China’s entertainment industry is reeling from the coronavirus, which has resulted in the temporary closing of Disneyland Shanghai (and also in Hong Kong) and nearly 70,000 movie theaters. This setback comes in the midst of the Lunar New Year, China’s most lucrative moviegoing season, which began on January 25. China, the second largest film market in the world after the U.S., accounts for 33% of global box office sales, according to CNBC, and generated about $9.2 billion of last year’s $42.5 billion worldwide sales. American film studios hasn’t been affected yet because non-Chinese films can’t be released during the holiday period. However, if things aren’t under control soon, there could be a $1 to $2 billion loss worldwide, according to The Hollywood Reporter.
“The good news is calendar Q1 is not a huge calendar for the [North American] box office, so there’s not a lot of big titles that are coming out, but if this stays an issue until June, there will be other films from other studios impacted,” Alexia Quadrani, JP Morgan analyst, explained to CNBC.
For example, China makes up about 30% of IMAX’s revenue, and CNBC reported that the company lost an estimated $20 million in the first week of closures—a figure that analysts say could lead to a consistent $9 million per-week loss going forward. Disney’s Mulan, for instance, which is depending on a vigorous showing in the Chinese market, could be in trouble if this shutdown is still going on in March. Any American film that suffers a delay in release because of the shutdowns would face stiff competition from homegrown Chinese blockbusters when it searches for a new opening date.
As for what the indefinite shutdown of those Disney theme parks could mean, to put things into perspective, Hong Kong Disneyland remained open during the protests last year. According to Quadrani, the park lost $80 million the fiscal first quarter of 2019, and that was with some revenue still coming in. It will be much grimmer now that the parks are closed.
The ripple effect hasn’t hit the United States just yet, but if the shutdown continues through February and March, then it’s likely American entertainment companies will be feeling the pinch. Think of it like losing multiple Super Bowl-size audiences. The numbers will add up, and not in a good way.