Chinese studios target further acquisitions

“We will acquire more content producers in future so we have IP to make into films and games,” said Zeng Maojun, vice president of Wanda Culture Industry Group, which recently acquired Warcraft producer Legendary Pictures.

He later added: “The reason we bought Legendary was to marry their experience with the China market for better effect.”

Zhang Qiang, executive director and CEO of Alibaba Pictures, said his company is also planning further acquisitions: “We invest in companies like [online ticketing outfits] Yueke and Taobao Piaopiao so we can use the internet to raise efficiency and strengthen the links in the industry chain,” Zhang said.  

Like digital rivals Baidu and Tencent, Alibaba has built its film business by buying out more experienced producers, distributors and other players in the local market. The company’s film arm, Alibaba Pictures, was formed by the acquisition of Beijing-based ChinaVision Media in 2014.

Talking about investments in both film slates and companies, Huayi Brothers Pictures CEO Jerry Ye said it was important to take the long-term view rather than rush into deal-making. “We buy the correct product at the correct time. You’ll hear a lot this year about our new releases,” said Ye, referring to the studio’s financing deal with STX Entertainment.

He added: “Western countries provide opportunities for cooperation and they’re really mature. So mergers and integration is inevitable.”

Bona Film Group founder and chairman Yu Dong explained why he took his company off the New York stock exchange last year. “Chinese companies that are not listed in the US have expanded quickly over the past five years, but Bona seemed to disappear,” Yu said.

He joked that his timing wasn’t great, as the Chinese stock market crashed last summer, but noted that since “coming home” his company has attracted investment from Alibaba and Tencent.

The panellists also talked about the bubbles being created by the huge surge of capital into the Chinese film industry – and agreed that the industry is still relatively immature despite the hype around box office growth.

Wanda’s Zeng said: “This industry is over-heated – fast money is twisting the mindset of investors and they’re not paying attention to the quality of the films.”

Panellists also speculated that the recent slowdown in box office may be due to a reduction in the huge volume of discounts provided by online ticketing services. “It’s become much cheaper and more convenient to buy tickets, which isn’t sustainable as we had too many new platforms selling tickets,” said Alibaba’s Zhang. “But in future we can achieve a growth rate of 30% and that’s still huge.”

Wanda’s Zeng said there’s still plenty of room for further cinema building: “Some cities like Shenyang and Chengdu are already reaching saturation, but there’s still a shortage of screens in smaller cities.”

He added that the cinema construction rate slowed down slightly in 2015, but that China would have 40,000 screens, the same as North America, by the end of this year.

However, one bubble that nobody denied is the huge increase in production costs. “I recently worked with an actor who tripled his pay when he moved on to his next movie,” said producer-director Huang Jianxin.

He then shared an experience that suggests the Chinese film industry is more like its American counterpart than it likes to admit: “You often have a great screenplay, but can’t afford a good actor because you lack the investment. That means you can’t make anything that’s mid-budget,” Huang said.