ArticleBizTime:Moives=Luxury?
Last week,the State Council outlined a set of measures, including financial incentives for cinema developers, that SHOULD accelerate the development of the film industry in China. That should spell good news for cinemas and film-makers. But what audiences care about most is ticket prices, and whether new policies will end the price hike.
The price for a movie ticket hit a new high last month in Shanghai with IMAX tickets fetching 150 yuan. But that is just the base price in a city with only one commercial IMAX screen. And it's not only IMAX tickets. Tickets for "A Simple Noodle Story", the New Year picture directed by Zhang Yimou,sold for 100 yuan. And on the peak days of, Christmas Eve and New Year's Eve, prices rose to 120 yuan in some cinemas. Going to the cinema is becoming a luxury few can afford.
Tickets on sale at most theaters are expensive. We spent 40-50 yuan on a ticket 7 or 8 years ago. But now, seeing a blockbuster can cost more than a hundred yuan and even a less popular movie will cost at least 60 yuan.
Tickets are very expensive. 50 yuan would be OK. But one hundred yuan for a ticket is way too high.
Ticket prices rose rapidly 8 years ago when the central government approved the establishment of cinema chains. Before that, all movie tickets were priced under the guidance of the government.Although most Chinese cinemas started a Tuesday half-price ticket offer in 2006, which originally contributed to an average price DECREASE, it's increased since 2007. Movie-goers in China pay more than those in other countries with higher monthly salaries. In China, the price for a movie ticket equals 1/40 of an urban citizen's average monthly income. Meanwhile, in the U.S., South Korea and India, that ratio of ticket price to monthly income is at least three times lower. So theatres in China are selling some of the most expensive movie tickets in the world.
Ticket prices have increased because the whole operation model of this country's film industry has changed. But within 8 years, domestic movie ticket prices have run ahead of the worldwide range. Why is the price on the brink of exceeding many people's affordability?
First we need to know how a ticket price is decided. Unlike the situation 8 years ago, it's now film makers, cinema owners and distribution companies that sit together and price movie tickets. Xu Pengle, former vice president of Shanghai Film Group, tells us more.
First of all, film makers and distribution companies set a base price in their contract with a theatre chain, let's say 30 yuan for a big movie like "Confucius". Cinema owners then price the ticket as they want, maybe 50 to 60 yuan. Any price above 30 yuan is ok.
Only cinemas recognized by the film makers can set their ticket prices above the base price. But film makers don't make as much money as the cinemas. As Wu Hehu, deputy manager of Shanghai United Circuit told us, the individual cinema usually gets 50% of the box-office takings, while film makers get 40%. The other 10% goes to the cinema chain which licenses the cinema to show the film.
Wu Hehu, Deputy Manager of SH United
Circuit.
The percentage may fluctuate according to different movies. But no matter how much it changes, the biggest percentage always goes to the cinemas themselves, because they are the industry terminals where the product is sold to the customers. The second largest percentage always goes to the film makers.
So film makers take a large share of the box-office revenue. And in China, the box-office accounts for 90% of a film maker's income. So the film maker relies heavily on the box office.
In overseas markets, box-office revenue only accounts for 20-30 percent of investment return, while audio CDs and copyright sold to TV stations account for 70%.
If you take the domestic blockbuster "The Founding of a Republic" as an example...It's revenue totalled 400 million yuan, making it the best-seller for Shanghai box offices last year. But, the film's original soundtrack only generated several million yuan. Only successful ticket sales can generate the investment film makers need for upcoming film productions.
Because of limited investment, many film makers cannot get the revenue they expect. Once they suffer a loss, it can be much more difficult for them to move on and shoot their next movie.
Besides the film makers, cinemas also have THEIR reasons for charging high prices. First, it's rental costs. Cinema mangers complain that rental prices in shopping malls are too high. In some popular business and commercial areas, the annual rent for a cinema can be as much as 70 to 100 million yuan. Normally in Shanghai, the rental fee eats some 10 percent of box-office revenue. In a market like the U.S., revenue is 10 times that of China. But the annual rental fee for a cinema in New York is about 1.6 million dollars, or 10 million yuan, the same price as in downtown Shanghai. That means movie theatres in China are shouldering as much as 10 times more rent than those in the U.S.
In the past, we always said that building cinemas you will see a deficit in the first year, break-even in the second year, and turn to profit in the third year. But now, as the rent has become higher, it takes longer to get a return on your investment.
According to some recent reports by local business
newspapers, some are having to wait as long as five years to break even, which
is TWICE the time Lu Jiazheng said it used to be. While rental fees are
hindering development, China also lacks screens. The U.S. has more than 40,000,
that's ten times more than China, serving only a quarter of China's population.
The main reason is that the capacity of the Chinese film industry is too small compared with the potential consumer population.
As the industry terminal, cinemas are shifting their
high rental costs onto their customers. And they can because THEY control ticket
pricing above the base price. As consumables, ticket prices in China are under
no supervision or limit. Industry insiders say it's hard for theaters to set a
fixed price that appeals to everyone.
Pricing Bureaus are not responsible for checking the prices of movie tickets. We can only follow the supply and demand of the market, and set prices that most people in society can afford.
