5 Reasons Why China Buys Way More Online Movie Tickets Than US

“It’s like looking at crystal ball,” one executive tells TheWrap of China’s embrace of new technology

Last Updated: June 15, 2016 @ 4:18 PM

China’s appetite for movies continues to grow as “Warcraft” is still amassing record-breaking box office returns in the country despite weak ticket sales in the U.S.

The mushrooming theatrical business there — set to outpace the North American market by next year — is underscored by the country’s exponential rise in online movie ticket sales, which represent a whopping 80 percent of overall movie ticketing, according to multiple sources that spoke to TheWrap.

Right now in the U.S., online ticketing accounts for only about 25 percent of all domestic sales — though online purchases climbed 50 percent last year over the previous year, according to Box Office Mojo.

But before anyone reads the U.S. online ticketing market’s much smaller piece of the overall U.S. ticketing pie as failure, they need to know a few things first.

1. There’s a lot more competition among Chinese online retailers.
Online ticketing in China has enjoyed steep double-digit growth for each of the past three years. It’s a virtual overnight change — but it didn’t happen organically. Third-party companies forced the change.

Internet portal Tencent, online marketplace Alibaba, and web services company Baidu currently dominate the online ticketing space in China.

Shockingly, they’re all losing money in their online ticketing activities — on purpose. The companies are forfeiting short-term profits to gain valuable new users and customer data, using the lure of movies as a king of loss leader. The hope is that new customers will make other purchases on their respective sites.

2. It’s a whole lot cheaper to buy tickets online in China.
As a result of the competition, online promotions offer fire-sale deals on movie tickets — often below the price at the theater. “If a movie ticket in China is $18, you can probably get it online for $6,” Lawrence Wang, regional manager of Vista Group in Shanghai, told TheWrap. “And if the online ticketer has a promotion, you can buy it for $2.”

That’s far from what’s happening in the U.S., where service charges are typically added to online ticket purchases — just one of many reasons why most Americans still buy their tickets at the physical theater.

“The whole model changed in China,” said William Palmer, CEO of New Zealand-based film industry analytics firm Movio, a Vista subsidiary. “It’s like looking at crystal ball of what might happen in the U.S.”

3. Habits in the U.S. are entrenched.
It’s not that Americans aren’t using smartphones or going online, but many feel they don’t need to buy their tickets online. “Online ticket buying has been around for many years in the largest markets like New York and Los Angeles,” said Eric Handler, co-director at research firm MKM Partners.

But it’s not as necessary to book your seats in less populated areas, where seats are consistently available at showtime. As a result, many Americans stick to the way they’ve always gone to the movies — more on a whim, than on a schedule. “It’s a little more difficult to change consumer behavior,” Handler said.

Though certain high-demand movie titles, like last December’s “Star Wars: The Force Awakens,” break old habits and cause online ticketing to surge.

4. China’s market is young.
Newer technology habits have formed quickly in China. As the country moved away from mainly showing Communist propaganda films and started importing American films with more frequency in the past decade, moviegoing demand skyrocketed.

The market is in its infancy as new multiplexes, equipped with online ticketing capability, have popped up across the country. “There is a greater willingness among consumers to engage in online ticket buying,” added Handler.

And the new movie fans are being conditioned to make their purchases online.

5. There are tech hurdles in the U.S.
Since many North American movie theaters are older, it can take longer — and cost money — to upgrade facilities so that moviegoers can do things like reserve specific seats that are commonplace in younger markets such as China’s.

The U.S. online ticketing market is expected to double in the next few years, said Matthew Bakal, chairman of Atom Tickets, an upstart company that allows people to reserve their seats and order concessions within a messaging chat. “Most of that growth will be in mobile ticketing via smart phone.”

Fandango, which currently claims about half of U.S. online ticket sales and saw 81 percent sales growth in 2015, is also rolling out new innovations. Starting this fall, consumers will be able to purchase tickets via Apple Messages.