Global movie theater operator IMAX Corp has signed an agreement with a Chinese State-owned film group to expand its theater business in China, a move that analysts said Tuesday would intensify competition in China's cinema big screen market.
The Canadian theater operator reached an agreement with Shanghai Film Corporation (SFC), Shanghai United Circuit Co (SUC) and Shanghai SFG-EPR Cinema Development & Management Co (SFG-EPR) to build 19 new IMAX theaters throughout China before the end of 2015, according to a press release published on IMAX's official website Monday.
The deal brings Shanghai Film's IMAX commitment to 22 theaters, making it IMAX's fifth-largest partner worldwide, according to the press release.
SFC, which is one of China's largest State-owned enterprises in the film distribution and exhibition industries, owns 100 percent of SUC along with a major share in a joint venture SFG-EPR with EPR, an entertainment REIT (real estate investment trust) from Kansas City, US.
Analysts said the move by IMAX showed the potential for big cinema screens in Chinese market.
"Because of the large population and rising income levels in China, spending on movies and entertainment will grow fast, not only in first-tier cities, but also in second- and third-tier cities," Hou Tao, vice president of Beijing-based EntGroup International Consulting, told the Global Times Tuesday.
China is IMAX's second-largest market with its total number of screens hitting 174 as of March 31, behind only the 378 in the US, according to IMAX's first-quarter financial report on its website.
IMAX has a total of 840 IMAX theatres in 57 countries and regions as of March 31.
China's box office has seen an annual growth of over 20 percent for four consecutive years since 2011, according to data released by the State Administration of Press, Publication, Radio, Film and Television, the country's media supervisor, on Thursday.
Box office revenues in Chinese market surged to 13.74 billion yuan ($2.2 billion) in the first half of this year, compared to 10.9 billion yuan in the first half of 2013 and 8.07 billion yuan in the first half of 2012, according to the media supervisor.
The surge in box office returns has been linked to rising income levels across the country.
When a nation's GDP per capita breaks the $3,000 level, spending on entertainment like movies normally takes off, according to media reports.
This happened in China in 2008, when the nation's GDP per capita reached $3,266 a year, and there has been a box office bonanza ever since, said media reports.
"We have witnessed the demand for The IMAX Experience [referring to a large-format theater experience provided by IMAX] increase exponentially," said Zhu Zhongxiang, general manager of SFC, in the press release.
Attracted by the alluring market potential, more domestic theater operators have also entered the big-screen cinema market, creating serious competition.
China's first cinema to utilize DMAX, or Digital Max, a homegrown cinema big-screen format developed by China Research Institute of Film Science & Technology and China Film Group Corporation, started operation in 2012 in Beijing.
DMAX, which aims to rival IMAX, has also witnessed fast expansion in China, with its market share rising fast.
"It is second only to IMAX in China," said Hou of EntGroup.
Poly Film Investment Co, a subsidiary of State-owned Poly Culture Group Corp, also started researching its PolyMAX big screen technology five years ago, and has a total of 10 PolyMAX big-screen cinemas nationwide now, according to Liu Debin, general manager of Poly Film.
"We plan to build more PolyMAX cinemas and are looking for more partners to apply our PolyMAX technology," Liu told the Global Times Tuesday.
Liu said China's market is huge and no cinema big-screen format is likely to monopolize the market.
IMAX has seen its revenue decline in China in the first quarter despite its fast expansion.
The total revenue for IMAX in China hit $10.5 million in the first quarter this year, compared to $11.03 million in the previous year, according to IMAX's first-quarter report.