Will Chinese film market bring a success to American studios?

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Will Chinese Film Market bring a success to

American Studios?

2013

Thesis:

Will Chinese Film Market bring a success to

American Studios?

MBA Program Part Time

Lei Zhang

Student Nr: 5939178

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Will Chinese Film Market bring a success to

American Studios?

2013

Executive Summary

In February 2012, China has decided to allow the importation of 14 more 3D or large format films per year and a profit –sharing increase from 13% to 25% for foreign film companies. This decision was considered as a major victory for American film studios from Chinese President Xi’s visit in 2012. Based on that , some people believe the Chinese film market will bring another success to American studios in terms of free cash. I challenged this education.

Indeed, the overview of the Chinese Film market is promising, the box office grossed up to USD 2.7 billion in 2012, taking it past Japan and becoming the 2nd biggest box office territory.

The Film Market in other territories refers to several business windows: theatrical, home entertainment, TV, internet based distribution, new media and others. When people talk about the Chinese Film market, they actually focus on the theatrical window only. If we put all the business windows together, the total revenue

generated by the Chinese Film market in 2011 is USD 2.6 billion, while the revenue from the Japanese film market in 2011 is USD 6.5 billion.

Even in Theatrical business itself, the Chinese Film Market confronts the risks with Governmental uncertainty, risks with entry, risks with substitutes, risks with buyers, risks with suppliers and risk with an intensity of competitive rivalry.

The Chinese Video Game market has similar problems with the Chinese Film market, its structure largely relies on online game (95% of the total revenue of the entire market), the PC game business generates less than 1% revenue to the market due to fierce pirates. However the mobile game business has been developing very fast, the actual sales are USD 51.4 million in 2012 representing a 91% increase from 2011, these benefits are resulted from newly developed technologies and varieties of newly designed games, but these new technologies do not yet help films generate revenue directly, currently only on advertising and planning stage.

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Will Chinese Film Market bring a success to

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Introduction

In February 2012, China has decided to allow the importation of 14 more 3D or large format films per year and a profit –sharing increase from 13% to 25% for foreign film companies. This decision was considered as a major victory for American film studios from Chinese President Xi’s visit in 2012.

Indeed, China has been the fastest growing film market in the world. In 2012, the MPAA (Motion Picture Association of America )’s Theatrical Market Statistics 2012 show China’s cinema audience is worth $ 2.7 billion up from $ 2.1 billion in 2011, taking it past Japan, whose total increased only slightly from $ 2.3billion to $

2.4billion, becoming the 2nd biggest box office territory. The US was still the biggest by some distance, with a value of $ 10.8 billion in 2012, a 6% rise in 20111.

According to a new report by Ernst & Young, China’s film market will surpass that of the US by 2020, some people believe the Chinese film market will bring another success to American studios in terms of free cash. I would agree that the growing Chinese film market indeed will bring a lot of potentials to American studios; However it cannot guarantee another success because:

• People only refer the growing to Chinese box office receipts, However the film market does not only consist of Theatrical window, but Home Entertainment, TV, Internet and other windows as Ill. When I take all these windows into the pie, is the Chinese Film Market still so appealing to American studios?

• Even for Theatrical window only, there are many risks associated with the market, have all these risks been taken into consideration when I talk about this growing market?

• People also look at Video Games as a successful example in China; However will all these success factors from Video Games be applicable to the Chinese Film market?

• If a success from the Chinese film market is uncertain to American studios, what will be the future of the Chinese film market?

In this thesis, I would like to go through these above mentioned questions to see if the Growing Chinese Film Market can guarantee a huge success to the Studios.

1_{Source: MPAA (Motion Picture Association of America) 2012 Theatrical Market Statistics}

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1 Theatrical Window vs. Film Market

1, 1 Film business introduction

Typically, a film will be launched with a bang in theaters, with the distributor investing heavily in marketing; the initial theatrical release engine then fuels downstream markets and revenues for years to come. After theatrical release, the film will be exclusively licensed for broadcast, viewing, or sale in a specified limited market for a defined length of time. The following are the primary windows and rights through which films have historically been distributed:

o Theatrical o Video and DVD o Pay television o Free television o Hotel/Motel o PPV/VOD o Non-Theatrical

o Cable and syndication

The above are the main distribution outlets, and do not represent the full reach of exploitation of the rights in a film. For example, rights to create video games and merchandising are not listed above.

The following depicts the film revenue cycle:

Theatrical Hotel PPV Home entertainments Residential VOD Pay TV Free TV

The length of each of these windows and whether they are exclusive or have a period of non-executive overlap with other rights is relatively standard, but far from fixed. With the advent of new technologies and platforms there have been more windows shifts in the last 5 years in probably in the prior 25. As a brief overview here, the windows can be summarized as follows:

o Theatrical: 1-3 months, with a hold-back of 6 months to home entertainment. o Hotel VOD/PPV: Short window, 2-3 months, prior to home entertainment. o Home entertainments: Continuous window, with hold-back of 6 months before

pay TV and shorter hold back (1+ months) before residential VOD. o Residential VOD: Historically 3+ months post video, but given online

pressures now accelerating and often simultaneous with or 30 days post videos.

o Pay TV: 1-1.5 years, sometimes with multiple windows between videos and free TV, with an 18-month hold-back to free TV. Often includes a “black”

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period following the pay window where the property cannot be exploited and is” rested”.

o Free TV: Multiple years’ window, with length, holdbacks, and carve-outs for secondary pay windows deal dependent on the type of Free TV outlet (e.g., network VS. cable VS. syndication).

1, 2 Film business revenue breakdown

From the above, what I can see is that the revenue of a film can come from multiple distribution windows. Below is also an extraction of a Studio Revenue Breakdown 2007; unfortunately I could not find any later version, However according to the breakdown below; I note that the main revenue stream for a studio is the Home entertainments window and TV window; Theatrical window only occupies 21%, nearly half of the Home entertainment window in size.

Figure 12

In order to ensure that too “out of date” info is used here, I have also checked NBCUniversal 2012 annual report, from the segment report for film, I can see the following:

Figure 23

2_{Source: This Business of Film: “A Practical Guide to Achieving Success in the Film Industry” by Stephen R.}

Greenwald and Paula Landy (Feb3, 2009)

3_{Source: NBCUniversal 2012 Annual Report – 10 K filing}

Pay TV 8% _PPV/OtherLicenseeing 7% 2% Free TV 13% Theatrical 21% Home Videos 49%

Studio Revenue Breakdown,2007

$983; 23%

$1.234; 29% $1.559; 37%

$463; 11%

Revenue breakdown of Universal Film 2012

Theatrical Content Licensing Home entertainment Others

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Again, excluding TV windows, the theatrical revenue is only 23% of the film segment. From the above figures, I noted that Theatrical revenue is approximately one fourth of total revenue a film can generate to studios. The same model is applicable to the Chinese film market?

