Investors got excited in early June over reports that The Walt Disney Co. (NYSE:DIS) and Chinese Internet TV company Youku Tudou (NYSE: YOKU) inked a deal for exclusive online marketing rights for Marvel movies in China. Unfortunately, Youku then sent out a press release on June 5th stating that the deal was just speculation and that no such exclusive rights have been granted, though Youku plans to continue being a major distributor for Marvel.
This deal is a bust, but the opportunity for Disney to generate huge revenue in China with its Marvel films is still very real.
Just how important is the Chinese film industry?
Audiences in China already have a taste for Hollywood action movies. The most recent Marvel release, Marvel: Age of Ultron, has grossed $910 million at foreign box offices so far. Over $155 million of that is from China, by far the largest foreign box office for the movie and twice the size of the next largest country, South Korea. The best part -- this Marvel fan base is set to grow much larger in the years to come.
The percentage of middle class (earning $9,000 to $34,000 USD annually) will jump to 75% of urban Chinese by 2022 from just 4% in 2000, according to McKinsey. With this massive increase in consumers with greater discretionary income, the film industry in China continues to explode. Total box office revenue in China is projected to surpass the U.S. by 2017 and double it by 2025.
Much more Marvel to come
Even though there may not be an exclusive partnership as speculated, Youku is still important to growing the Marvel Universe in China. According to the company, its marketing efforts were a major driver behind the popularity of the most recent three Marvel releases in the region. That extra push will be great for total revenue as Disney prepares to release 11 more Marvel movies over the next four years. According to DenOfGeek.us, the current release schedule will resemble the list below:
- July 17, 2015: Ant-Man
- May 6, 2016: Captain America: Civil War
- November 4, 2016: Doctor Strange
- May 5, 2017: Guardians of the Galaxy 2
- July 28, 2017: The Spectacular Spider-Man
- November 3, 2017: Thor: Ragnarok
- May 4, 2018: Avengers: Infinity War Part 1
- July 6, 2018: Black Panther
- November 2, 2018: Captain Marvel
- May 3, 2019: Avengers: Infinity War-Part 2
- July 12, 2019: Inhumans
The timing of these new releases coincides perfectly with the rising prominence of the Chinese box office, and Disney is like well-aware of the opportunity there.
One more reason to celebrate
Disney logged a great 2014, thanks largely to domestic growth in its theme parks, media networks, and consumer products segments. Yet when it comes to international revenue, such as Chinese box office receipts, the company has struggled with the rising value of the U.S. dollar. When Chinese sales are converted back to dollars, those sales are depressed by the unfavorable exchange rates, an effect that international companies have grappled with broadly.
However, if the currency situation normalizes, then Disney box office receipts in China will only look more impressive and make a bigger contribution to the bottom line. All together, the Marvel universe has a lot to gain in China, and investors should continue to be excited about how this blockbuster franchise will grow in that market.