Theory and Evidence



Analyzing the Chinese Movie Market

through A Case Study of Wolf Warrior 2

by

Tianyu Xu

An honors thesis submitted in partial fulfillment

of the requirements for the degree of

Bachelor of Science

Business Honors Program

NYU Shanghai

May 2018

Professor Marti G. Subrahmanyam Professor Durairaj Maheswaran

Professor Yiqing Lu

Faculty Advisers Thesis Adviser

Table of Contents

1. Introduction 3

2. Literature Review 6

3. Comparing Wolf Warrior 2 with Wolf Warrior 9

4. Comparing Wolf Warrior 2 with Top 100 Movies in the Chinese Market 14

5. Comparing Wolf Warrior 2 with Other Movies Released in 2017 in China 18

6. Conclusions, Insights, and Suggestions 25

7. Bibliography 28

Introduction

In recent years, China has become one of the most important movie markets in the world. According to a press release by the Motion Picture Association of America (MPAA), back in 2012, the Chinese movie market has grown by 36% to become the second largest movie market in the world, surpassing Japan (). The Chinese movie market experienced rapid growth in the past decades. From 2003 to 2015, the average annual growth of the total box office in the Chinese market is more than 35%. In 2015, the total box office of the Chinese market is 43.9 billion yuan, with an annual growth as high as 49% (2015-2016 Chinese Film Industry Research Report). And according to China’s media regulator, the Chinese movie market is expected to become the world’s largest movie market by 2020 (China Film Insider). As a marketplace with such a strong significance and huge potential, it is worthwhile to study the characteristics of Chinese movie market and to find out the factors that may contribute to or negatively affect the success of a movie in China.

Speaking of successful movies in China nowadays, there is one movie that must be mentioned, which is Wolf Warrior 2. It is a 2017 Chinese action film directed by Wu Jing, who also starred in the lead role, co-starring Celina Jade, Frank Grillo, Hans Zhang, and Wu Gang. As a sequel to 2015’s Wolf Warrior, Wolf Warrior 2 continues the story of a Chinese soldier named Leng Feng, who executes special missions around the world. In this sequel, he goes to Africa alone for an evacuation mission, fighting with the local rebel army as well as the vicious western arms dealer (Wikipedia).

The phenomenal success of Wolf Warrior 2 is beyond people’s expectations and should go down in Chinese movie history. Released on 27th July, 2017, it has generated a box office revenue of more than 5.68 billion yuan in China, becoming the best sold movie in China ever. Compared to the first movie in this sequel which only generated 0.55 billion yuan of box office revenue, Wolf Warrior 2 has made 10 times as much as Wolf Warrior (Entgroup). The total box office for the whole year of 2017 in China, during which nearly 300 movies were released in saturation mode, is 55.9 billion yuan, while Wolf Warrior 2 takes up more than one tenth of that (Entgroup). Because of its exceptionally strong performance in the Chinese market, Wolf Warrior 2 became the second highest-grossing movie in a single territory, right after Star Wars: The Force Awakens, and it also became the first Chinese movie which is listed among the top hundred movies in the world.

Wolf Warrior 2’s success is surprising not only due to those compelling numbers, but because it can reach such an achievement even when the market is cooling down from an overheated stage. After 2015, the annual growths of the Chinese movie market decreased a lot, and the bubbles existed in the previous time were all broken. Especially in 2016, the Chinese movie market went through a rapid cooling with an annual growth of only 3.7%. Although in 2017, the growth rate went back to more than 13%, the overall environment of the Chinese movie market is not as hot as before.

This paper aims to gain some insights about the Chinese movie market through a case study of the movie Wolf Warrior 2 by analyzing the reasons behind its exceptional success, so as to provide some advice for the movies played in the Chinese market. Wolf Warrior 2’s success is caused by multiple complicated factors, of which some may be contingent, or in other words, unique, for this single movie, while some factors may be widely shared among many of other successful movies in the Chinese market. Understanding the uniqueness and inevitability, if any, of Wolf Warrior 2’s success will be helpful for the movies that will be released in China in the future.