1, 3 Film business in China

Historical revenue data from official sources indicate that the film and television sector has expanded significantly in recent years. The total revenue of a film increased eightfold from 2003-2011 to reach RMB 17.4 billion in 20114. Of it,

• Revenue derived from the TV window increased 4-fold from RMB 0.6 billion to RMB 3.9 billion;

• Revenue derived from Oversea market increased 3-fold from RMB 0.6 billion to RMB 3.2 billion;

• Revenue derived from Theatrical window then increased 13-fold from RMB 1 billion to RMB 13.1 billion.

It says that the main driver of revenue increase in Chinese film business is Theatrical window. In 2011, the theatrical window even occupies 75% of total film revenue in China.

4_{Source: Blue book of China’s Media 2012}

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Figure 35

Figure 46

Compared to other countries, TV and Home entertainment windows in Chinese film business did not play due important roles in revenue generation; especially Home entertainment window only generated revenue of RMB 2187 million (USD 35 million) in 2011, which is approximately 1% of total revenue generated by Theatrical window. In the introduction section, I compared Chinese box office receipts to Japanese and concluded that the Chinese Theatrical market has taken it past Japanese, becoming the 2nd largest box office in the world. However if I take all the Film Industry Revenue into a pie, does Chinese Film Market as a whole still look so appealing? Let us do the comparison below:

7_{Extracted from The economic contribution of the film and television industries in China, published by Oxford}

Economics 1,0 1,6 2,0 2,6 3,3 4,3 6,2 10,2 13,1 0,6 1,1 1,7 1,9 2,0 2,5 2,8 3,5 2,0 0,6 1,0 1,1 1,2 1,4 1,6 1,7 2,0 2,2 0,0 10,0 20,0 2003 2004 2005 2006 2007 2008 2009 2010 2011 RM B B illio ns

2003-2011 China's Film Industry Revenue

Breakdown

Theatrical Oversea market TV Channels/Advertising

¥13,1; 75% ¥2,0; 12%

¥2,2; 13%

China's Film Industry Revenue Breakdown

2011

Theatrical Oversea market

TV Channels/Advertising

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Figure 5 8

Figure 69

In order to compare Japanese and Chinese revenue of the film Industry, I have translated the local currency to USD by using Onada website

(http://www.oanda.com/currency/historical-rates/) year average exchange rate.

Compare figure 4 and 5, it tells us the total revenue of the Film Industry in Japan at least 2.4 times higher than that in China from 2003 till 2011. In this sense, I may say that Chinese theatrical business became the 2nd largest box office territory in 2012; it is still far away to say that the Chinese Film Market is becoming the 2nd largest film market in the world. When I look at 2011 data specifically, I again noted that the

8_{Source: Blue book of China’s Media 2012; translated to USD by using yearly average exchange rate from}

Onada website

9_{Source: Economic Contribution of the Japanese Film and Television Industry Report, published by Mitsubishi}

Research Institute, Inc.; October 2012

115 ₇₆ 190 133 244 202 329 240 438 266 625 910 1.505 2.032 364 406 520 317 69 121 134 151 182 225 248 301 341 1.000 2.000 3.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 U SD M ILLI ON S

2003-2011 China's Film Industry Revenue

Breakdown

1.754 1.950 1.800 1.745 1.685 1.884 2.201 2.514 2.273 3.957 3.468 3.781 2.870 2.638 2.565 2.606 2.474 2.493 1.578 1.808 1.724 1.593 1.483 1.770 1.789 2.000 1.735 2.000 4.000 6.000 8.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 U SD M ILLI ON S

2003-2011 Japanese's Film Industry Breakdown

Theatrical Home Videos TV Channels/Advertising

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Home entertainment Market makes the biggest difference/distance between Japanese and Chinese.

Figure 710

Figure 811

1, 4 Home entertainment window in China

The home entertainment industry in China (as measured by retail and rental of physical media. I.e., DVDs, Blu-ray discs and VCDs) contributes a relatively small amount to total film industry, amounting to RMB 218 million (USD 35 million) in 201212. Thus, there is a significant scope for growth in home entertainment if it can move towards realizing its potential. As an illustration, if the home entertainment

10_{Source: Blue book of China’s Media 2012; translated to USD by using yearly average exchange rate from}

Onada website

12_{Extracted from The economic contribution of the film and television industries in China, published by Oxford}

Economics

75% 12%

13%

China's Film Industry Revenue Breakdown 2011

35% 38%

27%

Japan's Film Industry Revenue Breakdown 2011

Theatrical Home Videos TV Channels/Advertising

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industry in China contributed as much to film as in Japan (38%13), then this would be an extra CNY 6.6 billion (USD 1 billion) per year.

However, due to pirate, the situation for the Chinese Home Entertainment market is unlikely to change in a short period. This in turn will only make the Chinese

Theatrical window very interesting at the current stage to American studios. We will discuss further about home entertainment in China in section 4.

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2, Risks associated with Theatrical window

The decision made in the beginning of 2012 to increase the import quota and the box office share indeed placed a positive impact on the Chinese film market, especially for American studios. For the first time in history, imported films have taken more than half of total box office earnings. According to the Chinese Film Bureau’s figures, in 2012, Chinese domestic productions have taken RMB 8 billion (USD 1.28 billion) or 47.6% of the total annual gross of RMB 16.8 billion (USD 2.69 billion). In 2011, homegrown films accounted for 53% of the total ticket sales of RMB 13.3 billion (USD 2.1 billion). Below are the top ten imported movies with highest box office receipts in the year 2012:

Figure 914

Although the box receipts are very positive to American studios in 2012, there are still many risks associated with the theatrical windows.

To illustrate these risks, I have chosen Porter’s 5 forces framework, because

analyzing Porter’s 5 forces are useful to judge an industry’s long-term attractiveness at a point of time. These five forces are rivalry among threat of new entrants into the industry, the bargaining power of substitute products, the bargaining power of

buyers, the bargaining power of suppliers and the present competitors15. Moreover, Porter’s 5 forces explains why one industry is more/less profitable than others. I have also made some adjustments on the Porter’s 5 forces to make the analysis more

14_{Source: The Research Report on Chinese Film Industry 2012, translated to USD by using yearly average rate}

from Onada website

15_Source:_{http://en.wikipedia.org/wiki/Porter_five_forces_analysis}_{& “ How Competitive Forces Shape}

Strategy” by Porter, M.E. (March/April, 1979); Harvard Business Review 0 20 40 60 80 100 120 140 160

Top Ten Imported Movies in 2012

USD Million

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specific to Chinese film industry. For example, due to the importance of government uncertainty, I have discussed it in separate section other than including in the treaty of entry and focusing on more relevant and specific risks on the contrary to the optimistic opinion of Chinese film industry.

