Unprecedented box office success of Ne Zha 2 leads to ripple effects across China’s movie ecosystem
The China-made animated hit Ne Zha 2 exploded onto screens with the force of a “demon child” during the Chinese New Year, raking in a staggering 13.7 billion yuan ($1.88 billion) at the global box office in four weeks — and still counting.
The unprecedented success of the domestically made film boosted its production company’s stock by a jaw-dropping 260 percent in a week, and propelled sales of associated merchandise beyond 500 million yuan, sending factory operations into overtime to meet the booming demand.
The strong revenue generated by the film, which has become the world’s highest-grossing animation movie of all time, has sent a ripple through the entire film industry, showcasing the synergy between profitable intellectual property and the infusion of capital.
From the Sichuan-accented exclamation of Taoist immortal Taiyi Zhenren’s “Bashi de ban!” (How delightful!) to the grandeur of the East Sea Dragon Palace, Ne Zha 2 is a daring cultural reimagining.
On-screen, the film’s protagonist defiantly declares, “If there’s no path ahead, I’ll carve one!” Off-screen, a coalition of 138 Chinese animation studios, ranging from industry giants to obscure contributors, united to chart a new path for Chinese animation.
Director Yang Yu, better known as Jiaozi, said while international companies were initially considered to produce the movie’s visual special effects, they fell short of expectations. “We instead opted to entrust local teams with refining the work,” he said.
In Jiangxi province, Phantom Frenzy studio spent three months crafting the ethereal Yu Xu Palace dome effects, which include intricate circular patterns and the mesmerizing nectar water animations. The average age of the young animation team was 25 years.
In Shenzhen, Guangdong province, Fantawild Animation took the same amount of time to perfect the waterfall effects for a forest skirmish scene. To tackle the intricate scene, the animation team streamlined its workflows, used 50 high-performance workstations as a computational cluster, and conducted batch processing of simulation data.
“Each frame demanded 32 hours for rendering, totaling 15 days. Our aim was not just grandeur, but a rhythmic, aesthetically Eastern cascade,” team leader Wang Weiwei said.
In an interview with CCTV, Jiaozi stressed: “We must craft visuals that astonish, that break new ground artistically and captivate aesthetically. Only then does the endeavor hold merit.”
This relentless pursuit of technical excellence left Wang Zheng, general manager of Mianyang Zhonghuan Culture Communications, a company that owns eight cinemas and manages 22 others across China, awestruck.
“Many viewers revisited the film to dissect fleeting visual effect moments,” Wang Zheng said.
Before many screenings, tickets sold out within minutes. Some impatient international fans even went to nearby countries to watch the film.
In addition, hordes of fans of the movie traveled to real-world Ne Zha landmarks such as Tianjin’s Chentang Pass and Yibin’s Ne Zha Temple — rekindling interest in cultural tourism.
Zhang Feng from Beijing displayed a clutch of different ticket stubs for the film to illustrate his appreciation for different aspects of Ne Zha 2’s high-end production value. “IMAX 3D for its visual splendor, Dolby Atmos for musical immersion, 4DX for the fire wheels thrill,” he explained.
At the peak of Ne Zha 2’s box office reign, Zhonghuan cinemas scheduled up to 140 daily screenings, Wang Zheng said. The off-peak cinema occupancy rate hovered at 50 to 60 percent while prime-time screenings were sold out. The film accounted for 80 percent of Zhonghuan cinemas’ daily box office earnings, he said.
“Our scheduling hinges on demand, occupancy, and revenue — Ne Zha 2 dominated on all fronts,” Wang Zheng said.
Although the average attendance rate for Ne Zha 2 dropped by 50 percent one month after its release, this still stands as a commendable achievement, he said, pointing to a better “decline rate” when compared with imported animation films.
Wang Zheng noted that imported animation films often face a situation where, after one month, many theaters either stop screening them or only have occasional showings. “In contrast, Ne Zha 2 continues to be prioritized by theaters as a leading feature for screening,” he said.
As audiences wept during the movie’s heart-touching scenes, investors rejoiced over the production’s financial fortunes.
Ne Zha 2 boasted five production companies — three affiliated with Enlight Media and two linked to Jiaozi, information from data analysis company Beacon Pro showed.
With a reported budget of 500 million yuan, which included production and marketing, industry insiders estimated that Enlight could reap over 2 billion yuan from a 10-billion-yuan box office haul. After Spring Festival, Enlight’s shares surged, adding a remarkable 72 billion yuan to achieve 100-billion-yuan market value.
Professor Chen Shaofeng from Peking University, who is a former independent director at Enlight Media, hailed the film as a watershed moment in animation commercialization. “China’s director-centric model diverges from Hollywood’s producer-driven paradigm, yet recent market shifts offer enhanced protection for investor returns,” Chen said.