The paper is organized as follows. Section 2 is the literature review. There are very few academic papers that discuss Wolf Warrior 2, so most of the articles I found are from newspapers or periodicals. I summarize the reasons for Wolf Warrior 2’s success proposed by these articles and illustrate how this paper is different from those articles. In section 3, I compare the performance of Wolf Warrior 2 with its first sequel. In section 4, I use statistical approaches to compare Wolf Warrior 2 and other well sold movies in the Chinese market to find their particularities and commonness. In section 5, I conduct quantitative market analysis by building statistical model with all the movies with saturation release in the Chinese market in 2017, to find the factors that determine the box office outcome of a movie. Section 7 concludes my findings from the previous sections. What’s more, I draw some insights about the Chinese movie market, and provide suggestions which may help the movies released in China in the future to perform better.

Literature Review

In the film review “Wolf Warrior’s X Factor” written by Li Nan, Wolf Warrior 2’s success is attributed to five factors, including “A dedicated cast, stunning audiovisual effects, a reality-based plot that also factors in patriotism, astute release timing and intensive road shows in second- and third-tier cities”.

The first three factors are about the production and the content of the movie, which seems to be one of the essential elements of its success in current Chinese movie market. From 2010 to 2015, Chinese movie market was overdeveloped and full of bubbles. For many movies, a large portion of the budget was given to attractive but underperforming actors instead of being used in the movie production. These shoddy movies can still have high box office because of the idolization of the actors among the younger generation of moviegoers. However, considering the rapid slowdown of the growth of Chinese movie market in 2016, Li Nan argues that most of the moviegoers are gradually returning to rationality now, and are tired of those movies with poor quality.

As for the last two factors, releasing time and the attention to second- and third-tier cities, Li Nan only gave a brief explanation from a qualitative aspect, saying that “the film hit the stalls ahead of the 90th founding anniversary of the Chinese People’s Liberation Army, the perfect time for a patriotic military film” and that “the road shows created direct communication between the cast and the audience, which was effective in pulling crowds”. I will further confirm these two factors in my quantitative analysis in sections 3 and 4.

In an article called “Why the Movie Wolf Warrior 2 Is So Popular?” by Huainan Weng, Wentao Liu, and Jinhui Wang, four reasons are listed. First, the whole story contains strong patriotism feelings, which arouse audience’s resonance. Second, it carries forward the spirit of heroism, and well handles the balance between the hero and the country’s power and prosper behind him. Third, the soft power of Chinese culture is growing with more confidence. Last but not least, wonderful storyline and sophisticated art production also contribute a lot to its success. The first two reasons indicate that Wolf Warrior 2 well catered to the audience’s emotion and taste. Similar analysis about the audience’s preferences is done in section 4, but in a quantitative way. I collect the data of top 100 movies with the highest box office in the Chinese market in recent years, and then compare them with Wolf Warrior 2. I believe these 100 movies can well represent the taste of the moviegoers in China. The third reason is quite interesting, but the authors only briefly mention it and seems to be too broad. I will incorporate it with the content of Wolf Warrior 2 and further discuss it in section 3. The last reason is much the same as one of the factors mentioned by Li Nan.

Many articles focus on the production and content of the movie when analyzing the reason behind its success. I agree that the production and content of a movie are essential factors to its success, but I will not do much further qualitative research on this part. This aspect has been closely analyzed in a qualitative way by many authors. Since I am not a movie expert, I cannot provide more insights about it, and I believe that it can somehow be reflected from certain statistics such as production budget and ratings.

I didn’t find many articles that dig deeply into the reasons behind Wolf Warrior 2’s success. And for all the articles I found, their analysis was done qualitatively without any support of data. What I’m going to do differently in this paper is to quantitatively analyze Wolf Warrior 2 by putting it together and comparing it with and other 100 movies which have the highest box office in China, and also with all the movies with saturation release in the Chinese market in 2017. In this way, Wolf Warrior 2 is put into the context of the market, and the analysis which depends on real numbers will be more valid and persuasive. But some extent of qualitative research is still involved in this paper when analyzing certain aspects which is hard to quantify, such as the government policy and the strategy used in the movie’s market campaigns.

