She’s most well known for her role as ‘Little Swallow’ in the 1998 historical drama My Fair Princess, but actress Zhao Wei has come a long way since then. She has directed several box office hits, launched her own wine label and become a billionaire from her stake in Ali Pictures (see WiC286). Small wonder then, she is the latest person (there have been quite a few) to be given the moniker of China’s Warren Buffett.
Zhao has found herself in the headlines again since late December when Longwei Culture, a studio controlled by the 41 year-old, agreed to buy 29% of Zhejiang People Culture for Rmb3 billion ($440 million). After the deal is completed, Zhao will be the controlling shareholder of the obscure Shanghai-listed company.
“The new controlling shareholder is very optimistic about the prospects of the entertainment industry,” Zhejiang People Culture said in an announcement.
In fact, the studio started out as a property developer. After suffering several years of losses, it changed tack and ventured into mobile gaming and animated content production. The company’s new business was barely profitable in 2015 but Zhao’s investment has now valued it at more than Rmb10 billion.
China Times reports that in the first three quarters of 2016, the animation firm had a net profit of just Rmb66 million. Yet the stock is trading at a price-to-earnings ratio of over 130. Moreover, Zhao only set up her acquisition vehicle three months ago in Tibet (probably because of the region’s tax benefits) with registered capital of Rmb2 million.
To finance the deal, Longwei will borrow from third parties – including a little known Tibet-based finance company – collateralised by Zhao’s assets (they include shares in five listed companies) which Longwei claims are worth Rmb6.3 billion.
However, with China’s box office now facing some of its stiffest headwinds, industry observers question whether the investment makes financial sense. In 2016, total box office takings reached Rmb45.7 billion, up only 3.7% from a year ago. This marked the slowest rate of growth in a decade and new movie studios which have piled into the industry have been losing money on films almost every week. In fact, by the calculation of the entertainment industry blog Chief Entertainment Officer (CEO), only 12% of the 944 domestic films that were made in the past year were profitable (only 40% of those produced even made it to the big screen).
So what does 2017 hold for the rest of the show business industry? Well, if the Chinese New Year holiday, which begins this Saturday, is anything to go by, entertainment veterans say it doesn’t look too promising.
The period is traditionally not only the most lucrative but also the most crowded season for the film industry. Last year, thanks to Stephen Chow’s The Mermaid, which set a new record by taking $500 million, the week-long Chinese New Year holiday accounted for over 8% of the total box office takings for the entire calendar year.
“I am sceptical that the total box office takings this year will exceed that of last year. The truth is, The Mermaid simply sets the bar too high. In addition, there were a few other big hits like From Vegas to Macau III and The Monkey King 2, which all surpassed Rmb1 billion in the box office. With the current downturn, it is not going to be easy for any film to reach Rmb1 billion in ticket sales,” comments Jiang Yong, an industry expert.
This year, no fewer than seven films will open on the first day of the Spring Festival rush.
Five of the seven movies are comedies, while the remaining two are animated films.
First there is Jackie Chan’s Sino-Indian co-production Kung Fu Yoga. Then there is writer-director Han Han’s Duckweed, starring Zhao Liying. Plus there’s also a new film from Wang Baoqiang, whose marriage scandal became the most talked-about topic on weibo in 2016 (see WiC337) – which is yet another comedy. Last but not least, there’s always a Monkey King outing. Chow is back with the sequel to his 2013 fantasy hit Journey to the West: Conquering the Demons. The second instalment The Demons Strike Back will open tomorrow.
While comedy films usually perform well during the holiday season, some think having this many movies competing in the same genre could do more harm than good. “Based on the recent trend, three to four films might do well. As for the rest, some will slip through the cracks. But the majority will lose completely in the blood bath,” says the CEO film blog.
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