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Experts debate role, pitfalls of film financing
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THERE has been a massive influx of capital into the Chinese film industry in recent years but industry watchers and filmmakers have also warned about a possible emerging bubble and its unwanted influence on creativity.
By and large, the film industry has welcomed the positive role of capital investment.
Huang Jianxin, a fifth generation Chinese filmmaker and director of films such as “The Black Cannon Incident” and “The Founding of a Republic,” said the industry shared a love-hate relationship with the financiers, and it was difficult to separate them.
“Financiers with less experience in the film industry can be disastrous as they’re only after the returns on their investments rather than worry about the quality of the production,” he said.
Jerry Ye, CEO of Huayi Brothers Pictures, also welcomed investment in the industry, saying it can promote good film productions and filmmaking capability in general. “But if the only purpose is to squander away money and seek quick investment returns, it could lead to a bubble and hurt the industry in the end,” Ye said.
Yu Dong, founder, chairman and CEO of Bona Film Group Limited, said there is a need for effective coordination and partnership on both sides to ensure healthy development of the Chinese film industry and its growth at a global level.
Capital support is also necessary for the internationalization of the film industry but the industry itself has to learn how to merge their overseas assets with their existing business operations. That requires industry know-how and critical insight of the market, Yu said.
The film industry in China is headed for growth in the next three to five years, he said, and it has to chalk up a strategic direction for all the parties involved in it.
Indeed, for China to create a niche for itself in the international film market, it will take more than capital investment to support content producers as well as distributors.
China’s film production costs about 15 billion to 20 billion yuan on an annual basis, according to Zeng Maojun, vice president of Wanda Culture Industry Group and board director and president of Wanda Cinema Line.
It is already the world’s second largest market in terms of box office revenue. In its annual Entertainment and Media Outlook report, PwC said China is likely to take the top spot for box office by 2017, whose box office is estimated to touch US$10.3 billion.
By 2020, nearly one third of the US$49.3 billion box office earnings globally will be generated in China, the report claimed.
Zeng also expressed concerns about overheating in the industry and of fears that investors lacking film production experience would negatively influence the sector.
“We’ve seen a recent shift in investors’ mindset and some of them are seeking quick money, resulting in a lack of focus on content and viewers having limited access to high quality film productions.”
Financiers who wish to procure successful online gaming installments or popular novels still need to collaborate with professionals to turn them into a successful movie, Bona Film Group’s Yu Dong said.
“Investors should also realize there’s a huge risk while investing in film productions and it requires industry know-how and continuous efforts to develop a good idea from online novel or a video game to turn it into a good movie,” Ye of Huayi Brothers Pictures said.
“There might be a bubble in the industry, but like many other thriving industries in China, they have contributed to the growth of consumers’ demands. So at the end of the day, only the investors with professional capability are likely to thrive,” said Dylan Tey, Technology, Media and Telecommunication Practice Partner at PwC China.
He also added that financial derivatives, especially investments in the film industry, are in a limbo as relevant regulations are still not in place.
“Capital investment in China’s film industry has been extremely active in recent years and venture capital firms have been playing a vital role in the creation of start-up companies and private production houses,” said Alibaba Pictures CEO Zhang Qiang.
A relatively newcomer in the film-making sector, Alibaba Pictures said it aims to help the small and medium-sized film companies to tackle challenges, alongside investments in big releases such as Paramount’s “Mission: Impossible — Rogue Nation” last year and “Star Trek Beyond” this year.
For example, more than 80 percent of movie tickets in China were sold through online ticketing portals by the end of 2015, rising from around 30 percent just the previous year.
Internet companies have been providing subsidy for filmgoers by lowering movie ticket prices to around 30 yuan (US$4.5), making film going more accessible for ordinary consumers.
Alibaba Pictures said it would stick to its core investment strategy, which is leveraging Internet technology to help industry players to raise their efficiency and allow easier access for film viewers through its online platform.
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