Comparing Wolf Warrior 2 with Wolf Warrior

As the first sequel of Wolf Warrior 2, Wolf Warrior, which was released in 2015, resembles Wolf Warrior 2 a lot. They have the same genre, same director, and same lead actor, etc. But Wolf Warrior 2 achieved a box office which was 10 times as much as that of Wolf Warrior. Such great difference in box office is surprising and thus makes it vital to compare the performances of these two movies. Four elements are examined when comparing Wolf Warrior 2 with its first sequel. They are production, content, audience segmentation, and the performance in different tiers of cities.

Production and content are the two key elements of the quality of a movie, which can be indicated by indexes such as production budget, ratings, and audience’s feedback.

Wolf Warrior 2 has a much higher production budget than the first one and thus has better quality. The production budget for Wolf Warrior 2 is about 200 million yuan, while that of Wolf Warrior is only one fourth of that. Usually the overall budget of a movie is divided into four parts, “above the line (creative talent), below the line (direct production costs), post-production (editing, visual effects, etc.), and other (insurance, completion bond, etc.)” (Wikipedia). But I care more about the “production budget” which refers to only “below the line” and “post-production” two parts rather than the total budget, because they are directly involved in making movies. Like Li Nan mentioned in his movie review, for many Chinese movies, a large portion of the budget goes into the actors’ pocket, and how much an actor can gain is not determined by performance but by popularity. The above-the-line budget and other budget cannot represent the quality of a movie. Not many Chinese movies can have a real production cost that exceeds 100 million yuan.

Wolf Warrior 2 has a higher rating than Wolf Warrior and receives a lot of positive feedback from the audience, indicating its better production and content. For the ratings and feedback, the statistics are from Douban, which is the most authoritative movie rating website in China now, being regarded as Chinese version of the IMDb. Among the 0.5 million raters of Wolf Warrior 2, 57.4% of them gave four or five stars, which can be considered as good, or above average. This number is much higher than 45.6%, the percentage of raters who treat Wolf Warrior as a good movie. The average rating of Wolf Warrior 2 is 7.2, better than 70% of the other action movies; while the first sequel receives a score of 6.8, better than only 56% of other action movies (Table 1). 66% of the movie reviews that Wolf Warrior 2 receives are positive,

Table 1

Statistics of the Performance of Wolf Warrior 2 in Different Tiers of Cities in China

| |Wolf Warrior 2 |Wolf Warrior |

|Total raters |507146 |137689 |

|% of raters who gave 5-star |21.3% |13.8% |

|% of raters who gave 4-star |36.1% |31.8% |

|% of raters who gave 3-star |30.1% |39.1% |

|% of raters who gave 2-star |7.6% |10.6% |

|% of raters who gave 1-star |4.8% |4.8% |

|Average Rating |7.2 |6.8 |

|Better than % of other action movies |70% |56% |

Source:

while the first sequel receives only 53% of the positive feedback (Douban). Many of the reviews mention the well-shot and well-edited sophisticated fight scenes in Wolf Warrior 2 which are somewhat comparable to the Hollywood blockbusters.

The major difference of the content between Wolf Warrior 2 and the first sequel is the highlight of the Chinese personal heroism. In the Wolf Warrior, the heros are a group of soldiers from both China and the West, while Wolf Warrior 2 is regarded as the first China’s Hollywood-style heroes movie where the only hero is Chinese and the villains are Westerners. Such change is associated with Chinese ethnocentrism, or in other words, the growing confidence of the soft power of Chinese culture, referring to the article “Why the Movie Wolf Warrior 2 Is So Popular?”.

As for the target audience segmentation, I mainly examine the gender and age these two factors. Target Group Index (TGI) indicates that the gender distributions of the audience of Wolf Warrior and Wolf Warrior 2 are roughly the same. TGI is an indicator of the preference of the target group of people. TGI = 100 * Proportion of the group of people with a certain characteristic in the target group / Proportion of the group of people with the same characteristics in the total population (MBAlib). The base value of TGI is 100, representing the average level of preference. As is shown in figure 1, the two movies have similar TGI for the gender of the audience. It means that the audience for both movies are more consistent with male, by which we can infer that the gender distributions are similar for both movies.