2.1, Governmental uncertainty

Importing films is a state monopoly business which is exclusively managed by China Film Group (hereafter CFG), the largest and state-owned studio.

In April 2013, one year after the new ruling of imported films, American studios have a dispute with CFG. The dispute starts with a new sales tax on the imported films and CFG wants to deduct the entire tax from the box office split to American Studios. It was a definite surprise to Hollywood.

Twentieth Century Fox has rejected to accept the suggested new box office split of the film Life of Pie, which was one of the most popular imported films in 2012 obtained gross receipts USD 9116million. According to the new ruling, American studios should receive 25% of gross box office receipts; hence Twentieth Century Fox should receive USD 23 million. The new sales tax regulation CFG tries to put on will reduce approximately USD 2 million incomes.

Legal experts say the new tax regulations for many companies operating in China are confused. Last year, in several pilot cities, the officials did not say whether the new rules would apply to movie ticket. This month, the Chinese government

announced in August this year, the cinema will begin implementation of the new VAT regulations.

However without detailed clarification, the sales tax calculation is mostly dependent on the negotiation between American studios and CFG. On the other hand, Chinese domestic studios are not required to pay such taxes.

Since the new ruling announced at the beginning of 2012, CFG has made several follow up actions to the new ruling, for example, in summer 2012, CFG scheduled a few similar foreign movies for the exhibition in the same period including The Dark Knight Rises and The Amazing Spider –Man.

Furthermore, CFG also arranged a one month “blackout” period during which imported movies are not allowed to screen in cinemas.

All these actions are considered to limit the profitability of imported movies.

2.2, Risk with entry

16_{Source: http://online.wsj.com/article/SB10001424127887324743704578447010231952762.html}

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According to the Film Regulation and the Film Enterprise Rule, the existing regulation on foreign movies in China is outlined as follows.

• Production: Filmmakers are required to apply for government licenses, and co-production is encouraged.

• Importation: foreign movies are subject to the government censorship system and import quota system.

• Distribution: The distribution of foreign films is exclusively operated by CFG and HuaXia Film distribution.

• Exhibition: The annual screening time of foreign movies at theaters cannot exceed one –third of the total screening time. Foreign capital, apart from specific cities, is not allowed to have a major theatrical ownership. The regulation on theatrical ownership means foreign investors cannot control screening titles and schedules.

In Summary, subject to the censorship, import quota system, licensing system and screen quota system, the market access, American films are restricted.

2.3, Risk with substitutes

In 2012, Chinese companies made 893 films, an increase of 13 percent year on year, and the box office returns are about RMB 16.8 billion (USD 2.7 billion), up to 30 percent year on year. Domestic films made up to 47.6 % of the revenue.

Tong Gang, president of the bureau, called the year 2012 a tough time for domestic filmmakers because they faced fierce competition from Hollywood after the new ruling was announced back in February 2012. However he also said that “domestic films faced unprecedented pressure in 2012, but their performance was better than expected.

In 2012 a number of local productions contributed significantly to the box office, actually top three box office films are domestic films, the title Lost in Thailand, made for USD 3.9 million, grossed nearly USD 203 million. According to the film bureau, 36 million tickets were sold, more than those of Avatar and Transformers 3.

Figure 10

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I can observe that if I put aside the top three domestic movies (Lost in Thailand, CZ 12 and Painted Skin 2) aside, other domestic films can hardly compete with imported films. However the latest tendency shows that the small budgeted and localized movies have become more and more interesting and popular to the investors and customers. Like Lost in Thailand in 2012, Love Is Blind in 2011, made for USD 1.4 million, grossed up to USD 55.1 million. The reasons for these successful small movies are mainly due to:

• Localization: small budget domestic movies focus on producing more localized movies, which aim to reflect new trends of local people’s taste, culture, social conflicts and web language. These features are so linked to normal people’s daily life that young people are willing to pay high ticket price to watch it in the cinema, although there are no advanced technologies and complex stories.

• Increased screens: the numbers of screens in China have continued to increase, at the end of the year 2012 it reached 13,11817, 42% higher than 2011. The increased screens provide more flexibilities and convenience to the local film customers.

• Relatively High Price: one of the key differences in China, compared to say, the U.S., is that watching a movie is an entertainment luxury because the ticket prices are expensive. In 2011, the average movie ticket Int up to around RMB 40 (Around USD 6.2), which is close to the standard price (USD 7.8) in the U.S. Given that GDP per person in the U.S. is nearly 10 times higher than that in China, I can conclude that the movie ticket price in China is relatively high. In fact, the ticket price in some big cities like Beijing and Shanghai are sometimes higher than the average U.S movie ticket. The expensive ticket price indicates that Chinese customers pay extra attention when they select a movie to watch in cinemas.

17_{Source: The Research Report on Chinese Film Industry 2012}

0 50 100 150 200 250

Top Ten Domestic Movies in 2012

USD Million

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• Governmental protection: undoubtedly CFG continues to protect domestic movies. In history, they have hardly scheduled any domestic movies and imported movies in the same period. As I mentioned before, CFG actually wants to see more imported movies compete each other so that they can leave domestic ones out of the sharp competition. Additionally, CFG tries to schedule more summer time, Christmas and Chinese New Year time for domestic movies. From 2012 top ten domestic movies, four of them were scheduled in summary, two of them Ire scheduled during Christmas and two of them were scheduled during Chinese New Year.

2.4, Risk with buyers

The Research Report on Chinese Film Industry has made 10 times questionnaires in consecutive 6 years and got the following findings:

Figure 1118

Figure 1219

If I take the average movie ticket price ($ 6.2) of 2011 and take the highest percentage customers by income ($310 -$620) and the highest percentage customers by income ($ 124 – $ 232), I noted that a single movie ticket would occupy 1-2% of monthly income and 3-5% of monthly spending. These features

>$1,300 10% $930 - $ 1300 9% $620 - $ 930 23% $310 - $ 620 36% <$310 21% Missing 1%

Customers breakdown by monthly income 2011

> $465 21% $232-$465 28% $124-$232 36% <$124 15% Missing 1%

Customers breakdown by monthly spending 2011

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indicate how critical when a Chinese customer select a movie and timing of watching.

