The 30-percent drop of China’s stock market that wiped out $3.2 trillion in market value, but also rebounded on July 9, has reminded Hollywood investors of the volatile nature of the market.
Although box-office revenue has so far not been affected, since entertainment companies' exposure to China is mostly in the form of box office, investors have learned some lessons from the plunge of the country's stock market.
During the period when the market is in its biggest declines, "Jurassic World" still earned more than $230 million in China, which means that the box office is set to become more important as investment in the industry.
"I do not expect any significant impact on the film business due to the stock-market slide. It may affect some productions, but most production money is not from public companies," Jimmy Wu, founder and CEO of the Lumiere Pavilions theater chain, told The Hollywood Reporter.
According to the report, Chinese box-office revenue is rising by 30 percent a year, and experts expected that expansion will continue as film quotas will be lifted in the coming years.
"China is still going to explode in box-office terms to two or three times its current size," Wu remarked.
"Attendance in 2014 was 830 million, meaning individual residents in China only watched half a movie for the year. By lifting the import quota, the number of movies showing in China can easily increase to 600-plus, which means the average individual will watch one movie a year and box office will be over 60 billion yuan ($9.66 billion)," Wu added.
According to the report, Hollywood is also anticipating a big Chinese company to buy a Hollywood studio and they are looking at U.S. stock market-listed e-commerce giant Alibaba.
Jack Ma, Alibaba's founder and executive chairman, has expressed intention to become a major industry player internationally and has described Alibaba as "the biggest entertainment company in the world." He visited Hollywood last year.
But investors' sentiments have been affected as they fear that the Chinese crash might spread, which drove the stock to an all-time low during the week and rebounded only on July 9, Thursday.
Alibaba Pictures, the group's film unit that trades in Hong Kong, posted a 37.9-percent increase on July 8 after a decline of 5.6 percent the day before.
Li Daxiao, chief economist at Yingda, believes that the recent hit to Alibaba's market capitalization would make acquisitions unlikely for now, although the company's fundamentals remain strong.
"Alibaba is still a very promising and powerful company," Li said. "I don't think the stock pullback will have any influence on its normal business. In terms of acquisitions, if it is to make a deal with its market value, the stock crash might have some influence."
Li added: "Like Alibaba, [our market] was going too fast, and now there is a pullback. This is just normal. There is no need to panic."