[pic][pic]

Figure 1. Target Group Index of male and female audience of Wolf Warrior & Wolf Warrior 2. Source:

The age distribution of the audience of Wolf Warrior and Wolf Warrior 2 are still similar (figure 2). They are much more popular among young adults (aged from 20 to 29). The audience’s ages of Wolf Warrior are more concentrated than that of Wolf Warrior 2. From the first one to the second one, the age group of target audience are expanding, which leaves it the space of potential for greater gross.

[pic][pic]

Figure 2. Age distribution of the audience of Wolf Warrior & Wolf Warrior 2. Source:

Comparing to Wolf Warrior, Wolf Warrior 2 performs better in Tier 3 to Tier 5 cities, where there is higher box office potential. Table 1 shows the performance of Wolf Warrior 2 in different tiers of cities, and table 2 shows the that of the first sequel. Here “other cities” are the combination of Tier 4 and Tier 5 cities. And the way I measure box office potential is by comparing the local box office revenue with the local GDP. GDP represents the development of local economy and indicates the social wealth level, while the local box office revenue shows the amount of money that local people spend on movies. The lower the proportion of box office

Table 2

Statistics of the Performance of Wolf Warrior 2 in Different Tiers of Cities in China

|　 |Tier 1 Cities|Tier 2 Cities|Tier 3 Cities|Other Cities |Total/ |

| | | | | |Average |

|Screening (thousand times) |483.4 |1419.9 |897.1 |1355.6 |4156.0 |

|Number of Audience (million) |24.0 |61.1 |33.1 |41.2 |159.4 |

|Average Ticket Price (yuan) |43.3 |36.4 |33.5 |31.9 |35.6 |

|　 |

|Total Population (million) |88.5 |267.0 |295.8 |723.3 |1374.6 |

| Total Population % |6.4% |19.4% |21.5% |52.6% |　 |

|Total GDP (billion yuan) |10110.0 |22275.3 |18280.4 |17979.3 |68645.0 |

| Box Office / GDP (* 0.001) |10.3% |10.0% |6.1% |7.3% |8.3% |

Source: , 2016 China Statistical Yearbook

Table 3

Statistics of the Performance of Wolf Warrior in Different Tiers of Cities in China

|　 |Tier 1 Cities|Tier 2 Cities|Tier 3 Cities|Other Cities |Total/ |

| | | | | |Average |

|Screening (thousand times) |70.0 |234.0 |136.0 |196.2 |636.2 |

|Number of Audience (million) |2.3 |7.0 |3.2 |3.2 |15.8 |

|Average Ticket Price (yuan) |41.0 |34.0 |32.4 |32.2 |34.3 |

Source:

revenue in GDP is, the higher box office potential the city has. From the two tables, we can see that both two movies generate the largest proportion of box office in Tier 2 cities and has the highest ticket price in Tier 1 cities. Tier 1 cities have the highest economic development level among all the cities in China and thus have a higher consumption level and price level. The movie markets in Tier 1 and Tier 2 cities are both well developed and close to saturation, while Tier 3 and other cities have greater box office potentials. The box office distribution of Wolf Warrior 2 in different tiers of cities is more even than the first sequel. Whether in terms of the screening times, number of audience or the box office, Wolf Warrior 2 performs better in the Tier 3 to Tier 5 cities. In Li Nan’s review, he mentions that the main crews of the movie had intensive road shows in Tier 3 cities. And through online advertising, it is much easier to reach more people from small or remote cities nowadays. Instead of competing with other movies and squeezing profits from those developed movie markets, Wolf Warrior 2 puts more attention to those fast-developing movie markets which have great box office potential. This strategy seems to work well.

