“The upstream movie studio business has been inferior in terms of profitability versus the downstream cinema business. (It) is likely to stay that way as American studios have multiple ways to monetize their movies — selling DVDs, distributive rights to video-streaming platforms, merchandise — but Chinese studios can only monetize their movies by selling movie tickets,” Richard Huang, a research analyst at Nomura, told CNBC.
This pullback, however, should not be regarded as a wider trend for the Chinese film industry, said Wan Yuchen, an analyst at at China Market Research Group.
“The film industry in China has been growing rapidly, especially in the last 3 years and (has) attracted investment from many other industries, (including the) internet companies like BAT and Xiaomi,” Wan told CNBC in an email, referring to the acronym for China’s largest technology companies — Baidu, Alibaba and Tencent.
Nevertheless, Wan acknowledged that last year was a challenging one for the Chinese film industry due to greater levels of competition.
“The competition was fierce, and many companies like Xiaomi and Anhui Xinke failed to survive (in the film sector.) But in the long run, it would still be a trend for large players like BAT and Wanda to invest in the industry through acquisition,” she said.