The other critical part is how a Chinese customer selects a cinema. Below table lists the factors of cinema selection.

Figure 1320

One very interesting point to note is that the increase of numbers of customers is not in line with the increase of screens and box office receipts. This might result in the adverse impact on the market growth: numbers of cinemas and screens are increased, release of films is increased, the profitability of a film is decreased and then loss making cinema and films are increased.

Furthermore, more than 60% new cinemas and screens are built in the 2nd tier cities of China. People in these areas still do not have atmosphere, culture and habits of watching a movie in cinema, especially foreign movies.

Although China has 1.4 billion populations and is considered as a diamond market for films, it is still a long process to develop people’s mindset to go to the Cinema, especially when there is availability of much cheaper pirate DVDs in the later stage.

2.5, Risk with suppliers

Distribution costs in China are relatively high in China, which is due to the following reasons:

• Limitation of cinemas and screens: I have mentioned before that the number of cinemas and screens are increasing rapidly in China. However according to the recently released annual survey of the country’s film industry, among the 745 feature films produced in China 2012, only 31521 – or 42% -played in cinemas, the failure rate is much higher than that in the U.S, in which 609

21_Source: http://blogs.wsj.com/chinarealtime/2013/03/22/the-many-chinese-films-you-wont-see-in-a-theater/ 66,10% _53,20% 33,70% _26,80% _19,70% _18,60% 0,00% 50,00% 100,00%

Factors of selecting a cinema

Reeks1

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(75%) of 81822 feature films produced in 2011 was released to cinema. The reasons for the failure of so many Chinese films to make it into the theater are following:

o Storage of screens: although after rapid increase the numbers of screens in China have reached 13,11823, the population per screen is still as high as 103,220 per screen; On the contrary, the U.S has 39,500, the population per screen is 8,006 per screen. o State-funded propaganda films: these movies can push the other

movies off the screen. Local governments may spend RMB 5 million in making films for propaganda purposes, like paying tribute to virtuous man or praising their good work. Among the most widely disliked films in recent Chinese film history are two state-commissioned, star-studded propaganda epics -2009’s “ The Founding of a Republic” and 2011’s “ The Beginning of the Great Revival” – both of which dominated screens nationwide for

extended periods.

o Lack of variety of cinemas: China lacks for art theaters that can include those alternative movies that are not fit for ordinary cinemas.

• High print and advertising costs: Because theaters are scattered across China, the cost of print transportation is enormous. In addition, if a movie wants to reach a national audience, the marketers have to spend a huge advertising budget on regional, provincial and national media platforms. Such a considerable advertising cost becomes a burden not only for middle and small productions, but also for blockbuster projects.24 In fact, for some independent movies, the P&A costs are greater than the production costs. With limited promotion and marketing efforts, middle and small productions find it hard to gain high attendances, causing a vicious circle in market performances when the box office is the largest revenue source for films.

2.6, Risk with intensity of competitive rivalry

Indeed China allowed the importation of 14 more 3D or large format films per year. However in my opinion, it will only increase the competition between American studios, especially American studios. The intensity will reflect on the following areas:

• Fight for the schedule: as mentioned above, in order to protect Chinese

domestic films, CFG can schedule a few similar American movies in the same period and/or arrange a “blackout” period, which will undoubtedly increase the

22_{Source: MPAA (Motion Picture Association of America) 2012 Theatrical Market Statistics}

24_{Yang, H.C., & Tseng, C.Y.(2009). The battle of Hong Kong movies-Bodyguards and assassins. Retrieved from}

http://www.funscreen.com.tw/head.asp?H_No=279&period=239

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intensity of competitive rivalry. The American studios have to fight for the schedules to avoid direct competition against other big budget movies from other American studios.

• Fight for the screens: at current stage, China still lacks for the screens,

especially in the 2nd and 3rd tier cities, in order to ensure the enough box office receipts, American studios should not only fight for the screens against

Chinese studios, but other American studios as well. If unfortunately, a film is scheduled in the same period against other similar type of movies produced by other American studios, the screens will be the key element to win the battle of the box office war.

• Fight for the distributors: studios would also fight for a good distributor in China. As many American studios do not have their operating companies in China yet, they normally hire an agent to distribute their movies in China. This agent normally has a good reputation and relationship with the CFG and other Chinese governmental organization, which help them with the censorship and important quota system. This distribution deal is normally considered as a risk free deal to the distributors, as they do not bear the risk of loss and ask for the advanced payments for the prints and advertisement costs before movies are released, if the film is profit making, they will collect money from CFG and deduct their fees before the monies are returned to the studios; The distribution fees are relatively high; it is normally the annual fees plus a percentage of the studios’ share of the box office receipts.

2.7, Box office sales vs. net revenue

Until here, I have been discussing the risks associated with the Theatrical window by using Porter’s five forces, there is one important point to be mentioned as well, that is the difference between box office sales and net theatrical rentals. The share of box office paid over to distributors varies between territories. The typical exhibitor’s share in the US is 45 to 55% and in the rest of world 55 to 65%. The balance remitted to the distributor is termed the “net theatrical rentals”25.

As we mentioned earlier, China has been past Japan and became the second largest box office territory in 2012. However it does not mean the net theatrical rentals to the Studios are the 2nd largest market in the world.

I have obtained the percentage of the theatrical net rentals out of box office sales in Japan from Universal’s Financial Planning & Analysis department and used these percentages to determine the 2012 net theatrical rentals for China and Japan. The comparison is listed below: (note: in the comparison, I have ignored the ratio of imported movies vs. domestic movies, as it is very similar in these two territories : in the range of 45-55%)

25_{Source: http://www.creativeskillset.org/film/knowledge/article_5103_1.asp}

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Note that the 2012 net theatrical rentals for studios in China are only 60% of that in Japan.

If we take into the additional cost for hiring an agent in China (normally 2-4% of net theatrical rentals), the net revenue to the Studios from Chinese market will be even smaller.

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3, Comparison between Video Game and film distribution

Many people think that the Video Game market has a lot of similarities to Film market and now with the new change announced by the Chinese government, the Chinese film market will simply copy the success of the Video Game.

I agree that the there are lots of similarities between Video Game and Film market, but I disagree that the American Video Game company achieved a success in China, actually they are far away from a real success.

Furthermore, there are key differences between Chinese Video Game market and Chinese Film market

3.1. Overview of Chinese Video Game market

In 2012, total revenue of the Video Game in China is RMB 60.326 billion (USD 9.5 billion), a 35 % increase from 2011.