Comparing Wolf Warrior 2 with Top 100 Movies in the Chinese Market

In this section, I want to compare Wolf Warrior 2 with the other movies which perform as the top 100 in the Chinese market, trying to find some patterns that Wolf Warrior 2 shares with these successful movies and the its uniqueness. By “best performance”, I specifically refer to the box office performance, in other word, the gross income, because it is always one of the most significant terms in the business world. The reason I didn’t choose profit is that it is too difficult to calculate a movie’s cost, which includes many complex items like marketing spending and actor’s commission besides the production cost. These one hundred movies are not necessarily produced by Chinese production teams. They can come from anywhere over the world. But I focus on their performance merely in the Chinese market. My decision variable is a movie’s total box office achievement in the Chinese market. In the data set, I also include variables such as genre, production country, and statistics such as first weekend gross, ratings, released data etc. All the numbers are up to December 14th, 2017. I believe these 100 movies can well represent the preferences of the moviegoers in China. By comparing Wolf Warrior 2 with them, we can get some clues about the reasons of its success.

Action movies may be more successful in China than other types of movies. Figure 3 summarizes the genre of each movie in the top 100 list. The total number in figure 3 exceeds one hundred because some movies have more than one type of genre, for example, the movie Transformers is counted as both sci-fi and action. Among the top 100 movies in Chinese movie market, over half are action movies (figure 3), suggesting Chinese moviegoers’ strong preference and wide acceptance to such a genre. 62.5% of these best sold action movies come from the United States, generating a total box office of more than 36 billion yuan in China, and most of

[pic]

Figure 3. Distribution of genres of the top 100 movies in Chinese market. Source:

them are superhero movies. It proves the strength of Hollywood superhero movies in the Chinese market.

Chinese moviegoers have great passion and interest in Hollywood blockbusters. Among these 100 movies, 47 of them are from the United States, with an average production budget of about 150 million dollars, which is over 1000 million yuan, while the average production budget of Chinese movies in top 100 is around 150 million yuan. According to the Oneway Anova Analysis (figure 4), the ratings for the U.S.movies are statistically significantly higher than that

[pic]

Figure 4. Oneway analysis of ratings by country for the top 100 movies. Source: ,

of Chinese movies. Usually a movie is more likely to be successful in the domestic country, especially in China, where the government sets the annual movie import quota to protect the domestic productions, but many Hollywood blockbusters still have strong performance in China, suggesting their popularity in the Chinese market. As I mentioned in section 3, Wolf Warrior 2 is one of the very few movies whose qualities can be compared to the Hollywood blockbusters, and it is also the first China’s Hollywood-style superhero movie. Wolf Warrior 2 perfectly seizes the appetite of the Chinese moviegoers, therefore, its success is, to some extent, an inevitable outcome.

Speaking of releasing month, there are two peak periods of movie release in China which are during summer vacation and around the Chinese New Year (figure 5). Movies released

[pic]

Figure 5. Number of Top 100 Movies in Each Month. Source:

during these two periods have greater box office potentials because of more available potential moviegoers. One of the major groups of moviegoers, students, are free from school during these two periods. And watching a movie together with the family to embrace the New Year becomes a new trend these years in China. Wolf Warrior 2 was released in late July in 2017, right before the ninetieth founding anniversary of the Chinese People’s Liberation Army, which was a perfect time choice. The story of the movie is closely related to the Military theme with a strong patriotic spirit, so the Chinese government, as well as the mainstream media, also helps to advocate this movie.

Comparing Wolf Warrior 2 with Other Movies Released in 2017 in China

Besides the one hundred best-selling movies, I also conduct an analysis of the performance of the Chinese movie market specifically in 2017, the year when Wolf Warrior 2 was screened, to better understand the overall environment of the market. During the analysis, I include all the movies that adopted super saturation releasing strategy in China in 2017. Saturation release means that the movie “at least will be available in one out of two theatres in all major areas” (Timelockfilm). Movies with limited release are not taken into consideration, because they are not comparable with widely released movies, and the information about those movies is very limited. There are 266 movies in total that match the filter conditions. Sixteen of these movies which were released in December continued generating box office revenues in 2018. Although part of their box office revenue was generated in 2018, I still take this part into account because what matters to me is the release date but not the screening time, and it is difficult to figure out the exact screening period for a movie. For a few popular movies like Wolf Warrior 2, it is likely that their total screening time is as long as one year or even more than one year. After the saturation releasing period which normally lasts for one or two months, these popular movies may be screening occasionally in a limited number of theaters for a long time, but this part of box office revenue is too insignificant to be taken into consideration.

