Last week, the Coronavirus was declared an international health emergency. This epidemic is eye-opening and while there are many layers to this story, there’s one aspect that has come to the attention of the Chinese government. The coronavirus isn’t just killing people, but the box-office too.
For the better of the people, the Chinese government has decided to shut down all movie theatres around the country. Representatives thought it was the best idea to close down their theatres because those are areas that are heavily populated, which could prevent a further spreading of the virus.
Normally, the two weekends following the Chinese New Year are lucrative for the box office and serve as a big pay day for both native and worldwide filmmakers. However, those movies that were supposed to be released leave studios with a big decision to make.
All of the films that have been affected by the outbreak and the short time notice of movie theatres closing were all highly anticipated films or Oscar nominations such as Sony’s Little Women.
Patrick Brzeski and Pamela McClintock of The Hollywood Reporter explained that a well known Chinese production company, Huanxi Media, ended up signing a partnership agreement within 24 hours with the video streaming app TikTok so people can watch their highly anticipated film, Lost in Russia, for free. Huanzi Media acted quickly because many fans were upset that they couldn’t see the movie in theaters. The studio earned its money through the contract, gaining about $90 million.
But was this the right move? Professor of Management and Decision Sciences Stuart Abraham thought Huanxi Media did not think about their entire audience when they made the decision.
“When you go after the Lunar New Year, you’re going to people who are not in the population center but who have gone home. So the odds are that light is a good thing to have in a house. Even if you had satellite you’re not streaming,” Abraham said.
He continued, “So for the vast majority of the people, I don’t think you’ll reach them. I would look into that: what percentage of the population even has streaming?”
To us who are fortunate to have the means of internet accessible at our fingertips, the idea of sending a movie to a streaming service sounds like it’s accessible for all. But in a country that has many underdeveloped areas and is home to a communist government that limits internet access, Huanxi Media may be shunning the very people the movie was made for.
“The original offer was for folks who can’t afford much to come to a big theater, pay a very modest amount, and see a movie. When you release it via streaming, are you talking about the same people? Maybe not. What is this, only for rich folks?” Abraham noted.
Other than releasing films via streaming services, there are other approaches studios like Huanxi Media can take in releasing their films. Considering China has closed the door on all its theaters, film studios could think of the big picture and release their films worldwide with subtitles. At least it can bring in some dough while China tries to find a cure.
Another solution would be to postpone the releases to a later date. While it may cost the studios millions for their films to sit on the shelves, it might be worth it in the longrun.
“It’s a business decision,” Abraham stated. “If you have spent $200 million on a movie and you’re going to get $90 million, but if you wait, how long can you afford to wait before the cost of forgoing the $90 million is worse than the opportunity cost of where you’re going,” he concluded.
In the case for Lost in Russia, the film was made on a $43.25 million budget and it was sold for $90 million. For a film to break even, it must make double its budget back. So essentially, a film that was intended to be a splash with audiences only broke even. In a time of crisis management for Chinese studios, we are seeing some good and bad decisions of when to release their films.
In China, their box office usually reaches much greater lengths globally than the United States does, so this is a great loss for China and its filmmakers. According to Paul Armstrong of Forbes Magazine, closing the theatres will cause a $1 billion-plus hit overall.
Last year, according to Armstrong of Forbes Magazine, the Chinese Lunar New Year weekend grossed $500 million, whereas this year it has only been $2 million. This takes away the butter on the popcorn not only for China’s box office, but globally.
When calculating worldwide box office totals at the end of each year, China holds a large amount of that gross, and it’s mostly from the Lunar New Year. Professor of Communication Robert Scott explained, “the epidemic is not only impacting box office, but a number of film productions have shut down, which will likely affect the number of movies offered theatrically in the future.”
As the virus continues to rip through China, it will be interesting to see how film studios handle the releases of their films. Let’s monitor the situation, but from a great length.
IMAGE TAKEN from Nikkei Asian Review