Figure 1427

Figure 1528

26_{Source: 2012 China Gaming Industry Report, translated to USD by using yearly average rate of Onada}

website.

27_{Source: 2012 China Gaming Industry Report}

$2.674 $3.853 $4.926 $6.912 $9.551 $0 $2.000 $4.000 $6.000 $8.000 $10.000 $12.000 2008 2009 2010 2011 2012 M illio ns in U SD

5 -year revenue of Video Game in China

$12.024 $14.130 $15.629 $17.644 $19.483 $0 $10.000 $20.000 $30.000 2013 2014 2015 2016 2017 M illio ns in U SD

Forcast 5-year revenue of Video Game in China

from 2013

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Until here, I can see that indeed the Chinese Video Game market is fast growing and expected to continue its increase to reach the total revenue of nearly USD 20 billion in 2017.

3.2. Video Game Structure

However like film market, I also study further about the structure of the revenue of the video game market and noted that the total revenue of Chinese Video Game market can be broken down to three main elements: online game, mobile game and PC game. The total 2012 revenue of USD 9.529 billion is shared by the following: online game USD 9.04 billion; mobile game: USD 0. 5 billion; PC game: USD 0.01 billion. Below is the revenue breakdown by %.

Figure 1630

The Video Game situation in China looks very similar to the film market: large portion of revenue comes from one significant segment: online game. The question is again if the structure is healthy? To answer this question, I further studied the annual report of the Activision Blizzard INC for the year 2012 and noted that the total revenue of the company is USD 4,85631 million. It can be broken as the following:

Figure 1732

29_{Source: 2012 China Gaming Industry Report, translated to USD by using average yearly rate from Onada}

website

31_{Source: Annual Report of Activision Blizzard, Inc. filed 02/22/13 for the period ending 12/31/12}

32_{Source: Annual Report of Activision Blizzard, Inc. filed 02/22/13 for the period ending 12/31/12}

On line game 95% Mobile game 5% PC game 0%

Revenue breakdown of Chinese Video Games market 2012

On line game Mobile game PC game

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From the table above, I can clearly see that the net revenue of Activision Blizzard Inc., one of the biggest video game companies, is mainly from online subscription (20%), PC and other (25%), and Console (45%). Actually the online subscription revenue only takes 20% of the total revenue of the company, in which takes 95% of total revenue of Chinese Video Game market.

Again the revenue structure of the Chinese Video Game Market is so different than that of a major western video game company.

Compare to film

The revenue structure of Chinese Video Game market is very similar to the revenue structure of the Chinese Film market. They largely rely on one of the revenue

streams: the theatrical window for film market and online game for a video game. This feature of the structure is apparently unhealthy and I can say that the market loses their money from other revenue streams which are normally also major and important revenue stream in foreign markets.

3.3, online game

From above, I noted that the online game occupies 95% of the total video game market. Below table represents 5-year revenue of on line game in China, the annual average increase percentage is 36%.

Figure 1833

It is indeed a fast increase market; it is interesting to find out more about what drives these increases. From different research, I summarized the video game’s success factors can be summarized as below:

• Governmental control: as with almost all mass media in the country, video games in China are subject to the policies of censorship in the People’s Republic of China. In 2004, the Ministry of Culture set up a committee to

$2.648 $3.756 $4.788 $6.639 $9.026 $0 $2.000 $4.000 $6.000 $8.000 $10.000 2008 2009 2010 2011 2012 M illio ns in U SD

5-year revenue of on line game in China

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screen imported online games before they entered the Chinese market. The State General Administration of Press and Publication and anti-porn and illegal publication offices have also played a role in screening games. Examples of banned games have included:

o Hearts of Iron (for “distorting history and damaging China’s sovereignty and territorial integrity.

o I.G.I-2: Covert Strike (for “ internationally blackening China and the Chinese army’s image)

o Command & Conquer: Generals –Zero Hour (“ searing the image of China and the Chinese army”)

o In addition to banning games completely, several games have had their content screened to remove certain imagery deemed offensive or unfavorable. Common example includes skeletons of skulls being either fleshed out of removed entirely. Cases of which can be seen the Chinese version of the popular online game, World of Warcraft34. In 2012, the revenue of Chinese domestic online games is USD 5.835 billion, 65% of total revenue of online games; hence the revenue of foreign online games is USD 3.2 billion, 35% of the total revenue. Chinese governmental control in a way support and protect Chinese domestic online games.

• Increased customer base: in 2012, the online users have been increased by 0.12 billion to 0.5 billion, the 0.12 billion increase mainly comes from people between age 19 to 25 and from 2nd or 3rd tier cities of China.

• Improved technology: on line technology has been improved further. The environment of broadband gets further developed and advanced. According to Industry and Information Department, the broadband users have reached 0.1636 billion in 2012. This technology has improved make online game players have more capacities to join more games. On the other hand, with new tools like Unity 3D and Html5 are introduced, the research and

development costs for game companies are reduced; quality and performance of games are enhanced.

• Verities of games: new and different games are launched into the market. In recent years, newer and more games are designed for children and senior people, the games of combination of comic and animation, tales and books become popular for kids. Games of chess, Chinese chess, Mahjong and Poker and so on attract older people who usually enjoy the traditional games

34_{Extracted from Wikipedia: https://en.wikipedia.org/wiki/Online_gaming_in_China}

35_{Extracted 2012 China Gaming Industry Report (abstract) – page 43; edited by Yao Li Zhang, Nan Zheng,}

published by Gaming and Pirate Committee (GPC) in January, 2013

36_{Extracted from :}

http://news.flanders-china.be/government-pushes-%E2%80%9Cbroadband-china%E2%80%9D-project

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most. These trends enlarge the age structure of online game players and in turn bring more revenue into the online game market.

• Price differential: prices are more differences and detailed to attract different groups of game players.

o First, a distinction of hierarchy such as VIP, ordinary, free users, players are more willing to become VIP users.

o Second, set up of a fast path to a higher stage of the game, players can reduce their time spent on the lower levels of the game.

o Third, based on the needs of different customers, pets and props are updated and redistributed regularly, providing raffle

opportunity to encourage users to conduct consumer and trade with each other.

o Fourth, strengthening the culture of paying users’ habits: granting low-paying users and non-paying user’s part props to increase the difficulty to obtain another part, and to reduce supplies. Making sure the supplies are always less the demand. In this way, the new customers are speeded up to change their low-paying or non-paying customer status.

o Fifth, providing more payment channels and enhancing payment speed and convenience.