On average, imported foreign movies are more competitive in both the box office outcome and word of mouth than Chinese movies. Out of the 266 movies, 176 movies, which is about 66% of the movies, are produced by Chinese production teams, but the box office revenue of Chinese movies only accounts for 50.5% of the total box office revenue (table 4). Both the average box office and ratings of the 176 Chinese movies are below the average of all the movies. One reason of this phenomenon is that the Chinese government applies a quota for movie import.

Table 4

The performance of each country’s movie in Chinese market in 2017

|Production |Number of Movies |% of Number of |Box Office |% of Total Box |Average |Average |

|Country |Released |Movies |(million RMB) |Office |Box Office (million |Douban |

| | | | | |RMB) |Rating |

|U.S. |48 |18.05% |21867.98 |39.07% |455.58 |6.9 |

|U.K. |10 |3.76% |982.63 |1.76% |98.26 |7.4 |

|Japan |9 |3.38% |488.98 |0.87% |54.33 |6.7 |

|France |5 |1.88% |110.18 |0.20% |22.04 |6.4 |

|Cooperation |5 |1.88% |2375.30 |4.24% |475.06 |6.6 |

|Russia |4 |1.50% |54.91 |0.10% |13.73 |5.3 |

|Spain |2 |0.75% |186.95 |0.33% |93.48 |8.0 |

|German |2 |0.75% |5.88 |0.01% |2.94 |6.6 |

|India |1 |0.38% |1299.12 |2.32% |1299.12 |9.1 |

|Australia |1 |0.38% |17.17 |0.03% |17.17 |7.4 |

|Thailand |1 |0.38% |270.66 |0.48% |270.66 |8.2 |

|Canada |1 |0.38% |43.20 |0.08% |43.20 |6.1 |

|Mexico |1 |0.38% |4.83 |0.01% |4.83 |5.2 |

|Sum / Average |266 |100.00% |55972.29 |

|Action |53 |554.64 |6.1 |

|Comedy |53 |187.11 |5.2 |

|Drama |48 |141.74 |6.5 |

|Animation |44 |101.63 |6.3 |

|Romantic |39 |118.33 |5.2 |

|Crime |30 |228.83 |6.2 |

|Fantasy |22 |422.75 |5.9 |

|Horror |17 |25.31 |3.8 |

|Sci-fi |16 |374.87 |6.1 |

|Adventure |11 |451.74 |6.6 |

|Mystery |8 |116.50 |6.0 |

|History |7 |91.16 |6.5 |

|Documentary |6 |68.71 |8.3 |

|Thriller |6 |138.30 |5.5 |

|Music |5 |154.69 |7.3 |

|War |4 |107.85 |6.4 |

|Average |23 |205.26 |6.1 |

Source: , Box Office Mojo, Douban Movie

a preference for Hollywood action blockbusters to a large extent. Other than action movies, fantasy and adventure movies also have relatively higher average box office revenues. On the other hand, horror movies have the worst performance in terms of box office revenue and word of mouth.

Movies released in January and July tend to obtain higher box office revenues (table 5). They were not only released during the summer or winter breaks, most of their screening time was also within the period of the break. Usually people go to the theaters more often during the breaks, which are the peak periods for the movie market, and the theaters may adjust the ticket price accordingly. In the meantime, the competition between the movies matters. If there are too many movies released in the same month, especially when some of the movies have similar genre and target audience, the audience will be shunted, and the performance of the movies may be hurt. June and December are the two months with the most new movie releases, but the