Xu Pengle, Former Vice President of Shanghai Film
Studio:
No one is supervising ticket prices. They should float with the market.
Theatre managers say they don't have a precise formula
for calculation of ticket prices. Usually, they set the price according to the
director, cast and visual effects of a film.
For "A Simple Noodle Story", for example, we thought it would be very popular with audiences because of its director, Zhang Yimou. So we set the price a little bit higher.
And it doesn't end there. The same film shown by the same cinema chain could cost more at one cinema than another based on what time of year it is. Some choose to increase prices over the holidays, for example. Again, it comes down to lack of price supervision.
So, the price of a ticket has reached a new high for three main reasons: movie makers' reliance on the box office, high rents and a lack of price supervision. Does it mean audiences will continually have to pay more? And can these prices be sustained?
Movie ticket prices have gradually gone up since the whole industry was commercialized. Is there any way cinemas and film makers can modify their ticket prices? How much longer will people have to pay so much money for the simple pleasure of going to the cinema?
Statistics show that although revenue has gone up, attendance has been shrinking. Three decades ago, a record annual attendance of nearly 30 billion was set. But today a fraction of that...only 70 million a year.. go to the cinema. Now, more and more young people are watching their screen idols elsewhere.
I watch nearly 50 movies a year. But I may watch about 5 or 10 of them at the cinema. I like to download movies from the internet. That's cheaper.
Besides watching movies on-line, it's also much cheaper to buy DVDs, including genuine releases, in China, if you're prepared to wait to see a new release. A ticket costs at least 5 times more than a DVD. In America, DVDs are more expensive than in China while tickets are more affordable.
In America, the average ticket price is around 7 dollars, while a DVD costs 20. It can be cheaper for a couple to stay at home and watch a DVD. Although the cost may be a little more than two tickets, they at least save money on popcorn and parking fees.
The alternatives available may help drag ticket prices down in China. We know that more screens could also help. That's why cinemas are being built fast. 6 to 7 years ago, there were about 1 thousand screens nationwide, but today there are 5,000. An average 500 new screens are open for business every year, nearly 2 screens a day. It SHOULD have an important effect on cooling ticket prices.
I estimate that in the next 8-10 years, we'll have more screens in more districts, and even communities, and ticket prices will THEN be more reasonable. Going to watch a movie in a theatre, will be as normal as eating a burger or having a cup of coffee.
The building of screens is happening faster in Shanghai than anywhere else in the country. I think that in 3 to 5 years, supply will meet demand. The market will be saturated.
Experts like Lu tell us theatres with lower operational costs, charging less for a ticket, were established in southwest Shanghai a year ago. Take Qing Chun Cinema for example. Seeing the newly released Confucius here costs 70 yuan. Meanwhile some tickets downtown are much more. Yonghua Cinema City is charging 150 yuan, for example.
Some newly established cinema chains are offering cheaper options like the theater in Xuhui Chang Qiao district. They are using the specific community culture there to attract bigger audiences while keeping ticket prices low. In addition, the rental fees they pay are relatively low.
Cinemas like Qing Chun offer discounts to students, teachers and military personnel, on top of their already low prices. They also offer 50 percent discounts on Tuesdays and Wednesdays. Such generous concessions are rarely seen in downtown theatres. The best they might offer is student discounts for specific showings, and half price tickets on Tuesdays. The manager of Qing Chun cinema told us WHY he's put the discounts in place.
The rent for our cinema is only 30 percent of downtown cinemas. It means we can keep our prices down. We charge our members 30 yuan and are able to make a profit. We never aim to achieve an excess profit on our balance sheet.
Keeping prices low, not only benefits the cinema, but
the people living in the local community. Wang says they did some research last
year. The population in Tianlin district is about 250 thousand. And in 2009,
their attendance was 300 thousand. They drew the conclusion that under their
pricing system, everyone in the district got to watch at least one movie last
year. But elsewhere the story's very different. Statistics from the State
Administration of Radio, Film and Television,show the average Chinese person
goes to the cinema once every four years. Qing Chun isn't the only one trying
this business model, but they were one of the first. Qing Chun cinema chain
developed in Zhe Jiang, before its network spread to many other provinces. Ten
years ago, they developed the cinema supermarket concept, giving more people
access to films.
In the late 1990s, the whole film industry was affected by pirated DVDs and video CDs. Traditional cinemas were very out of touch. Audiences had to wait a long time to watch new releases. At that time our group set up the first cinema in mainland China with more than 4 screens; it had 14.
Wang added that in 5 years, the chain will have 50 cinemas across the country. And in the next 2 to 3 years, it will have three cinemas in Shanghai, all operated in the same way. Their first consideration will be how to fulfill local demand. And they won't be limited to big cities. Insiders believe this batch of low-price theatres will force prices down.
Although prices have increased over the years, they won't be so high in the future. New theatres selling cheaper tickets will have a big impact on the market.
These cinemas are gradually on the rise, and more may be on the horizon following the State Council's announcement. Although movie fans have to shell out a lot at the moment, most experts predict ticket prices will eventually go down across the board.
Sun Yanfeng,
reporter
All this points to a happy ending for movie-goers fed up with paying over the odds. But as to how long it will take before going to the movies is an everyday pastime, rather than a luxury few can afford...only time will tell.