Wolf Warrior 2 is bigger than Avatar.
Upon hearing that statement, most people only have one question to ask: "What the heck is Wolf Warrior 2?" According to numbers released by China's film board, the local action flick from director/star Wu Jing has brought in a whopping $853 million in its home country, or nearly $100 million more than $760 million Avatar made in the United States. For comparison, the highest-grossing film in any single territory is Star Wars: The Force Awakens, which made $936 million in the United States.
How did Wolf Warrior 2 become one of the biggest movies of all time without anybody knowing it? How did a movie which would probably be better served as a straight-to-video release in America become the single biggest Chinese film ever made?
The answer may be that it was lightning-in-a-bottle, a once-in-a-lifetime event which happened to hit at the right place at the right time. Or maybe the answer is more insidious. The State Administration of Press, Publication, Radio, Film and Television of the People's Republic of China (or SAPPRFT) has a history of supposedly shady dealings with regards to their box office reporting, to the point there the Motion Picture Association of America is currently in the midst of an audit into the country, the ramifications of which could be game-changing for the industry. This all begs the question: Is China's Government Honest In Their Box Office Reporting?
The State of the Chinese Box Office
First off, it's important to differentiate between films like Wolf Warrior, which are produced by state-run companies within mainland China, and movies from Hong Kong, like John Woo classics Hard Boiled and The Killer. HK movies do not have their content dictated by the government of mainland China.
In recent years, the narrative has been that the Chinese appetite for movies has become larger than ever. China now has over 40,000 movie screens, even more than the United States, and double the amount the country had as recently as 2013. Despite the massive increase in movie screens, and the fact that China's population is around three times that of the USA, China's box office results are still #2 in the world, and not rising as fast as industry analysts had hoped.
While some movies do better than expected in the region, with success stories like Fate of the Furious ($392m in China, versus $225m domestically) and Transformers: The Last Knight ($228m in China; only $130m in the United States and Canada), examples like these are exceptional outliers in the formula, not the norm. There is more to the story than just raw numbers.
Hollywood doesn't just want for their movies to gross as much in China as they do in the United States; they need them to gross more – much more. In the United States, it's generally accepted that studios take home roughly half of a movie's box office gross. The true numbers are highly variable and differ from movie to movie, and even depending on how long a movie is in theaters, since studios often get a bigger cut of a movie's opening weekend than subsequent weekends. Thanks to taxes and other factors, that number goes down to around 40% in most foreign territories. However, in China studios are only privy to 25% of a movie's earnings. This basically means that, for a Hollywood movie to be as profitable in China as in the USA, it needs to make twice as much money.
Hollywood analysts are deeply perturbed by the relative lack of growth in the Chinese market, despite the rising availability of venues to view movies in theaters. China was supposed to be a veritable license to print money; while the market is immensely valuable, it's not quite the goldmine they had hoped for. Digital piracy is rampant in China, way more than in America, and many simply prefer to stay at home and watch movies online. Without getting into the difficult statistics about international poverty, it's safe to say that going to the movies is a luxury not everyone can afford, even more than it is stateside.
China, Reluctant Consumer
Despite the exuberance of China in growing their movie business, they have been notoriously difficult with regards to saturating their marketplace with Hollywood films. China has an infamous policy of limiting the number of Hollywood movies it allows into local theaters; in 2012, only 20 Hollywood productions were released to theaters in China. That number has since risen to 38, but it's still a tightly-secured supply. Why is this the case?
China is strict on enforcing the types of content released to its people, and the government's draconian opinions towards censorship have long been an annoyance. The Chinese government demanded substantial edits to movies like Pirates of the Caribbean and Skyfall, while some films, like Deadpool, Mad Max: Fury Road, Ghostbusters, and Suicide Squad, were banned completely for not complying with decency standards.