Will China Overtake the U.S. as the World's Largest Movie Market in 2016? Why the Answer is "Probably Not."

Expectations started high this year for the Chinese film industry. After the truly spectacular growth of 2015 many have been predicting this as the year the Chinese box office overtakes the U.S. as the world’s largest movie market. But six months into 2016 and it is apparent the buzz was too optimistic. Chinese box office earnings have steadily deaccelerated. The Wall Street Journal sees this as a product of both the cooling Chinese economy, but also a maturing online ticketing industry. Steeply discounted tickets were a staple the fledgling industry of online ticketing platforms all vying for a share of the pie. Platforms constantly working to gain market share frequently offered tickets for under $2 USD, which as a byproduct drove up the growth of box office receipts.

The days of cutthroat discounts are now ending with several major players finally finding solid ground, and share, in the market of ticket sales. According to Xu Yongming, the general manager of Nuomi Pictures (subsidiary of Baidu Inc.), “The subsidy carnival has passed.” With fewer discounts available a large portion of the population accustomed to cheap tickets are reluctant to pay higher prices, with others inevitable being priced out.

Repercussions of fewer ticket subsidies comes alongside signs movie theaters are beginning to reach saturation. Wealthier and more populace first and second tier cites are already covered with cinemas. Most new theaters have been built in less-developed areas with the aid of government subsidies. Households in these regions also spend less on entertainment that their first-tier counterparts, particularly during this slowdown in China’s economy. So, while new theaters continue to open at an aggressive pace, they are understandably less lucrative.

These two forces together color a larger picture of market growth decline. China’s stated goal of $9 Billion US in box office receipts for 2016 is going to be a narrow needle to thread, and will require a series of quality films released at the most opportune times possible.

This is a summary of an original Wall Street Journal article.