Film fraternity

Movie moguls: Wang Zonglei (left) and elder brother Wang Zongjun

Move over, Warner Brothers. China’s Huayi Brothers are vying to become a leading global movie producer.

Huayi Brothers, founded by the two brothers Wang Zhongjun and Wang Zhonglei, is the mainland’s largest privately-owned filmmaker. Beijing has approved its application to be the first media company to list on Shenzhen Stock Exchange’s ChiNext, a Nasdaq-style market (see WiC last week).

Last year, revenues of Rmb68 million and a profit of Rmb31.6 million ($4.6 million) were supported by a 12% market share at the Chinese box office, trailing only state-run China Film Group.

Still, this doesn’t make them much of a match at the moment for Hollywood studios: Time Warner’s film entertainment divisions earned an operating income of $823 million in 2008.

“Although we are already leading the domestic market, we still have a long way to go to match Warner Brothers,” Wang Zhongjun admits. “But given the speed of China’s economic development and the fast growth of its movie industry, a world class Chinese entertainment group is sure to emerge in the near future.”

Born into a military family, Wang Zhongjun joined the army when he was 16 and later worked at the State Commodities Bureau.

With a growing passion for painting and photography, he then resigned to work as a photographer. In 1994 he opened an advertising firm with his younger brother.

Their break into the movie industry was largely a coincidence. A friend was short of Rmb5 million financing for a film. The brothers decided to help him out by lending the funds and discovered a passion for filmmaking in the process.

The brothers soon proved to have an eye for talent, with an early bet on director Feng Xiaogang and his first movie Sorry Baby in 1998. Since then Feng has become the country’s highest grossing domestic director, and has worked with Huayi on blockbusters like Assembly and If You Are The One (see WiC11).

Huayi Brothers was also the first to collaborate with Western movie companies. In 2000, it teamed up with Columbia Pictures to produce Big Shot’s Funeral. The two companies later co-produced Cellphone, which was a box office performer in 2003.

The company’s success stems from Wang Zhongjun’s ability to attract financing, says China Entrepreneur magazine.

Since 2000, the two brothers have received more than Rmb400 million from backers like Taihe Group, Li Ka-shing’s Tom Group, Yahoo! China, and Focus Media. China Merchants Bank and ICBC have also funded several Huayi hits.

Alibaba chairman Jack Ma is also an investor in Huayi Brothers. “I remember the first time I met Wang I asked, ‘Do you want to be Time Warner, or do you only want money?’ He said he wanted to be Time Warner. So I said fine, because that is also what I am interested in.”

Beijing now seems to share a similar vision for government-owned filmmakers.

In an announcement last week, the State Council said that state-owned entertainment groups will be reorganised to allow outside financing so that they could “live on their own rather than being attached to government departments as parasites.”

We get their meaning, even if the wording could have been a little more carefully chosen.

In other words, the government is hoping for industry consolidation, with larger domestic firms capable (one day) of squaring up to the global giants.

“China’s market is very fragmented,” says Michael Tung, the chief investment officer of China Media Capital. “China should have four or five huge media groups. There’s nothing like News Corp or Time Warner.”

Under the proposed reforms, media companies will have greater freedom to produce a wider range of entertainment and cultural content for distribution inside China, and even for export.

Back at Huayi Brothers, Wang Zhongjun is enjoying his media mogul status with a garage of imported BMWs, an impressive art collection and a stable of 60 horses.

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