In the end credits, Ne Zha 2 recognized 135 companies in various categories such as co-production, production teams, art services, digital assets, visual production, and animation production. Of these enterprises, 115 were classified as small and micro-sized ones.
“The nature of outsourced work in this specific visual effect field dictates the absence of large enterprises,” Chen said.
“As entities that do not participate in film investment but solely engage in production, outsourced parties have minimal connection to the post-film profits. It is truly the combined efforts — that come from the enthusiasm for the animation industry of these participating companies — that have propelled the film forward, paving the way for a more mature development of Chinese animation,” he said.
Sales of products associated with Ne Zha 2 have shone as brightly as the film itself.
“Almost all the goods that were brought in were sold out well before the second day of the Chinese New Year,” said Wang of Mianyang Zhonghuan. “The daily sales revenue of Ne Zha 2’s products accounted for approximately 20 to 30 percent of the cinema’s non-ticket revenue.”
He added that there had been some product supply shortages, mainly due to inadequate forecasts of demand for the products, a situation which was compounded by logistical issues during Spring Festival.
Sales of authorized Ne Zha series merchandise on Taobao’s platform have surpassed 50 million yuan, according to data from the online retailer. The range of products includes blind boxes, trading cards, plush toys, resin dolls, film cards, fridge magnets, badges, stickers, and dozens of other items, with sales continuing to grow.
On Jan 30, Pop Mart released Ne Zha-themed series of blind box figurines on its Tmall official store. With over 20,000 people searching online daily, sales quickly exceeded tens of millions of yuan within eight days of the launch, becoming a hard-to-find item.
Qin Lang, who oversees trendy toys at the Tmall platform, said the blind boxes are restocked irregularly, and daily inquiries from fans are still high.
At the Pop Mart store in Sanlitun, Beijing, the display case for the Ne Zha series of blind box figurines already bears a “sold out” sign. This series of blind box figurines includes eight regular designs and one hidden design, with a single item priced at 69 yuan and the full set at 552 yuan. Staff members said that only display items are available in the store, and restocking times are uncertain.
Official stores of the card game company Card.Fun introduced new trading cards for the Ne Zha series. In just one week, over 700,000 cards in the series were sold, surpassing 1 million yuan in total sales. The limited-edition “Jiaozi director autographed” cards have become a favorite with collectors.
“The growth in searches and transactions for Ne Zha 2 related products is explosive, with over 100,000 more searches per day compared to the previous day. This kind of surge in sales for IP merchandise is very rare in recent years. As the hottest IP (intellectual property) of the year, we expect this ‘Ne Zha whirlwind’ will continue for at least another month,” said Qin from Tmall.
In Yiwu’s small commodity market in Zhejiang province, an “unofficial merchandise” scene is unfolding. Merchant Chen Jianguo was proud to show “his achievements”. He had replicated the Ao Bing mask in 3 hours, and the initial batch of 5,000 sold out within 48 hours.
“The official version sells for 199 yuan. My version is only 19.9 yuan, with free shipping!” he said.
While Chen Jianguo is proud of his product, the rampant growth in unauthorized products is causing headaches for copyright holders.
The challenges associated with merchandise piracy underscore the fragility of China’s domestic animation industry. Despite advances in technical collaboration and product development, the Chinese animation sector still has ground to cover before achieving a “Disney-style ecosystem”, said Chen Shaofeng, the professor from Peking University.
“For instance, Disney typically kick-starts IP development a year prior to a movie’s release, supported by a robust legal team specializing in intellectual property,” he said.
“They also strategically map out theme park expansions tied to their IPs. In the world of IP economics, box office earnings may only represent roughly 30 percent with derivatives and theme parks occupying a major share of total profits, signaling a need for Chinese production teams to sharpen their focus on IP profitability,” he said.
Meanwhile, locales associated with Ne Zha, like Yibin and Jiangyou, are steadily gaining prominence on the back of the movie’s success. The hashtag #MultiplePlacesCompetingforNeZhaIP# has trended across various social media platforms.
Data from the online travel service Fliggy revealed a notable surge in searches for Ne Zha-related destinations in the past week, with searches for Yibin witnessing a 225 percent spike and Jiangyou searches skyrocketing by 453 percent. Searches for attractions such as the Ne Zha Nao Hai Water Park and Ne Zha Town have also experienced a significant upswing.
Ne Zha 2 has showcased the formidable impact of a top-tier IP. Nonetheless, as audiences resonate with the hero’s “My fate is determined by me, not by heaven” ethos, the Chinese entertainment industry is considering how to ensure it is not a one-off success.
“Chinese filmmakers should embrace an industrialized system and hold content in reverence,” Chen Shaofeng said.
