Western investors have long been beguiled by the sheer size of the Chinese market. But the reality has often failed to match their visions — just take the entertainment industry in China.

The quest to combine the best of Hollywood magic with Chinese audiences has been playing out for some time now, with mixed results. Over the next year, investors are likely to be pitched a new wave of young companies wanting to go public and promising to succeed where others have failed.

In a few months, STX, the second-tier Hollywood studio whose backers include Beijing-based Hony Capital, is expected to list its shares in Hong Kong. If all goes to plan, Open Road, another smaller Hollywood studio, will follow suit with an initial public offering in Hong Kong in 2019. Open Road was bought late last year by Tang Media Partners, which is based in Shanghai and Los Angeles, and counts, China Media Group; Tencent Holdings; and Neil Shen, founder of Sequoia Capital China, as investors.

Over the past two years, the dominant story about China and the entertainment industry has been the serial acquisitions of western assets by former high-flying companies such as Dalian Wanda. Those transactions involved the conversion of massive amounts of Chinese renminbi to dollars to pay — or more likely overpay — for assets such as Wanda’s $3.5bn purchase of Legendary Entertainment, or its first signature deal, the $2.6bn purchase and subsequent listing of the AMC cinema chain.

That wave of deals is now over, having fallen victim to Beijing’s displeasure and concerns about capital flight. That should sharpen investors’ focus on trying to pick the companies that will profit from the mixing of Hollywood and China, where the entertainment industry is changing fast.

Investors, for example, say Amazon is in talks that will probably result in its earmarking $1bn to acquire the rights and to produce three seasons of episodes based on a science fiction trilogy known by the title of the first volume, The Three Body Problem by Liu Cixin, a work that is wildly popular in China. It will prove more of a blockbuster than Game of Thrones, some mainland industry insiders predict. The rights are held by Lin Qi, the chairman of Youzu Interactive, primarily a developer of online games that is listed in China

Open Road is scouring the Chinese web for content (and is obtaining properties from online novel sites) to boost its fortunes ahead of that tentative listing. Many of the companies plotting IPOs over the next 12 months have attracted capital from some of the most respected venture capitalists.

That is no guarantee they will prove a savvy investment for later stage investors, but the optimism about future Chinese entertainment and media consumption is growing. Analysts at Credit Suisse recently published a report on the prospects for the media industry in China, noting that it has “transitioned from a supply side and quantity driven expansion to a new age of growth underpinned by content and quality…Meanwhile, the TV drama industry has been transformed with the rise of online video websites as the primary distribution channel.” (That market has tripled in value to $42bn in 2016 from five years earlier, the brokerage notes.)

Part of the report’s optimism again rests on the size of the potential market — as it always does with China. “If the US is the dragon’s head, China is the dragon’s tail,” says one investor. “It is fat and growing. To really prosper, you need the Chinese tail; you need to pre-sell in China as well as the US.” Box office revenues [in China?] are expected to grow at a rate of 15 per cent in the next three years to$87, Credit Suisse says.

In addition, protectionism gives Chinese mainland players an unfair advantage in the domestic market. Despite Beijing’s problems with overpaying for foreign entertainment content, studios and sports teams, the government is still determined to see Chinese content go global.

Most importantly, China’s growing clout in the global entertainment industry reflects its edge when it comes to mobile technology. Entertainment companies are developing short video streaming services for their mobile customers. Sequoia and Tencent, for example, are backing Kuaishou and plan to take the company, which is valued at $18bn, public this year. Meanwhile, Bilibili, another Chinese short-form video company in which Tiger Global and Li Ruigang’s China Media have invested, will soon go public in the US with a valuation of $4bn-$5bn.

As tantalising as these prospects seem, it is worth noting that just one of the three companies covered in the Credit Suisse report — Beijing Enlight Media — has an outperform rating. The challenge for investors is that many of these companies are young with a track record that is too short to judge. Not all of the new generation of aspiring media titans will succeed. Hollywood has always been about marketing dreams to investors as well as to audiences.

Investors should not be too starry-eyed.