Entertainment

The new movie moguls

Internet giants are making a big push into film production

Li Bingbing w

Li Bingbing: stars in Tencent-financed movie

After being passed over for the chief executive role, Jeff Robinov left Warner Brothers last summer. The movie boss, who masterminded blockbusters like Gravity, as well as the reboot of the Batman franchise, hasn’t taken long to land a new job. This week he announced that he has secured funding from one of China’s largest conglomerates Fosun in his new firm, Studio 8.

Fosun has not revealed the size of its investment but says that it will “exercise significant influence over the distribution arrangements of movies produced by Studio 8 in the mainland of China, Hong Kong, Macau and Taiwan regions.”

“We are happy to partner with Fosun, a well-respected Chinese company with global investment capabilities,” Robinov said. “Both China and the US possess film markets with the most influence and potential and we are excited to unite the markets, teams, technologies and respective advantages and work together on building a number of top-level films including co-production films between China and other countries.”

In the same week Fosun announced its foray into filmmaking, Shenke, a Shenzhen-listed company that makes parts for electric motors, invested Rmb440 million ($70.59 million) in Hairun, another studio. At first glance the synergies between movies and motors seem mysterious. But Hairun, which has produced more than 3,000 television episodes, has been frustrated in its efforts to IPO in Hong Kong. Hairun’s private equity investors have opted for a backdoor listing via Shenke instead.

But potentially of more significance, China’s largest listed internet firm Tencent has unveiled at least six movie projects. These include the 3D sci-fi flick Zhong Kui: Snow Girl And The Dark Crystal, starring Chen Kun and Li Bingbing. It should be released early next year.

Why the sudden interest in filmmaking, especially when researchers like Zhang Jiangang, from the Chinese Academy of Social Sciences, have been telling the South China Morning Post that fewer than 10 domestic films a year are generating decent financial returns for investors?

Even Sun Zhonghuai, vice-president at Tencent Media, sounds a little unsure. “Internally we have been asking ourselves, why do we want to go into filmmaking?” he admits. “As an online video portal, participating in television programming is very normal. But the risks in films are significantly higher.”

Like its online rivals, Tencent has been beefing up its digital content in an effort to attract more customers to its different platforms (Tencent is the largest online gaming firm and controls the popular mobile messaging application WeChat).

Tencent’s main rival Alibaba Group has something similar in mind. In March, it bought a controlling stake in ChinaVision Media, a major TV and film producer, for more than $800 million. A month later the company announced that it had teamed up with Yunfeng Capital, a private equity firm co-founded by Jack Ma, the Alibaba chairman, to acquire a significant interest in online video-sharing service Youku Tudou for $1.2 billion.

Earlier this year Alibaba launched Yulebao (which means ‘entertainment treasure’), a crowd-funding vehicle that lets ordinary internet users invest in a range of development-phase games, films and TV shows. Yulebao is promising an annualised return of 7% and the fund has already invested in a slew of projects including the latest instalments of the romance series Tiny Times, as well as an adaptation of the bestselling novel Wolf Totem and a China-set action film starring Nicolas Cage.

“You invest in this film and then you will pay attention to this film. For some medium and small films, it has a very good promotion effect,” says Mai Hua of LeTV, one of the Tiny Times backers.

The third member of the Chinese internet troika Baidu has also opened a film studio. As WiC reported in issue 226, the search giant has invested in a joint venture called Aquamen Entertainment, which will be based in Los Angeles. Speculation is mounting that Baidu will launch a crowd-funding vehicle similar to Yulebao next month.

Some of the studios are nervous about the activities of the internet giants. “So in the future are we all going to be working for BAT [the acronym for Baidu, Alibaba and Tencent]?” asks Yu Dong, the chief executive of Bona Film, a studio and distributor.

Ren Zhonglun, chairman of Shanghai Film Group, made his concerns more plain: “Almost all the moviegoers today are from the eighties and nineties generation. They grew up with the internet, and they represent a new way of thinking and lifestyle. When internet firms start to invest in films, it means that the traditional business model of filmmaking will become obsolete. We – a group of people who are born in the sixties and seventies – will almost certainly be eliminated.”

Not everyone thinks that the internet giants spell disaster for the studios, returning to the argument that people who invest in a film will be much keener to go to the cinema and judge the final product.

“Even though the amount raised on Yulebao is not huge, they have changed the way that films are financed. For a film to make Rmb100 million in the box office, at least 3 million people need to go to see it at the cinema,” Gao Jun, a film critic, told Xinhua. “If next time, Yulebao launches a fund and 30 million people invest, that will propel the box office to Rmb1 billion. If they raise 10 funds in a year, that will be huge for ticket sales,” Gao suggested.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.