 million nationwide, accounting for only 1/3 of the number of theaters in the country. This group of theaters contributed 66.2% of the total box office that year, and this proportion has a rising trend.

However, as the era when the movie screen market is booming slowly passes, the market distribution is getting closer to the "28 Rule", which may be a good thing for the giant screen market. Market observers said,"By introducing a giant screen system to create differentiation and establish a relatively high-end image of the theater, it is currently a relatively mature way and has high audience recognition."

Editor: Nancy