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Chollywood? Internet giants say why not?
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FOR a younger generation glued to smartphones, it was only a matter of time before the Internet changed movie-viewing habits along with everything else in daily life.
Internet companies are moving into all aspects of the film industry, from production and ticket sales to fund-raising and marketing. Is the Hollywood blockbuster becoming a thing of the past in China?
“For Internet giants, it’s a very natural trend to become increasingly interested in content production because they want to keep consumers on their platforms for as long as possible,” says Jane Kong, PwC China Entertainment and Media Partner.
“Internet companies can have better control over self-produced original content and enjoy exclusive rights,” she adds. “They have existing distribution platforms and enough audience.”
Leading the trend has been e-commerce giant Alibaba, which is leveraging the vast consumer base of its retail websites Taobao, Tmall and online payment service Alipay.
Last June, Alibaba took a controlling share in Hong Kong-listed ChinaVision Media Group, after purchasing a 16.5 percent stake in US-listed video website Youku Tudou Inc.
Alibaba’s crowd-funding service Yule Bao, which allows ordinary consumers to pay a minimum of 100 yuan (US$16) to invest in development-phase games, movies and TV shows, has attracted 530 million yuan and funded 21 productions since it was launched in June last year.
“By allowing viewers to use their preferences to fund the kind productions they like, we’ll be able to make more reliable predictions about box office performance,” says Liu Chunning, president of the Digital Entertainment business unit at Alibaba Group.
Liu says the company will allow more consumers access to film and TV productions, thus helping film companies to seek innovative business models in the Internet age.
Following other online video streaming websites, the company will also launch an online film and TV series distribution streaming service, based on Tmall’s set-top boxes. In March, Alibaba acquired 8.8 percent stake in Beijing Enlight Media for US$383 million.
Another Internet player Baidu, along with private equity firms Hopu Fund and Tian’an Property Insurance Fund, announced earlier this month that it has purchased a 4.8 percent stake in Hong Kong-listed theater operator and film producer SMI Holdings.
Last November, Tencent and Alibaba both purchased 8.08 percent stakes in Shenzhen-listed production firm Huayi Brothers, with 150 million yuan raised through a private placement.
Huayi gives the two companies access to priority airing of its productions through Internet streaming services. In addition, Alibaba and Huayi will also co-produce five films in three years and allow Yule Bao to participate in the fund-raising process.
Tencent also said it will allow Huayi Brothers priority in adapting its online gaming or Internet literature works into film productions.
Participation in the film industry by the Internet giants will create more entertainment options for grass-roots consumers and provide additional revenue streams for cinemas, according to entertainment and media industry consultancy Ent Group.
China’s film revenue, including box office receipts, cinema advertising and home video expenditure, is set to grow at an estimated compound annual rate of 14.5 percent through 2019, reaching US$9.96 billion, according to the latest Global Entertainment and Media Outlook by consultancy PwC. That’s almost double 2014 revenue.
Box office income is expected to reach US$8.86 billion by 2019, while home video subscriptions through online streaming websites and set-top boxes will be worth US$753 million, with an estimated growth rate of 13 percent in the next five years.
Yu Dong, founder and chief executive officer of Bona Film Group, says 2015 is turning into a remarkable year, with Internet giants completing their initial investment in the entertainment sector. The Internet, he says, has introduced more players to form a rich and abundant ecosystem.
“But I worry that smaller production firms will try to follow suit and think that box office revenues are easy money,” Yu said. “Bringing more players into the field doesn’t change the fact that China’s creative industry still lags behind developed countries. Good playwrights just don’t appear on the Internet overnight.”
Others are more optimistic. President Wang Changtian of Enlight Media, says his company is launching its own film streaming service for paid viewers within two or three months.
“By leveraging Internet resources and collaborating with Alibaba, we’re confident we can provide an alternative to Hollywood blockbusters,” Wang says, adding that he expects to see more companies dedicated to online productions and distribution emerging in the coming years.
Movies or TV productions that are solely distributed through online channels will be worth 3 billion yuan in 2015, or about 10 percent of the overall box office, according to Zhu Huilong, senior vice president of video streaming website Youku Tudou Inc.
“The online streaming services offer new channels for small productions that wouldn’t have a chance of airing in cinemas,” he adds.
“Online video streaming and subscription provides a new entertainment format, and the home entertainment market is big enough to offer significant space for imagination in the future,” PwC China’s Kong adds.
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