China's Box Office Isn't As Important As Hollywood Thinks

Rey and China

The second biggest box office market in the world is China - but is Hollywood getting blinded to the reality behind that cash? Much is made of the country's importance to global box office numbers, a topic which recently made headlines due to the outright failure of Star Wars: The Last Jedi in the territory. The sci-fi juggernaut has raked in more than $1.27 billion dollars worldwide, but some are calling the film a bomb because it failed to make an impact at the Chinese box office, and is expected to finish its run well under $50 million, a huge step down from The Force Awakens' $124 million haul, which itself was considered underwhelming.

While it certainly would have been nice if Star Wars could break out in China, it really doesn't matter all that much. Actually, the Chinese box office is not nearly as important to a film's success as some people would have you believe. If a movie manages to hit overseas, that does not make up for its shortcomings in North America, and a blockbuster's failure in China does not undo its success everywhere else.

Related: Star Wars: The Last Jedi Was A Box Office Success

Sure, China is the world's second-largest box office market, but there's far more to the equation than that attention-grabbing statement. The truth is far more complicated than that.

How Much Money Does Hollywood Actually Make From China? (This Page)

China Doesn't Actually Save Franchises From Box Office Doom

Aaron Paul Rami Malek and Scott Mescudi in Need for Speed Movie

A particular narrative has been going around that China can "save" a movie from box office failure. Movies like Warcraft, Need For Speed and Terminator Genisys all had the dubious fortune of making more money in China than they did in America, and sequels for each of these films were strongly considered, at least according to hopeful studio executives trying to build hype. But how much is this true? Warcraft is often cited as a huge Chinese smash hit, yet no sequel has been put into production. Need For Speed 2 was being floated as a completely Chinese endeavor and still nothing has yet to come from those plans. As for Terminator, the series is being rebooted under the watchful eye of series creator James Cameron, essentially ignoring the events of Genisys (as well as Terminator 3 and Salvation).

If China's box office is so important, then why wasn't Warcraft 2 immediately greenlit? After all, the original made over $200 million in that territory alone. If it had made that much money in the USA, then a sequel would be a no-brainer! Alas, it's not that simple. It's easy to say, "Warcraft made $433 million worldwide off a $160 million budget! It's a success!" There's an old and outdated misunderstanding that if a movie doubles its budget in worldwide grosses, then it is profitable. That's simply not true.

It's tough to pin down the exact numbers for each film, but money earned in China isn't worth nearly as much as money earned in the United States. For a typical Hollywood movie, the film studio earns about half of the box office gross. It's never this exact, but conventional wisdom says that when 2016's Warcraft made a measly $47 million in the USA, the studio took home roughly $23.5 million of that cash. For most foreign territories, the studios only take home around 40% of the gross. Minus America and China, Warcraft brought in $172.7 million, which means Legendary took home about $69 million. When it comes to China, however, the typical Hollywood studio only gets to bring home a shockingly low 25% of a film's gross, or half of what they bring make from American ticket sales. Warcraft made $213.5 million in China. 25% of that is just $53.4 million.

Related: Why Star Wars Still Struggles at the Chinese Box Office

Adding up this rough estimate of money brought in by the studio, Warcraft only made Legendary $145 million, well short of its budget of $160 mil, and that's not even getting into marketing costs. Using math, it's easy to see that Warcraft was far from a hit. That being said, Warcraft, while not a success, wasn't a total disaster, and the money brought in from China certainly helped Legendary save face when it came to the film's financial fallout. An added wrinkle to this formula was the fact that Legendary was purchased by the Chinese Dalian Wanda conglomerate in January 2016, which muddies the waters of the film's middling fiscal failure... Though that relationship may or may not be moving along so well, according to this article from Variety.

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