Chi­nese film ex­ecs grow more con­fi­dent

En­ter­tain­ment and tech fig­ures at fes­ti­val in Shang­hai be­lieve they’ll soon catch up with Hol­ly­wood.

Los Angeles Times - - BUSINESS - By Julie Maki­nen julie.maki­nen@latimes.com Ni­cole Liu of The Times’ Bei­jing bureau con­trib­uted to this re­port.

SHANG­HAI — Three U.S. f ilms — “Fu­ri­ous 7,” “Avengers: Age of Ultron” and “Juras­sic World” — have sold al­most $750 mil­lion in tick­ets in Chi­nese the­aters since April.

Even a year ago, that kind of box-of­fice per­for­mance from Hol­ly­wood movies would have prompted a bout of hand-wring­ing among Chi­nese movie ex­ec­u­tives, anx­ious about how for­eign ti­tles were leav­ing lit­tle space for home­grown films.

But at the Shang­hai In­ter­na­tional Film Fes­ti­val this week, there’s been a no­tice­able air of self-as­sur­ance among Chi­nese en­ter­tain­ment chiefs and the se­nior hon­chos of In­ter­net com­pa­nies like Alibaba that are rapidly piling into the movie, TV and stream­ing busi­ness.

The buoy­ant mood seems at­trib­ut­able to sev­eral fac­tors, in­clud­ing surg­ing box-of­fice re­ceipts for not just for­eign but also do­mes­tic films. That is cou­pled with sky-high stock val­u­a­tions as Chi­nese eq­uity mar­kets have soared in re­cent months de­spite a slow­down in the over­all econ­omy.

China’s over­all box-of­fice take was up more than 40% year over year in the first quar­ter and has con­tin­ued apace since, and do­mes­tic pro­duc­tions are shar­ing in the bo­nanza. For in­stance, two films re­leased from China’s Bona Film Group — war drama “The Tak­ing of Tiger Moun­tain” and casino caper “From Ve­gas to Ma­cao 2” — each grossed about $150 mil­lion on much lower bud­gets than their Hol­ly­wood block­buster cousins.

The coun­try also con­tin­ues to add screens at a rapid pace, and of­fi­cials from the State Ad­min­is­tra­tion of Press, Pub­li­ca­tion, Ra­dio, Film and Tele­vi­sion pre­dict that the coun­try may have 40,000 screens by 2017 — about as many as the U.S. and Canada do.

“It won’t take long for us to catch up with Hol­ly­wood be­cause we can hire Hol­ly­wood peo­ple and bor­row their sys­tem,” Wang Cheng­tian, chair­man of film pro­duc­tion com­pany Bei­jing En­light Media, said dur­ing one panel dis­cus­sion. He said his com­pany planned a slate of 20 films for next year, up from 13 this year.

Wang Hong, chair­man of Heng­dian Film and TV Pro­duc­tion Co., which has a mas­sive stu­dio lot and a cin­ema line, said China can cre­ate uni­ver­sal sto­ries and reach out to au­di­ences around the world.

“I don’t think we should be too frus­trated by the tem­po­rary chal­lenges brought on by Hol­ly­wood block­busters,” he said. “The fu­ture is bright.”

Other in­dus­try rep­re­sen­ta­tives at var­i­ous events de­scribed Hol­ly­wood as “slow,” “in­ef­fi­cient” and “be­hind.” Few spoke of want­ing to do co-pro­duc­tions or part­ner­ships with U.S. stu- dios. In­stead, the fo­cus was on the do­mes­tic Chi­nese mar­ket and how to lever­age In­ter­net tech­nol­ogy for crowd­fund­ing, mar­ket­ing, ticket sales and stream­ing.

“It has be­come the gold mine.... That’s why [Baidu, Alibaba and Ten­cent] have all set their sights on the en­ter­tain­ment in­dus­try,” said Yu Dong, chief ex­ec­u­tive of Bona Film. “This is a won­der­ful thing. We don’t lack for cash any­more.”

