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Why Is China Such an Important Market for Disney?

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China: An important movie market for Disney

The Walt Disney Company’s (DIS) new animated film, Zootopia, seems to be doing very well at the box office. According to The Hollywood Reporter, Disney’s Zootopia crossed $300 million at the global box office on March 11. The movie had earned $25 million at the Chinese box office by March 12 and is expected to cross the $100 million mark in China (FXI).

As the chart above indicates and according to Statista, Disney’s Zootopia earned $23.5 million at the Chinese box office in the week between February 29 and March 6, 2016, and was ranked second at the box office in China, beating Chinese movies. This indicates that China is becoming an increasingly important market for Disney movies.

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Disney intends to “leverage” its box office success

At a Deutsche Bank investor conference early this month, Disney stated that the company believes that its box office success in China can be “leveraged” successfully across its other businesses.

Piracy is a dominant issue in China when it comes to consumer merchandise. However, Disney believes that the growing Chinese population and success of Disney movies creates an opportunity for the company to sell its licensed merchandise at “affordable” prices in China. However, Disney considers censorship in China to be a big hurdle when it comes to television. Censorship issues have also been a hindrance for companies such as Netflix (NFLX).

Chinese regulations prevent Disney from launching a channel in the country. This is one reason the company has tied up with Alibaba (BABA) to launch DisneyLife and Tencent Holdings (TCEHY) to distribute its ESPN sports programming in China. Netflix makes up 0.86% of the PowerShares QQQ ETF (QQQ). QQQ holds 4.7% in the television sector.

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