Compare to film

Online game business in the Video Game market is like the Theatrical business in Film market, they are the main revenue driver. They have a lot of similarities, for example Chinese government control, improved technology, extension in 2nd or 3rd tier cities.

However their differences are actually more appealing to me, which are summarized as below:

1. Stabilized customers vs. increased customer: like I mentioned before that Chinese cinema customers are not increased in line with cinema and revenue increase, which will result in a decrease of a film’s profitability on every customer. On the other hand, video game customers are actually increased with more video game and broadband.

2. Single vs. varieties: although Chinese government increased the quota of imported films, the increased portion is mainly 3D movies. Therefore American studios aim to release big budget movies in China, this remains interest in their target group of customers, but cannot enlarge the customers’ age structure. Video Game, However, has more varieties in introducing more games, which can attract old people or children.

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3. High price vs. price differentials: since 2011, the average movie ticket has been up to RMB 40 (USD 6.3), which is relatively high by considering the Chinese customers’ monthly income. If I take the travelling costs to a cinema into our discussion, the costs of watching a movie is even higher. By contrast, the charges of Video Game provide more flexibility. Although they try many ways to encourage people to pay extra for better service and/or performance of a game, there are an option of being non-paying player, low-paying player, normal-paying player and VIP player. The customer can control what kind of games they want to play and how much they are willing to pay for it.

3.3, PC game

In 2012, the actual sales of PC games are RMB 75 million (USD 12 million), representing 23% growing from 2011. 5 new PC games are released, less than 7 games in 2011, approximately 29% decrease37.

Figure 1938

Figure 2039

37_{Extracted 2012 China Gaming Industry Report (abstract) – page 116; edited by Yao Li Zhang, Nan Zheng,}

published by Gaming and Pirate Committee (GPC) in January, 2013. Currency is translated by using yearly average rate of Onada website.

38_{Extracted 2012 China Gaming Industry Report (abstract); edited by Yao Li Zhang, Nan Zheng, published by}

Gaming and Pirate Committee (GPC) in January, 2013.

$4,47 $3,67 $4,44 $9,45 $11,90 $0,00 $5,00 $10,00 $15,00 2008 2009 2010 2011 2012 M illio ns in U SD

5-year revenue of PC game in China

71 70 68 27 32 21 7 5 0 20 40 60 80 2005 2006 2007 2008 2009 2010 2011 2012

Number of PC games released 2005-2012

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Although PC games have been increasing in the past 5 years and reached nearly USD 12 million in 2012, it only occupies less than 1% of the total video game market of China. The reasons for this very low market share are following:

• A ban put in June 2000, when the government prohibited the manufacture or sale of game consoles on the mainland of China. The arguments were

ostensibly to prevent the nation’s youth form being corrupted by violent game content and the resultant sedentary lifestyle. That did not stop console-like devices from hitting shelves, these included such rip offs as the Vii, Pop station and play station 3 – even a full –blown attempt by Lenovo early 2013 to sell its CT510 as a game console. That particular experiment turned out to be a lot less like Microsoft’s Kinect than advertised, and has since withered, in no small part to its USD 600 price tag. Lenovo sold off its eedoo console subsidiary as a result40.

• There has been a talk of lifting the ban, but nothing has come of it.

Companies like Sony, Nintendo or Microsoft does not make such money on just the sale of the video game consoles themselves. Their main revenue comes from customers returning to buy more games and peripherals. The irony is that most of the world’s gaming consoles are already made in China. Nintendo’s Wii is built by Taiwan-based Foxconn on the Chinese mainland, and Flextronics makes the Xbox in China. Sony has a range of local suppliers to build its PlayStation systems, and would welcome a chance to sell directly to Chinese consumers.

• Pirate is a serious problem in video games and peripherals. “In China, people may buy the video game console, but they may not buy the games or

peripherals due to piracy or cheap local knockoffs. So, if Sony or MS launches a console here, even if it is legal, they will probably bleed money until their online game distribution and purchase has been fully enabled.” said game developer and expert, Frank Yu41.

Although the actual sales of PC games increased by 23% in 2012 to USD 12 million, it still has less than 1% market share, even the government plans to lift the 13 years ban in China, due to the severe pirate, this action will not provide a huge change in the PC game market.

Compare to Film

The PC game situation is very similar to the home entertainment situation of film market, they both share a very low market percentage and the reasoning is the same: severe pirates in China.

40_{Source: http://www.electronista.com/articles/11/07/06/eedoo.isec.console.to.be.sold.in.china.this.fall/}

41_{Source: http://www.chinadaily.com.cn/bw/2009-05/25/content_7937551.htm}

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Digital piracy and fake products are a problem throughout the developing world but nowhere to the scale seen in China. Its piracy problem is far deeper than fake video games and/or DVDs. It has a booming industry of fake motorcycles, cars, designer clothing, cell phones and any electronics products you can name. The Chinese will even deal in fake razor blades, toothpaste and

pharmaceuticals. These fake products can range from shoddy imitations to replicas indistinguishable from the original. It is estimated that piracy contributes a third to China’s GDP42.

The Chinese government itself has been known to put forth this very argument, which makes it difficult to enforce legal policy. Even though pirates are in

violation of international laws, regulation in China is known to be inconsistent at best. Some say that the authorities in China do not take enforcement of

intellectual property laws seriously. But with so much of the nation’s GDP at stake, it is small wonder why authorities may turn a blind eye.

The problem is unlikely to be solved through diplomacy, litigation or law

enforcement – business is forced to come up with creative solutions of its own. However businesses like PC video game or home entertainment confront such a big challenge of combating pirates in China with limited governmental support. At current stage, both PC video game and home entertainment businesses will continue to suffer from pirates.

3.4, Mobile gaming market

In 2012, the actual sales of Chinese mobile gaming are RMB 324 million (USD 51.4 million), representing a 91 % increase. The number of users and actual sales revenue growth mainly come from the mobile network. Currently on the market has a variety of mobile network games with a monthly income exceeding RMB 10 million (USD 1, 6 million)43.

Figure 2144

42_{Extracted from http://www.audioholics.com/news/industry-news/dvd-piracy-china-black-market}

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Figure 2245

The revenue of mobile game has been increased very fast in the past 5 years; the trend is expected to continue in the next 5 years, the weighted average growing rate will be 18.9%.

Not only revenue, but market share and customers have increased as well in the past 5 year.

