Wearing a T-shirt emblazoned with the Horde logo and holding a replica of the Doomhammer, Ding Cong waited in line at a cinema to see the new Hollywood blockbuster Warcraft, based on the popular video game series. Like many other fans, the 31-year-old has spent far more on merchandise than he did on the actual film ticket.

Sales of merchandise based on the fantasy film topped 100 million yuan ($15.05 million) even before the flick hit cinema screens on the Chinese mainland on June 8. Industry insiders predicted that the final number might exceed 500 million yuan, Beijing Daily reported.

However, very little of the merchandise is designed by Chinese companies.

Hou Kaiwen, CEO of Mtime, the only agent selling authorized Warcraft merchandise on the Chinese mainland, said among a wide variety of spin-offs sold on the company's website, ranging from key rings to figure models, only about 30 percent were domestically designed.

Mtime is also authorized to design merchandise that falls into four categories: daily necessities, digital products, toys and furniture. Of the company's several hundred designs, just a few dozen have been approved by Blizzard Entertainment, the copyright owner of Warcraft.

China's annual box office sales is likely to surpass North America's as soon as 2017, but its film merchandising industry is still in its infancy.

Up to 80 percent of the Chinese movie sector's total income comes from the box office, while the total in North America is only 30 percent, with the majority of revenues coming from film merchandise.

The problem is not manufacturing capacity, at which China excels, as evidenced by the fact that it produces almost 90 percent of global film merchandise. "What matters is the lack of innovation capability on core products," said Ding Fei, CEO of Shanghai Antler Network Technology.

Another large stumbling block is insufficient intellectual property rights protection in China. Counterfeit Warcraft-themed T-shirts, for example, can be found in many stores, both online and offline, being sold at much lower prices than the genuine products.

Xie Dongjun, managing director of Australia Zinc Group China, who has been involved in movie merchandise research and development for over 10 years, said compared with Hollywood studios, "Chinese companies do not have a well-established copyright licensing system, resulting in a chaotic mixture of fake and genuine products on the market, leaving consumers unable to tell the difference."

Mark Caplan, vice-president of consumer products at Sony Pictures, suggested the first moves to develop China's film merchandising industry should be to regulate the market, tell consumers where they can buy genuine products and teach them how to recognize formal, reliable outlets.

It would also be helpful to introduce more of the latest high-end merchandise from overseas markets, experts said.

Xiao Wu, who is involved in the gaming and animation merchandise industry, said many such products are not available on the mainland, and as a result, some Chinese consumers order from overseas online shops, which can result in difficulties making payment and longer delivery times. Meanwhile, others choose to buy fake products.

Chen Shaofeng, deputy head at the Institute for Cultural Industries of Peking University, said in addition to strengthening copyright protection, piracy could also be curbed if the genuine Chinese derivatives improve their quality and are presented by more forms.

Film merchandise is very much part of movie culture and gives emotional sustenance to fans who identify with particular movies and genres. It is certainly much more than the plush toys and models based on figures, or hats and T-shirts bearing film logos, which are usually seen in Chinese markets.

"In future, we will highlight more on the functionality and practicability of film merchandise to actually combine IP with people's lives, rather than just placing them at home or on tables in office," said Xie as quoted by China Cultural Daily.

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