TCB In RMB: A Weekly Business Roundup

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Welcome to TCB In RMB, a new weekly summary of important developments in the Chinese entertainment business.

Huayi Bucks the Trend

At the Boao Forum last weekend in Hainan, a pan-Asian economic summit modeled on Davos, China’s biggest privately owned film studio, Huayi Brothers announced that in spite of the Chinese government’s increased curbs on capital flight, it would continue collaborating with Los Angeles-based STX Entertainment. In 2015, Huayi and STX entered a three-year deal to co-produce and distribute 12 to 15 films per year.

To date, Huayi and STX have partnered on nineteen titles in the medium-budget range, including several horror films, a sensitive genre with China’s censors. So far, only The Boy has been released in China, earning $2.6 million (out of a global total of $64.2 million), while the comedy Bad Moms has been the partnership’s only hit, costing $20 million and earning $179 million worldwide on its release last summer.

With that deal set to expire in early 2018. Huayi Co-CEO James Wang told Bloomberg that he wishes to expand the relationship with STX by helping STX expand in the Asian market. “We have had a lot of contacts in this regard,” Wang said.

 

Cracking Down On Box Office Fraud

China’s film regulators hit theater owners where it counts this week, punishing three hundred and twenty-six cinemas for box office fraud. After a SAPPRFT investigation of box office reports dating to 2016, sixty-three cinemas cited for deliberate under-reporting of ticket sales in excess of $145,000 were forced to close for a minimum of ninety days beginning March 27, and an additional sixty-three cinemas cited for fraud in the $72,500-$145,000 range were shut for a minimum of sixty days.

One hundred and ten cinemas cited for under-reporting receipts between $14,500 and $72,600 each received fines of $29,100. This theatrical blacklist comes less than a month after China’s first film industry law took effect on March 1, with specific provisions targeting box office fraud. In January 2016, Bona Films CEO Yu Dong gave voice to the widespread industry belief that some 20% of China’s total box office revenue went unreported by cinemas.

 

The Korean Ban

The Korean news agency Yonhap reported that South Korean productions have been excluded from the 500 films set to show at this year’s Beijing International Film Festival between April 8 and 23.

Since last July, Beijing has targeted Korean entertainment in reprisal for Seoul’s agreement with Washington to install the U.S.-made missle-defense system known as THAAD.

In recent years, China has represented the largest foreign market for Korean pop culture, including TV dramas, pop songs, and films, spending over $12 billion annually to consume 40% of the country’s cultural exports in recent years.

 

Le Eco: The Drama Continues

Internet conglomerate Le Eco’s effort to buy Vizio, the US’s largest television maker for $2 billion has been reported to have ground to a halt by a cash crunch as well as China’s tightening restrictions on outbound investment.

Le Eco set its sights on Vizio three years ago, and announced an agreement with the company last July. The deal marked a record high in the global television industry, and was expected to be close within in six months, but it never did.

To alleviate cash pressure, Le Eco is reportedly selling 50-acres of land in Silicon Valley that was originally to have been used to manufacture the company’s Tesla-esque smart car project.

At the same time, Le Eco’s sports subsidiary, Le Sports just secured $1.23 billion in Series B financing, surpassing Alibaba Music and Wanda Investment to become China’s largest entertainment firm. Only a week ago, Le Sports had appointed Gao Jun as its new COO after the departure of Yu Hang from the company.

Just yesterday, the company also announced the closing of a previously announced deal with Sunac holdings that puts another RMB 6 billion in its coffers.

 

Can Zhang Yimou Make Money on VR?

SoReal, the Virtual Reality venture of acclaimed Chinese auteur and director of The Great Wall, Zhang Yimou opened its first concept store this past Tuesday in a 32,000 square-foot location in central Beijing.  Although the company refers to it as a VR Museum, it is more like an arcade, featuring VR films, interactive VR games and other immersive experiences– and already Chinese reports are expressing doubts regarding its commercial viability. Ticket prices range from RMB 298 to RMB 498, or $43-$72.  By comparison, the price of an adult ticket for Shanghai Disneyland is 370 yuan, or $53.

 

 

 

 

 


About the author Yingzhi Yang is a business reporter based in Beijing, covering entertainment and technology. She has written for The Los Angeles Times and Pacific Standard, and recently joined the staff of the Financial Times.

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