Movie theaters declining, screens slightly increasing, domestic cinema chains entering "stock optimization" phase

The pilot program has received a pretty good response, and we are already studying how to extend the service further," said Zhou Minghui, manager of Times United Cinema at Xitian City, Hangzhou (referred to as “Times United Cinema”), to Securities Times reporters. In late February this year, Times United Cinema launched an innovative service: viewers dissatisfied with their experience can request a 40% refund within 20 minutes of the movie starting.

This service has triggered an unexpectedly strong response. Zhou Minghui admitted that the launch of this service was partly due to intensified market competition, with cinemas seeking to explore differentiated business strategies; and partly to genuinely improve the movie-going experience for audiences.

In recent years, domestic annual box office revenue has consistently hovered around 50 billion yuan, with overall theater occupancy rates fluctuating downward. Amid fierce competition, some cinemas have chosen to exit the market, and this year the number of cinemas in China has decreased; many others are upgrading equipment and optimizing services to retain audiences.

Number of Cinemas Decreasing

The period after the Spring Festival each year is typically a peak for cinema closures. Since February this year, cinemas in multiple regions have announced closures. Data from Top Consulting shows that, as of now, over 300 cinemas have suspended operations this year. The total number of operational cinemas in China is 13,341, down 280 from the end of 2025 when there were 13,621.

For example, in Wuhan, since March, several cinemas have closed, including Wuhan Lainer Wanlong Cinema, China Film Starry Sky Cinema Wangjiawan Branch, and Huayi Brothers Cinema Wuhan Huangpi Branch. The Huayi Brothers Cinema Wuhan Huangpi Branch, which has been open for 15 years, plans to close on April 6.

China’s cinemas previously experienced several years of rapid growth. In 2018, the total number of cinemas in China first exceeded 10,000, reaching 10,517. By the end of 2019 and 2020, this increased to 11,470 and 12,000 respectively. However, growth has slowed significantly in the past two years, and this year the number has even begun to decline.

Data source: Top Consulting

“By 2026, the decline in the number of cinemas in China is an inevitable result of the industry shifting from expansion to stock optimization,” said Cheng Fei, CEO of Top Consulting.

Cheng Fei further analyzed that on one hand, the number of screens in China is still growing moderately, with 51% of new cinemas being built in third-, fourth-, and fifth-tier cities, reflecting that sinking markets remain a key focus; on the other hand, in 2025, 740 cinemas closed, and the number of cinemas is expected to decline in 2026. Coupled with leading theater chains suspending light-asset franchise models and focusing on direct operations, this indicates the industry has moved away from blind expansion and entered a rational adjustment period characterized by reduced quantity and improved quality.

Cheng Fei believes that there is currently a structural surplus of cinemas in China. Although the overall number is high, distribution is uneven. First- and second-tier cities have dense cinema layouts, with some areas experiencing over-competition, while third- and fourth-tier cities and rural areas still have large market gaps. The current stable total volume and structural adjustments are market self-corrections for supply and demand imbalance.

Film producer, supervisor, and planner Tan Fei also told reporters: “Overall, the number of cinemas is quite saturated, and the market may not support so many theaters, so the decline in total cinema count is normal and aligns with industry patterns.”

Low Attendance Rates Persist

Cinemas are typical capital-intensive projects. Wanda Cinema, a leading A-share theater chain, previously disclosed an investment plan to build 162 new cinemas with 1,258 screens. The construction cost per screen can reach 2.5 million yuan, and a cinema with eight screens alone costs about 20 million yuan to build.

Operating costs for cinemas are also substantial. Industry insiders say that fixed costs include venue rent, labor, equipment depreciation, and renovation amortization, which are often difficult to reduce.

Correspondingly, the revenue sources for cinemas are relatively limited. Currently, domestic cinema revenue mainly depends on box office sharing. Under the current distribution mechanism, a 50-yuan movie ticket, after taxes and shares with film studios and theaters, results in the cinema only receiving about 20 yuan. When box office revenue is low, operating costs cannot be covered.

