Disney's "Avatar: The Way of Water" (DIS) has been greenlit for a China release.
"It's huge — there's really no way to overstate it," Shawn Robbins, chief analyst at Box Office Pro, told Yahoo Finance.
The original "Avatar," released in 2009, heavily relied on foreign markets as it went on secure $2.74 billion globally, becoming the highest grossing movie of all time. More than $200 million of that total stemmed from mainland China.
"That market has only grown since," Robbins added. "We even saw multiple re-releases of that original film draw considerable revenue in China over the last few years. I really anticipate this is going to add a significant amount to the bottom line for 'Way of Water.'"
The sequel's reported production budget of $250 million-plus, which director James Cameron noted makes it "the worst business case in movie history," will have to be the third or fourth highest-grossing film just to break even.
One risk remains increased lockdowns amid Beijing's zero-COVID policy. That, coupled with the lack of Hollywood-approved films, have heavily weighed on China's theatrical ecosystem, with the country's box office down 35% compared to the same point in 2021, according to data from consultancy Artisan Gateway, cited by Variety.
"This just goes to the nebulous aspect of forecasting what's going to happen in China — whether it's the box office, government related, or pandemic related, there's so many factors in play here," Robbins said.
A Hollywood... without China?
Hollywood-China relations peaked between 2012-2016, but the Chinese market began to turn its back on the U.S. right around 2018. At that time, regulation of the country's film management was assigned to the Communist Party's propaganda department.
Last year, "Fast & Furious" star John Cena came under intense scrutiny after apologizing to China — in Mandarin — for calling Taiwan a country, underscoring Hollywood’s profit pursuit.
China has long been a major moneymaker for the movie industry — but the country has increased its censorship rules in recent years with major titles including Disney's "Black Widow," "Eternals," and "Shang-Chi and the Legend of the Ten Rings," along with Warner Bros. "Space Jam: A New Legacy" all denied China releases.
Reasons for denial can include anything the government deems inappropriate, such as depictions of homosexuality or content the government believes violates the country's values.
"The lessons of the past year or so have have really underscored that studios have to start taking into account that their [biggest], most expensive tentpoles might not get a release in China," Robbins said.
"Spider-Man: No Way Home" was denied after producers refused to remove the Statue of Liberty from the film, while Chinese regulators quickly rejected "Top Gun: Maverick" due to the presence of the Taiwanese flag on the back of Tom Cruise's Capt. Pete "Maverick" Mitchell's combat jacket. Beijing does not recognize Taiwan as an independent country.
Despite the lack of a China release, both "Spider-Man" and "Maverick" went on to secure global receipts of $1.9 billion and $1.4 billion, respectively. Hollywood insiders cited the results as a major turning point when it comes to the complicated Hollywood-China relationship.
"The fact that China now is not as important to Hollywood is a fantastic thing for the creative expression of these filmmakers," Chris Fenton, movie producer and author of the book "Feeding the Dragon," previously told Yahoo Finance Live.
"We can still make movies without integrating China propaganda or narrative into them, and if they're relevant, if they're universal in tone, there will be consumer markets [in China] for future movies," Fenton said. "But right now we don't have to placate Beijing with every single movie that we make."
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at email@example.com