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Film Licensing: Gower Street Predicts $21.6 Billion Recovery For Global Box Office

A Special Report For TLL Members Only

TLL Editor in Chief

The $21.6 billion estimate would put 2021 80% ahead of 2020’s dismal revenues, but still 49% behind 2019’s record global tally.

Mitchell says this report is the final estimate Gower Street plans to publish for 2021 before actual revenue figures are announced in early January.

While the overall picture shows a better than expected recovery in late 2021, the news is better in some regions than others. Generally speaking Gower Street’s analysis shows a very strong performance in Asia, and particularly in China. The Licensing Letter’s own analysis actually showed that China improved its figures for film box office in both 2020 and 2021 over 2019, despite the impact of the pandemic.

That trend is due to the rapid growth in cinema attendance and the burgeoning film industry in China, which overpowered the negative impact of COVID-19 restrictions.

Gower Street’s research confirms that trend, showing the Asia-Pacific region accounting for a startling 52% of box office revenues, with 34% global box office coming from China alone. By contrast, only 22% of revenues came from domestic box office returns, the same amount as reported in the EMEA (Europe, Middle East and Africa) region.

The sunburst graph (below), shows approximately how Gower Street expects the estimated end of year to be split among key regions and major markets. Mitchell says this continues a trend reported on last year. When compared to 2020 actuals, the chart below shows there is a continuing and clear gain in Asia Pacific (APAC), mainly to the detriment of Europe, Middle East and Africa. In 2020, APAC accounted for 50.2% of global box office; the first time that region accounted for more than half of global revenues.

“Two stories are immediately evident,” said Mitchell at the time. “The first, and most obvious, is the continued and dynamic power shift to Asia Pacific. For the first time, the Asia Pacific region represented over 50% of the global box office in 2020. This is up over nine percentage points from 41% in 2019 (a year-on-year rise of 22.4%). The three biggest international territories in 2020 were all Asia Pacific markets: China, Japan and South Korea.

“However, while China, as expected, delivered the biggest portion (more than half) of the Asia Pacific result, becoming the #1 global market for the first time as previously reported, it was Japan that offered the biggest proportional growth, up 103% year-on-year compared to a 15% improvement for China. Japan was up over six percentage points (from 6% of global box office in 2019 to an astonishing 12.2% in 2020).”

Fast forward to today’s report, and Gower Street’s analysis shows that trend continuing, with the exception of a major drop in figures from Japan, which was hit with major COVID-19 restrictions over the summer. Instead, China’s presence in the chart grew substantially as that country’s film industry continues to soar. For that reason, competing markets have lost market share.

The market share of global box office represented by the Domestic (down from 21.8% to 21.6%) and Latin American (down from 4.9% to 4.6%) regions is expected to remain relatively unchanged between 2020 and 2021, the report states. In contrast, APAC is expected to expand its market share from just over 50% in 2020 to 52.2% in 2021. EMEA drops from 23.1% to 21.6%.

“However, this APAC gain is entirely due to China, which has made its own further encroachment within the APAC region, with a reduced market share of worldwide box office in the region’s other key markets: Japan, South Korea, and Australia,” said Mitchell.

China is expected by Gower to represent nearly 34% of the global box office by the end of 2021, compared to just over 28% in 2020. Japan, meanwhile, sees its market share halve from 12.2% to just 6%. Korea drops from 4.1% to 2.4%, and Australia from 2.7% to 2.1%.

Market Share Figures Skewed By COVID-19 Pandemic

While the figures for 2020 and 2021 are highly encouraging for China, it’s also true that the overall market has been dramatically affected by the COVID-19 pandemic, the results of which were not felt in the same way in all countries.

One trend that The Licensing Letter has seen is that in the US and Canada, pandemic restrictions and the general reluctance of film fans to enter theaters resulted in a cataclysmic drop in revenues. This was exacerbated as studios chose to delay the release of many films, and also chose to release some major blockbusters simultaneously on streaming services on the same day they were released in theaters.

Data from Box Office Mojo shows the impact of COVID-19 on box office revenues, as the weekly ticket sales dropped to almost zero after March, 2020. The same thing did not happen in China, where box office revenues actually increased in both 2020 and 2021.