Figure 2346

$22 $94 $135 $263 $514 $0 $200 $400 $600 2008 2009 2010 2011 2012 M illio ns in U SD

5-year revenue of mobile game in China

$819 $1.131 $1.383 $1.616 $1.942 $0 $1.000 $2.000 $3.000 2013 2014 2015 2016 2017 M illio ns in U SD

Forecast 5-year revenue of mible game in China from

2013

0,80% 2,40% 2,70% 3,80% 5,40% 0,00% 2,00% 4,00% 6,00% 2008 2009 2010 2011 2012

5-year market share of mobile game

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Figure 2447

From above tables, it is very interesting to note that the revenue of mobile game is increased in line with customer and market share’s increase, which indicated that the mobile game has entered a fast growing and healthy developmental path.

The drivers of the fast and healthy growing can be summarized as below:

• Smartphone penetration enhances and promotes mobile game market scale: because of price reduction and promotional activities of 3G business, the sales of smart phone have increased rapidly, in Q3 2012, the actual sales of smart phone in China is 49 million units, 77.1% of the total sales48. In Q2, 2012, the smart phone users are 290 million. In 2013, these numbers are expected to be 500 million. The increased Smartphone users will result in the additional sales of mobile games.

• The features of mobile game are developed further to meet the needs of the user: with mobile technology and design features for the mobile phones, mobile games can meet the requirement of fragments of times, reflecting its competitive advantages.

• Quantity and quality of mobile games are increased and improved: with further progress made in technology, mobile games are rapidly developed. In 2012, Microsoft, Tencent, Google and other enterprises increased investment in the development platform; developers will develop tools, environment, and development platform for greater technical support. For example, the

ANDROLID 4.0 operating system has been optimized for unity so that the complexity of the development of the games is reduced; yield, quantity and quality are increased and improved. The users of ANDROID 4.0 have been increased from 60 million at the end of 2011 to 14049 million in 2012.

Additionally, as Unity 3D, Html 5 and other development tools and

48_{Extracted from “ 2012 the first three quarters of China’s mobile phone market monitoring report”}

9,76 21,1 30,15 51,31 89,13 0 20 40 60 80 100 1 2 3 4 5

5-year number of mobile game customers increase

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technologies greatly reduced barriers to development, developers can get rid of the early technology development process of accumulation, more focused on the development of the game itself.

• Emphasis on the billing and networking make mobile game more profitable: in the field of mobile games, products with emphasis on billing and networking become main stream. To obtain higher incomes, mobile game applies the operating strategy of online game, particularly web game, taking the price of severe billing approach.

• Networking, social mobile gaming technology extend product life cycle: in the era of mobile games alone, the life cycle is six months on average, and that is because of the lack of socializing, the lack of opportunities for interaction provided. From the existing mobile game products, the life cycle has been extended, which is mainly due to the social function. When the main content is completed, the users can remain in the game because of the network. This will help mobile game companies launch a branch game or updated version of the content.

• Deeply involved in telecom operators, a mobile game is expected to exceed two bottlenecks: mobile payment and gaming traffic: over the years, the impact of policy adjustment from telecom operators is massive, responsible for revitalizing the mobile internet industry chain. Operators for mobile game development, marketing and sales play a key role. Operator’s 3G

construction, increased internet bandwidth, lower access charges has

become a necessary foundation for the development and protection of mobile and online games. Therefore, the rapid development of mobile games must rely on operators’ resources with huge customer basis and strong charge channel advantages. In the sales channels, operators have three drivers of development. First, the operator’s intervention helps mobile game fees find unified exports. Charge model on mobile games has no successful example for reference; the original charge model of mobile game has its own

limitations, which are not compatible with each other. Bankcard, SMS charges and QQ coins and other billing methods do not provide a sense of trust to users. Second, the flow rates can only rely on operators to solve the

problems. Third, the operator or the user to enter the mobile internet platform, the use of mobile game is the first entrance, so operators enhance the control of the mobile internet portal platform, and on this basis, the effect of promotion for the game is still very obvious.

Compare to film

New media including mobile device has a lot of potential for the future of the film industry. In fact, mobile device has already been playing a critical role in the

entertainment research and planning process for a majority of Smartphone and IPAD

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users, according to a research produced by GMI (Global Market Insite, Inc.), more than a quarter (28%50) of mobile device users are currently using their mobile devices to watch film trailers. This research further finds out that 13% people have bought cinema tickets via their phone. Although only a minority of consumers has bought movie tickets through their handset to date, the survey shows that this is likely to change – over one quarter (28%) expect to use their handset to purchase tickets within the coming year. Furthermore there is real appetite amongst

consumers to use their phones as part of the ticketing process – almost half (45%) would like to be able to get tickets delivered to their handset. One quarter of those who viewed movie trailers on their mobile device said that they saw influenced their decision to go and see the movie.

Despite the positive impact of mobile device on films, the impact is still on the advertisement and planning stage, there are still many limitations to watch a quality movie on mobile devices. This is very different than mobile games which can

generate revenues directly from the game players.

50_{Source: http://www.gmi-mr.com/company/news/movies-on-the-small-screen}

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4, The future of Chinese film market

Through my research, I have been talking about the barriers for American studios in the Chinese film market. However are there any potential solutions to overcome these problems? The answer is yes, which is built upon the newly developed relationship between American studios and CFG and the potential enhancement in the existing business windows and emerging new media.

4.1, new relationship between American studios and CFG

Refer to the tax dispute I have discussed in the section of 2.1 above, the latest news In August, 2013 is that CFG would resume payments owed to the American Studios shortly.

“ We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full.” Said MPAA chief executive and chairman Chris Dodd.”It I our understanding that the payment process has recommended.51” The confirmation from the MPAA is surely exciting news for the American studios and the MPAA itself. It started from Fox for rejecting to accept the payment of Life of Pie after deducting 2% of sales taxes, and joined by other American studios later on, eventually the MAPP became the representative to negotiate with CFG. The

confirmation/announcement from the MPAA can be considered as a victory to the joint efforts from the American studios and the MPAA.

From this successful experience, we can observe that the Chinese government also wants to protect its film industry, the American studios as main market players are so important to the industry. When they come together, the Chinese government is forced to think twice about their decision. It also can be proved by the 12th five-year plan (2011-2015), the government committed itself to “deepening reform of China’s cultural industries.” In an interview last year, the president of the CFG, Sanping Han said: We must try and attract more foreign technologists, expertise, producers, investors, distributors, directors, actors and artists, to come and collaborate with us on high-quality coproductions and then learn from them52”.