Table 6

The Performance of Movies in Chinese Market in 2017 by Release Month

|Released Month|Number of Movies |Average |Total Amount of |Average Amount of |Average |

| |Released |Box Office (million |Audience (million) |Audience per Screening |Ticket Price |

| | |RMB) | | | |

|Jan. |21 |329.65 |188 |12.33 |32.68 |

|Feb. |14 |242.08 |98 |14.01 |32.99 |

|Mar. |18 |219.40 |118 |8.34 |31.64 |

|Apr. |17 |259.16 |125 |11.96 |31.74 |

|May |26 |148.80 |117 |9.80 |31.63 |

|Jun. |28 |136.83 |109 |11.02 |31.39 |

|Jul. |20 |447.57 |256 |11.68 |32.50 |

|Aug. |20 |151.30 |87 |14.91 |32.18 |

|Sept. |24 |272.64 |193 |10.28 |31.41 |

|Oct. |21 |77.50 |49 |7.54 |31.32 |

|Nov. |25 |129.91 |96 |7.37 |32.51 |

|Dec. |32 |194.05 |183 |9.78 |30.71 |

|Average |22 |210.42 |135 |10.75 |31.89 |

Source: , Box Office Mojo

average box office revenues for the movies released in these two months are not high because of the intense competition. Wolf Warrior 2 was released in July where there were 20 new movies released in that month, of which only two were action movies (figure 5). Since different types of

[pic]

Figure 5. Number of Action Movie Released in Each Month. Source:

movies may target different audience segments, Wolf Warrior 2 did not face too much competition and therefore had great market share and box office potential.

Wolf Warrior 2 seizes the great potential in the movie markets of less-developed cities. 39.34% of its total box office is generated in Tier 3 and other cities, while that number is 42.48% on average (table 7). Compared to the average, the proportion of Wolf Warrior 2’s box office

Table 7

Comparison between the Box Office Distribution of Wolf Warrior 2 in Different Tiers of Cities and that of Other Movies Released in 2017

|　 |Tier 1 |Tier 2 |Tier 3 |Other |

| |Cities |Cities |Cities |Cities |

|Wolf Warrior 2 |18.30% |39.23% |19.51% |22.97% |

|Average of |20.42% |40.27% |18.84% |20.50% |

|All the Movies | | | | |

Source:

revenue made in Tier 3 and other cities is 8% higher. In developed cities, i.e., Tier 1 and Tier 2 cities, the movie markets are close to saturation, where the population of moviegoers is becoming steady and the number of theaters is also stabilized. In these markets, it is unlikely for a movie to obtain a box office which is far beyond the expectation, because the market size is reaching its limitation. However, in less-developed cities, i.e. Tier 3 and other cities, the movie markets are still under the rapid growth phase. In recent years, many new theaters are built and widely spread in these cities, making theaters more available to the public, and more and more people are becoming regular moviegoers. Due to the quickly-expanding market size, there is huge box office potential in these cities.

After analyzing these factors alone, I use linear regression model and regression tree model to put all the variables together and further analyze their significant level. In the linear regression model (figure 6), three variables are statistically significant: whether the movie is an action movie, the production country, and the rating from Douban. Compared to the box office of non-action movies, the box office of action movies are 192 million yuan higher in estimation. Compared to the movies produced in China, the movies from the United States may have a box office revenue of 181 million yuan higher, while the box office of movies from other countries

[pic]

Figure 6. Linear Regression Model

may be 105 million yuan lower on average. A one point increase in rating is associated with a 58 million yuan increase in the box office, if holding other covariates constant. In the regression tree model where the Complexity Parameter is 0.001 (figure 7), whether the movie is an action or not is the most important factor, and generally action movies have higher box offices than non-action ones. Ratings, release month, and production countries are also important variables here. For

[pic]

Figure 7. Regression Tree Model

non-action movies, those whose ratings are higher than 5.5 have a relatively higher box office than other non-action movies in general. For action movies, it is the release month that matters more for their box office outcome. Although the two models are not well fitted for all the data points because of their low R-squared, they are still meaningful for us to figure out which factor may affect more of a movie’s box office outcome.

