China Daily Hong Kong Edition- 'Up, up and away'

The mainland entertainment industry is growing at an incredible rate, offering huge opportunities for investors as demand grows from an increasingly affluent population, experts told a China Daily roundtable in Hong Kong on Friday.
"We’ve witnessed explosive investment growth in the mainland film industry in the first half of 2014, and we are seeing the rise of the film industry,” said Wang Guowei, founder of movie financiers National Film Capital.
In the first six months this year, as many as 63 mergers and acquisitions (M&As) involving film companies were initiated, with total capital involved reaching 55 billion yuan ($8.9 billion), Wang said. Among these, nearly 60 percent of companies were acquired by enterprises from other industries, he added.
A major part of the acquisition moves targeted the assets or copyright of television series, Wang noted.
"We can see that investors and capital are eager to find their way into the mainland film industry.”
He said the rise of any industry has to be led by a large number of M&As. “And we can see that a few large and powerful companies are rounding up their territories in the movie industry.”
Investors who put their money into the mainland film industry are probably reaping profits. Breakup Buddies — a Putonghua film released on Sept 30 — recorded box office revenues of 1.1 billion yuan as at the end of October, while The Continent — directed by famous mainland writer Han Han — drew revenues of 630 million yuan.
Wang also emphasized that aside from box office revenue, the mainland film industry has great potential in terms of developing related industries.

Full speed ahead
"In the United States, if the box office revenue of a film is one dollar, than the revenue from the related industries will be seven dollars, while in Japan, it will be five dollars; only on the mainland, when the box office revenue is one dollar, the revenue from related industries is 1.3 dollars.”
David Chen, co-founder of investor interest group AngelVest, said the company has seen many trends in the mainland entertainment and media industries in the past few years, and that they are very similar to what they witnessed in the US about two decades ago.
"From my perspective, the major difference between the mainland movie industry at present and the US one 20 years ago is the speed — the high speed at which a company can leverage their assets to grow further,” Chen said.
He said the two technology giants on the mainland — Alibaba Group and Tencent Inc — are very good examples of large enterprises going into the entertainment industry.
Chen also pointed out that government support could be very important for the entertainment industry to grow.
He mentioned the thriving entertainment industry in Japan and South Korea, which are drawing many angel investors, thanks to the support provided by the governments of the two countries.
Alibaba has invested in sports and entertainment, as well as content and distribution, Chen noted. He added that in March, Alibaba launched Yulebao — a crowd-sourced film investment fund that individuals can use to invest in movies or games, with initial outlay starting at 100 yuan — and it managed to meet its funding target of $11.8 million in less than a week.
In fact, the central government is committed to promoting the development of the national entertainment industry.
"We will enhance the development of cultural industries and foster a well-regulated market for cultural goods. We will develop culture and arts, the press and publishing, and radio, television and film, and run archives well,” Premier Li Keqiang said in his Report on the Work of the Government (2014).
Karon Wan, partner at Deloitte Consulting (Hong Kong), said the mainland entertainment industry is moving rapidly, with people investing in the sector for various reasons and that they are not necessarily experts themselves.
High-tech changes
The industry is being driven fast by public demand, and that demand is being boosted by technologies, said Wan.
"Advanced technologies have enabled people to watch films or television series on their mobile phones and tablets. Meanwhile, a lot of applications have been developed on the mainland for people to get access to these resources, like PPTV,” he said, referring to the online video network technology platform.
Box office revenues on the mainland are increasing at a very fast pace, and it is predicted that they will grow from $3.13 billion in 2013 to $5.9 billion in 2018, with the compound annual growth rate expected to be as much as 13.5 percent, according to PricewaterhouseCoopers.
Meanwhile, the mainland online video market is also expanding quickly, growing from 1.76 billion yuan in 2009 to 8.96 billion yuan in 2012. The market is expected to expand to 16.53 billion yuan this year and to 25.95 billion yuan in 2016, according to iResearch, an organization focused on studying the mainland Internet industry.
Contact the writer at sophiehe@chinadailyhk.com