The reality is that as the number of cinemas increases, the average attendance rate has been declining in recent years. Data from Lighthouse Professional Edition shows that in 2019, the attendance rate was 10.9%. Since 2020, it has remained below 10%, with a rate of 7.1% in 2025, and only 6.6% since 2026.

On March 11 this year, the Fai Wang Cinema in Baoshan District, Shanghai, closed. This cinema has 7 screens and 839 seats. During its peak in 2019, it earned over 7 million yuan annually, with an attendance rate of 14.5%. By 2025, its box office had fallen to 3.39 million yuan, and the attendance rate dropped to 5%.

“We usually go to the movies, and unless it’s a major release, there are often only one or two people in a theater. During peak periods like the Spring Festival, it’s a bit better, but cinemas can’t rely solely on these peak times to ‘fill the seats’,” Tan Fei said. The current attendance rate is not enough to support healthy industry development.

In response, some theater companies have prioritized controlling operating costs, especially for cinemas where rent accounts for a large portion of expenses. Some chains have proposed rent reduction targets and are negotiating directly with landlords to lower fixed costs and improve per-store profitability.

Hengdian Film and Television, in its 2025 annual report, mentioned that the company is focusing on reducing rent across regions, implementing energy-saving upgrades, centralized procurement, strengthening equipment preventive maintenance, and optimizing organizational structure to improve labor efficiency, significantly lowering daily operating costs.

Trying to Be “Different”

“Film, as a form of entertainment and cultural consumption, still plays an irreplaceable role. The market still needs movies. Whether providing audiovisual enjoyment or serving as social entertainment venues, cinemas’ status is irreplaceable,” Tan Fei said.

Besides cost-cutting, many industry practitioners are actively exploring other ways to retain more viewers. Recently, Times United Cinema in Hangzhou gained market attention for a service initiative. From March to April this year, the cinema trialed a movie experience guarantee service: if viewers are dissatisfied within 20 minutes of the film starting, they can request a 40% refund.

“Among the cinemas around us, including our own, there are about seven theaters. We are one of the older cinemas, so the competition pressure is quite high. After investing heavily in hardware and equipment upgrades last year, we also started improving our service,” Zhou Minghui explained. As a terminal screening venue, cinemas cannot control film quality, but they can enhance service to improve customer experience and retain patrons.

Under fierce market competition, leading theater chains are not only reducing costs and optimizing services but also increasing resource investment to develop diversified formats.

Wanda Cinema has focused on creating “super entertainment spaces” in recent years. The company has gradually introduced new consumer brands like Haoyun Coconut, 52TOYS, and Paili Cube into theater lobbies, aiming to leverage the scene-setting power of movies to turn cinemas into offline hubs connecting Generation Z’s interests and social activities.

Shanghai Film last year launched the country’s first anime-themed cinema and simultaneously developed “Yingyuan Society,” a venue designed to offer a theme park-style consumption experience. A Shanghai Film representative told reporters that these initiatives aim to extend audiences’ stay before and after movies, enhancing immersive experience and social belonging, which is part of the company’s effort to evolve cinemas from screening venues into cultural consumption destinations.

Cheng Fei believes that, given the current situation, cinemas need to shift from scale competition to value competition. Feasible paths include technological upgrades, enhancing differentiated experiences, promoting multi-format integration, and increasing non-box office revenue.

On the technological front, he cited that in 2025, box office revenue from domestic special effects theaters increased by 48.5% year-over-year. IMAX and other high-end theaters averaged 999.5 yuan per screen, far surpassing regular theaters at 489.6 yuan. The IMAX-GT theater in Guiyang generated 28.53 million yuan in annual box office, demonstrating that high-format theaters are key to breaking through.

Regarding format integration, Cheng Fei suggests that cinemas could move away from the traditional “lobby–theater” binary structure. During low-yield periods, they could introduce “film+” models, hosting art exhibitions, themed markets, e-sports live broadcasts, and other activities, extending consumer engagement from 2 hours of viewing to 3-4 hours of cultural consumption.