Why China Will Soon Be Hollywood's Largest Market

For the hundred years that the movie industry has been around, the United States has been the largest market for films. But as early as next year, a new country may hold that distinction.

Indeed, some analysts expect China's yearly box office revenue to exceed that of the U.S. by the end of 2017. And even if that's an optimistic estimate, China will almost certainly have overtaken the United States by the end of 2018.

For proof, just take a look at the growth rate in the China film market over the past few years. In 2014, China's box office grew 27% from the previous year to $4.55 billion. In 2015, it grew 41% to $6.78 billion.

Due to a weak crop of films and a slowdown in China's GDP growth, 2016 may not see such a remarkable uptick. However, even with the speed bump, by the end of 2018 China's film market should surpass the $10.7 billion in yearly box office revenue that the United States has averaged over the past five years.

"North America will probably play second fiddle to China within the next two years," said Paul Dergarabedian, senior analyst at Comscore (SCOR) . "And by the end of the next decade (2030), China's film market could generate double the revenue of North America's."

That's an incredible result, considering that China was barely a box office factor not too long ago. "The only reason you would talk about China 20 years ago would be to learn about piracy," said James Schamus, a veteran film producer in the industry. "It is night and day, the difference between China then and now."

The increased importance of revenues from China is in keeping with the globalization of the film market over the past few decades. For instance, the highest-grossing film of 1989, Tim Burton's "Batman," saw 61.1% of its worldwide box office total come from North American theaters, with the other 38.9% coming from foreign territories.

The latest film starring the Caped Crusader, however, shows how the tides have turned. "Batman v. Superman" grossed only 37.9% from North America and saw 62.1% of its total revenue from international markets--almost an exact reversal of the 1989 "Batman."

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