Global box office income
Boon to producers but no guarantee of success: experts
The huge success of Wolf Warrior 2, a domestic film depicting the story of a member of the Chinese special forces heading a rescue mission of Chinese nationals in an African country, has sent the share price of its distributor up by 35 percent in four trading days.
The movie's success also brought to public attention a business model called the minimum guarantee distribution scheme, which experts said makes things easier for independent film producers but does not guarantee success at the box office.
Media reports said that Beijing Jingxi Culture & Tourism Co, which financed and distributed the film under the scheme, was the biggest winner behind the success of Wolf Warrior 2.
According to a stock exchange filing by the Shenzhen-listed Beijing Jingxi Culture & Tourism, Wolf Warrior 2 had earned 983 million yuan ($146 million) in box office revenue as of Sunday.
Over the weekend, the movie harvested $126 million in box office revenue globally, beating Christopher Nolan's Dunkirk, according to industry news site mtime.com.
The company explained that the filing was made as required by China's market regulators as the box office take had surpassed 50 percent of the company's operating revues in a single fiscal year.
The company's shares ended at 18.15 yuan per share on Tuesday.
According to the 21st Century Business Herald, the producer and distributor of Wolf Warrior 2 developed a tiered system in which the two sides divide the box office revenue.
The distributor will get 12 percent of ticket sales under 800 million yuan, 25 percent of the revenue that exceeds 800 million yuan but is less than 1.5 billion yuan and 15 percent of the revenue above 1.5 billion yuan.
Experts said the agreement reflects the fact that distributor had "skin in the game" when it bet that the movie would succeed under the minimum guarantee distribution scheme.
In the case of Wolf Warrior 2, the distributor "bets" that the movie would hit box office revenue of 800 million yuan.
An industry insider, who is familiar with the distribution business but preferred to remain anonymous, said that a movie usually breaks even when its box office is three times its production cost.
"The movie reportedly costs about 200 million yuan, so the distributor in this case 'guarantees' that the producer will make a profit of 200 million yuan," the person said. "But in the case of Wolf Warrior 2, apparently the distributor is the happy winner."
Industry experts said that the success of Wolf Warrior 2 has been a shot of confidence for market players when it comes to the minimum guarantee distribution scheme, as many had believed that golden time had passed.
The model had been gaining momentum in recent years, as a total of 13 movies were released under this model last year, compared with just a handful three years ago, according to the 21st Century Business Herald. However, movies distributed so far this year using this model have all failed to live up to expectations.
"People have said that the model went cold at the end of 2016, but now confidence in it has been restored," the anonymous insider said.
Chen Changye, a film industry analyst, said that under the model, independent producers could make films with bigger budgets with reduced financial pressure.
"The model is a boost to the domestic film business, encouraging producers and independent production company in particular. But the quality of the film still mainly depends on how the independent producer makes it," Chen said.
But the movie market is fickle, experts noted. "You can have a good film and a powerful distributor, but you don't have guaranteed success. A mix of factors decides the success of a film," the anonymous expert said.