China, on the other hand, relied on very strict circuit breaker restrictions early in the pandemic, almost entirely shutting down the country, leaving an eerie scene of empty streets and shops. However, that approach allowed China to reopen earlier and more generally, and in 2020 and 2021 filmgoers actually increased their visits to theaters.

Total reported revenues from theaters in China hit a high in 2020, despite the impact of COVID-19 restrictions, and figures for 2021 indicate the country will hit a new record.

According to figures from iResearch in the chart below, China’s theater returns (box office plus other related sales like snacks) in 2020 significantly outstripped revenues in 2019, which was itself a record setting year, hitting 100 billion yuan in total revenue for the first time. In 2020, however, returns grew to an astounding 119 billion yuan, and 2021 looks even better.

Box Office Recovery Driven by Blockbusters Domestically and in China

The major factor driving the increase in late 2021 is the return of major blockbusters in all markets, and particularly the domestic and APAC markets, says Gower Street’s report.

“The $1.4 billion gain to the global prediction since our previous estimate, which was based on 8 months of actuals and estimates for the final four months of the year, is primarily due to the blockbuster boost brought about by October,” the report states. “The combined successes of China’s Golden Week holiday, led by THE BATTLE OF LAKE CHANGJIN; James Bond title NO TIME TO DIE; and Marvel anti-hero sequel VENOM: LET THERE BE CARNAGE ramped up cinema-going around the world.

Golden Week in China is in the first week of October, and is traditionally China’s second biggest holiday week of the year after Chinese New Year. “This year it also returned China to the Stage 5 “full recovery” level of Gower Street’s Blueprint To Recovery for the first time in over four months. Likewise the same week’s opening of the VENOM sequel in Russia returned that market to its Stage 5 level. Meanwhile the long-awaited launch of NO TIME TO DIE boosted UK/Ireland, Germany and Austria to achieve their own Stage 5 targets for the first time since the pandemic began. Both UK/Ireland and Germany delivered their second biggest week of the pandemic in the succeeding play-week.”

Overall, Gower’s global estimate for October has risen nearly 30% from an original estimate of $2.5 billion to $3.2 billion. Significantly, this would put October business just 4% behind the average of the three pre-pandemic years (2017-2019) for the month. No previous month in 2021 has performed better than 40% behind the three-year average. A significant portion of that gain came from China, which is predicted to gross 41% ahead of the three-year average for October, having tracked well below the three-year average for the previous four months.

So, what properties driving the box recovery the most? The primary boost has been seen from three Chinese-produced blockbusters, and the rest from either US productions and one film, No Time to Die, from the UK. What is the most significant, even allowing for the impact of the pandemic, is that three of the top four films globally were all produced in China. The Chinese movie about the Korean War, The Battle at Changjin, has racked up $828.1 million in ticket sales and is still going strong, while Hi, Mom follows close behind with $822 million.

The American action movie F9: The Fast Saga still leads the charts for US films with $721 million, although it is expected to be eclipsed by year’s end by No Time to Die, and possibly by Shang Chi and the Legend of the Ten Rings. However, the last film to round out the top four is yet another Chinese film, the action comedy Detective Chinatown 3, which rang in with an impressive $525.5 million, and is still leading over the well received James Bond film No Time to Die.

The list of top 10 movies globally is dominated by three Chinese productions that all hit the top 4 for revenue, including The Battle at Lake Changjin, Hi Mom, and Detective Chinatown 3.

However, two American films continue to perform strongly in theaters globally, with the sci-fi epic Dune and the superhero flick Venom: Let There Be Carnage both showing strong ticket sales globally.

According to the Gower Street report, those two US films combined with No Time to Die and the three Chinese hit movies will help drive theater revenues to a stronger than expected performance by the end of 2021. However, one item worth noting is that the domestic box office returns are expected to see a much larger boost in 2022 than would be the case in other markets. That expectation by TLL is based on the fact that many of the most anticipated films from major studios like Disney have been delayed. As reported last week, Disney has rescheduled all of its major blockbusters, but those delays for the past two years also mean there will be a heavy slate of major blockbusters in both 2022 and 2023, which is expected to drive ticket sales as pandemic restrictions are scaled back.

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