Furthermore, the CFG desires and plans a quick IPO in Shanghai stock exchange. The public ownership of the CFG will have an overall positive impact on the

American studios, that is because foreign investments could neuter the CFG’s protectionist and secretive modus operandi, pushing the company to act in more profit-oriented and transparent manner.

51_Source:

http://www.independent.co.uk/arts-entertainment/films/news/china-resumes-payment-to-hollywood-after-tax-dispute-8761338.html

52_{Source: http://www.forbes.com/sites/jackperkowski/2013/03/01/chinas-film-industry/}

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4.2, potential enhancement in existing and new business windows

In my opinion, besides the new relationship between the CFG and the American studios will ease American films released in China, there are also other solutions to enhance the American studios’ business in China, although they might not be the perfect ones. The potential solutions from my view are summarized below:

• Theatrical window - co-production: after the new ruling is implemented,

American studios can share the maximum box office split 25% of an imported film (let us ignore the possibly additional tax CFG is trying to levy on American studio’s share); However if it can enter into the market as a coproduced film, the box office share can be raised up to around 40%, very close to a Chinese domestic production. The most recent successful example would be Iron Man 3, it generates RMB 700 million (USD 145 million), the additional box office share for Walt Disney would be USD 16 million. Co-production can take three different forms: joint, assisted or commissioned production. Joint productions are treated as domestic films with respect to release in China. As such, they do not fall under the import quota. Thus for co-productions, 38-38.5% of BO revenues usually goes to the producers, the same as for domestic

productions. Generally speaking, the Chinese government supports co-productions as a way for China’s film industry to gain access to international production know-how and FDI and views co-pros as vehicles to achieve the political goal of projecting China’s soft power abroad. However American studios would need to thoroughly assess whether it makes sense to target the co-produced film to either Chinese or American audiences in order to avoid making too many compromises and amendments that ultimately render the film marketable to either side.

• Home entertainment window: with the current position of the home

entertainment market in China and the continuing development of internet-based delivery platforms it is likely home entertainment growth in China will be driven by services such as IPTV (Internet Protocol Television) and Video on Demand (VOD). Video pm Demand allows viewers/subscribers to select and watch from a library of films and television programs on demand. It is likely that services will expand the home market significantly beyond its current size, especially if the market can close the gap to its potential size as a part of the transition. China had 372 million households in 201153. In addition there Ire 156 million fixed broadband subscriptions54, the highest of any country in the world. However, measured on a per capita basis, it still lags significantly behind more advanced economies. There Ire an estimated 11.6 fixed

broadband subscriptions per 100 inhabitants in China 2011, compared with,

53_{China Statistical Yearbook 2012}

54_{International Telecommunication Union}

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for example, 27.4 in Japan, 36.9 in South Korea and 32.7 for the UK. Clearly there is a massive potential for growth in IPTV and VOD services. As of the second quarter of 2012 China already had the largest number IPTV

subscribers in the world at just over 16 million55. However the potential for growth in IPTV services is enormous when one considers there was an estimated 203 million subscribers of more traditional cable television

services56. A recent study expects IPTV subscriber growth to be an average of 29% per year from 2012-2014. In particular the VoD market was expected to grow by 110% per annum from 2008-2014, driving the IPTV market to be worth USD 2.16 billion by 2014 (RMB 14 billion in 2011 exchange rates)57. It is therefore likely that China will “leapfrog” the physical home entertainment media stage experienced in many Istern countries and that the future will instead see an increased focus on digital delivery system. In addition the possibility for home entertainment market growth will be enhanced if the industry can take advantage of the movement towards digital delivery to realizes its potential.

• New media window: it still sounds far away, but with fast technology changes and development, mobile device like iPad/tablet or especially smart phone might become another important film distribution window. If movies can be formatted to display the best quality in customers’ mobile devices and

charged by telecom operator, it is certainly very appealing to American studio. Especially with the import quota in China, good American movies are

introduced via pirate DVD, timing and quality are uncertain. Now more and more mobile device users like to watch movie trailer and commercial in their mobile device, or get the movie tickets delivered to their devices. If the quality movies, especially not imported ones, are available on the mobile devices timely, after watching the movie trailer, the customers might be very interested in watching the full movies.

55_{Source: Point Topic.}

56_{Source: Blue Book of China’s Radio, Film and Television (2012),}

57_{Source: Chinese IPTV, Market Analysis, RNCOS (2011)}

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5 Conclusion

From my research, I have discussed the Chinese film market revenue structure, risks associated with film theatrical window, the similarities and differences between

Chinese Film market and Chinese Video Game market.

The purpose of this discussion is to challenge the idea that the Chinese Film market will bring another success to the American studios. After all this discussion, we can conclude that it is too early to say that the Chinese Film market will bring a success to the American studios, because the structure of the market is not healthy and even theatrical business itself has many associated risks.

After having compared to the Chinese Video Game market, we can further conclude that there are key differences between Chinese Film market and Chinese Video Game market. It is hard for the Chinese Film Market to simply copy Chinese Video Game’s “ success”, plus there is also a question mark regarding if the Chinese Video Game market has ever achieved a real success.

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Reference

"The Business of Media Distribution: Monetizing Film, TV and Video Content in an Online World" Ulin, Jeff;

"Playing to the World's Biggest Audience: The Globalization of Chinese Film and TV" Curtin, Michæl;

"The International Film Business: A Market Guide Beyond Hollywood" Finney, Angus;

"This Business of Film: A Practical Guide to Achieving Success in the Film Industry" Greenwald, Stephen R.;

Think Outside the Box Office: The Ultimate Guide to Film Distribution and Marketing for the Digital Era" Jon Reiss;

"The Biz: The Basic Business, Legal and Financial Aspects of the Film Industry." Moore, Schuyler M.;

MPAA (Motion Picture Association of America) 2012 Theatrical Market Statistics NBCUniversal 2012 Annual Report – 10 K filing

Blue book of China’s Media 2012

The economic contribution of the film and television industries in China, published by Oxford Economics

Economic Contribution of the Japanese Film and Television Industry Report, published by Mitsubishi Research Institute, Inc.; October 2012

The Research Report on Chinese Film Industry 2012

http://online.wsj.com/article/SB10001424127887324743704578447010231952762.ht ml

Yang, H.C., & Tseng, C.Y.(2009). The battle of Hong Kong movies-Bodyguards and assassins. Retrieved from

http://www.funscreen.com.tw/head.asp?H_No=279&period=239

2012 China Gaming Industry Report

Annual Report of Activision Blizzard, Inc. filed 02/22/13 for the period ending 12/31/12

https://en.wikipedia.org/wiki/Online_gaming_in_China