Conclusions, Insights, and Suggestions

Wolf Warrior 2’s exceptional success is slightly unexpected in a gradually cooling down market, but according to my analysis in the previous sections, it is a reasonable outcome. There are three factors that contribute the most to its success. First and foremost, it is the first sophisticated, Hollywood-style Chinese superhero action blockbuster. Chinese moviegoers have great interest in action movies, especially Hollywood action blockbusters. And now they are tired of watching movies with popular stars as the main actors but have poor quality. Wolf Warrior 2 caters to the audience’s preference and thus receives high box office as well as good word of mouth. Second, Wolf Warrior 2 has chosen a perfect release time where there was not much competition with similar types of movies. The release date was near the 90th founding anniversary of the Chinese People’s Liberation Army, which fits the theme of the movie, and the movie was largely advocated by the Chinese government in the mainstream media because of this. Third, Wolf Warrior 2 not only cared about big cities, but also put a lot of attention to those less-developed small cities. Although big cities have a huge moviegoer base, the growth rate of the movie markets there is much flatter than the growth rate of movie markets in small cities. Seizing the opportunity in the fast-expanding markets enabled Wolf Warrior 2 to achieve a box office revenue which is higher than expectation.

Through analyzing the success of Wolf Warrior 2, we can gain some insights about the current Chinese movie market and thus provide some suggestions to the movies that are going to be released in China in the future. In the past few years, there was an upsurge in the movies starring by popular but underperforming stars. Many people, especially the younger generation, were attracted by the appearance of those pop stars and thus had more tolerance to their poor acting skills. Many groupies might even buy a dozen tickets without using them merely to support the box office of their idols’ movies. It was likely that a movie received terrible ratings or reviews but obtained a very successful box office revenue. Some directors would spend most of the movie budget on hiring actors, rather than improving the movie production process. However, the Chinese movie marketing is gradually changing now. More and more people are returning to rationality, caring more about the overall quality of a movie instead of merely the stars. This is a warning signal for the movie producers that making a successful movie is not as simple as inviting popular stars to be the actors, and that paying a huge amount of money to these stars is risky. They should pay more attention to enriching the content and improving the production quality of the movies.

Other than the quality issue, some Chinese movie production teams are criticized for copying the skills or patterns from foreign movies, especially Hollywood movies. Although Wolf Warrior 2 has embedded Chinese culture into the story, it still has the problem of imitation since its story-telling method resembles the Hollywood style to a certain extent. This is why Wolf Warrior 2 is only successful inside China but not internationally. Robert McKee said that if Chinese movies keep imitating Hollywood movies blindly, they are not likely to be successful throughout the world (). Imitation may be a shortcut that can get you closer to the success, but innovation and creativity are the essential keys of being truly successful.

In addition to the movie itself, the marketing strategy for a movie is also important. How to better promote a movie to make it more competitive and get more market share is always the question for the movie promotion team. Based on my previous analysis, I think movie promotion teams should put more effort into promotional activities in less-developed small cities. There is much more potential in the movie markets in these cities since the markets there are still far from saturation and are expanding quickly. Advertising movies in these small cities is cheaper and thus may have a higher payoff ratio than advertising in big cities. But the problem is that this marketing strategy will not be effective in the long run, because these movie markets will also get close to saturation in the near future. What’s more, the choice of release time also matters for a movie’s box office. The peak time of movie watching every year is during the summer and winter breaks, so many movies choose to release during that period, causing a more intense competition in the market. There is always a trade-off here. Besides the peak periods, it is wise to release a movie near certain a day or festival which is related to the theme of that movie. If a movie can be tied with a certain campaign, releasing it near the time of the campaign can help the movie get more free media exposure, just like what Wolf Warrior 2 did.

The Chinese movie market is currently under a stage of upgrading and transformation, where the opportunities and challenges coexist. Compared to the developed movie markets like the United States, the Chinese movie market still has a relatively high annual growth, but not as high as the growth of a few years ago. Wolf Warrior 2 is a good example of the movie that seized the opportunity and achieved huge success. There will be more and more movies with high quality, so the competition will intensify. Such a healthy competitive environment is a great motivation for the movie production teams to improve themselves and make better movies.

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