Shares of Bona have surged in re­cent months. The com­pany, which has been listed on the Nas­daq ex­change since 2010, has seen its stock dou­ble since Oc­to­ber to close at $12.76, down 10 cents, on Wed­nes­day. Yu re­cently un­veiled plans to take Bona pri­vate.

Yu said the com­pany plans to make 26 films in the next year and a half, with a tar­get of reach­ing $1.6 bil­lion in box-of­fice re­turns. China’s to­tal year-to-date box of­fice is about $3 bil­lion.

Bona is hardly alone; shares of other Chi­nese en­ter­tain­ment com­pa­nies such as Alibaba Pic­tures, En­light and DMG En­ter­tain­ment have also seen their mar­ket val­ues soar by bil­lions in re­cent months as Chi­nese in­vestors have gone on a buy­ing spree.

Some observers say there’s a lack of fun­da­men­tals be­hind those val­u­a­tions and a come­up­pance is in the off­ing.

“There have been no earth-shat­ter­ing news an­nounce­ments por­tend­ing ma­jor new de­vel­op­ments. No ac­cel­er­a­tions in growth or earn­ings to fuel the ex­po­nen­tial in­creases in value,” Rob Cain, a pro­ducer and long­time ob­server of the Chi­nese film mar­ket, wrote this week in Forbes. “In fact, the Chi­nese econ­omy’s growth has been slow­ing over the past year, and … media com­pany earn­ings look vul­ner­a­ble.”

There are a few names from the U.S. en­ter­tain­ment in­dus­try that Chi­nese tech and en­ter­tain­ment ex­ec­u­tives are ea­ger to em­u­late: Net­flix and HBO. Dur­ing the fes­ti­val, Alibaba Dig­i­tal En­ter­tain­ment Pres­i­dent Liu Chun­ning said his com­pany was start­ing a paid stream­ing ser­vice called Tmall Box Of­fice, or TBO, charg­ing cus­tomers through Alibaba’s set-top TV boxes and smart TVs.

“We will pave the way for the rest of the movie in­dus­try,” he said. “We need to cre­ate sce­nar­ios where view­ers want to pay. HBO is a good ex­am­ple where peo­ple are will­ing to pay. Their busi­ness model is great.”

De­vel­op­ing mar­kets be­yond the the­atri­cal box of­fice is key for China, where piracy ba­si­cally pre­vented a ro­bust home video or DVD mar­ket from ever be­ing cre­ated. But Chi­nese con­sumers are ten­ta­tively start­ing to demon­strate a will­ing­ness to fork over money for con­tent.

Rep­re­sen­ta­tives of Baidu’s online stream­ing video arm, iQIYI, said dur­ing the fes­ti­val that it had amassed 5 mil­lion pay­ing cus­tomers.

“Users’ will­ing­ness to pay for con­tent re­flects the huge op­por­tu­nity and po­ten­tial for iQIYI and the online-video mar­ket in China,” said Chief Ex­ec­u­tive Yu Gong, pre­dict­ing that the “golden age” of the­ater­go­ing in China would last only five more years.

Still, those 5 mil­lion pay­ing cus­tomers rep­re­sent only 1% of iQIYI’s 500 mil­lion users.

Jonathan Spink, chief ex­ec­u­tive of HBO Asia, agreed that the in­dus­try was now go­ing through an “in­ter­est­ing time” thanks to the rise of the In­ter­net, but cau­tioned his Chi­nese coun­ter­parts not to get too far ahead of them­selves.

“The value chain of films still re­lies on the­aters. With­out the­aters, no one will make films. With­out TV, no one will make pro­grams,” he said. The In­ter­net of­fers “huge op­por­tu­ni­ties for view­ers to see con­tent, but we can’t lose sight of how we make con­tent.... Peo­ple have been fore­cast­ing the demise of cin­ema for a long time and it hasn’t hap­pened yet. “

ChinaFotoPress via Getty Im­ages

DI­REC­TOR RENNY HAR­LIN and ac­tors Fan Bing­bing and Jackie Chan at­tend a news con­fer­ence for “Skip­trace” at the Shang­hai In­ter­na­tional Film Fes­ti­val.

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