2016 film and television industry inventory: BAT's entry into the game increased net profit of film and television companies

2016 is a year when film and television bid farewell to their barbaric growth. This year, with the joining of Internet companies such as BAT, the rules of the film and television industry were continuously broken. At the same time, capital entered film and television gradually returned to rationality, and the bubble was gradually squeezed out.

The original title guaranteed issuance was completely defeated, BAT entered the game and made efforts. The market value of Wanda Theater fell by 50% in the Year of the Monkey. The film and television industry inventory: Bad films flew everywhere, and the box office won miserably.

2016 was the year when film and television bid farewell to barbaric growth. This year, with the addition of BAT and other Internet companies, the rules of the film and television industry were constantly broken. At the same time, capital entered the film and television industry gradually returned to rationality, and the bubble was gradually squeezed out.

This year, China's film market opened high and low, and the summer and National Day stalls fell one after another. This surprised all industry insiders who shouted "hit the box office of 60 billion yuan" at the beginning of the year. The "inflection point theory" in China's film market became rampant.

As the most upstream IP in the film and television industry, the popularity of 2016 can be seen. Many popular IPs have been made into movies, but because they have their own audiences, the box office is high.

In the midstream publicity field this year, as Internet companies disrupted the situation, the competition became more intense. With the end of the ticket compensation war, guaranteed distribution became rampant. However, except for two films that were successful last year, the rest of the guaranteed distribution all "heroically sacrificed." Alibaba, Tencent and others are making efforts in the field of publicity and distribution, competing with traditional publishing companies for market share.

As the last link in the realization of the film and television industry, downstream theaters also faced a round of M & A wars last year. With the launch of China Film and Shanghai Film Co., Ltd. in the capital market, the hegemony among theaters has become more intense, but this still does not affect Wanda's position as the first brother of the theater.

Also relying on capital power is the asset securitization of film and television stars. Last year, film and television stars entered the A-share market through mergers and acquisitions and other means, using their own halo effect to realize assets, and stories of getting rich overnight with the help of A-shares continued to be staged. It is worth mentioning that film and television star Zhao Wei actually became the actual controller of Wanjia Culture.

Box office opened high and low, narrowly won.

Last year's 2016 movie box office ended in disappointment, basically missing the 60 billion yuan target set at the beginning of the year.

According to data from the State Administration of Radio, Film and Television, the total box office of movies nationwide in 2016 was 45.712 billion yuan, a year-on-year increase of 3.73%, compared with 48% in the same period last year.

At the same time, the number of screens in China of 41179 has exceeded the number of screens in the United States of 40759. Therefore, the single-screen box office in China is 1.25 million yuan, which is down more than 20% compared with the single-screen box office of 1.59 million yuan in 2015.

Among the national box office, the number of movie visitors in urban theaters was 1.372 billion, a year-on-year increase of 8.89%; the box office of domestic movies was 26.663 billion yuan, accounting for 58.33% of the total box office. Overseas box office and sales revenue of domestic films was 3.825 billion yuan, a year-on-year increase of 38.09%.

In contrast, the box office for the whole year of 2014 reached 29.6 billion yuan, and the box office for the whole year of 2015 was 44.069 billion yuan, with the latter growing rate of 48%. In contrast, the growth rate in 2016 dropped sharply, basically missing the target of 60 billion yuan at the beginning of the year.

The box office champions of domestic films and imported films in 2016 were "Mermaid" and "Zootopia" respectively. Among the top ten films in my country's box office, the total box office totaled 13.01 billion yuan, which was significantly smaller than the total box office of the top ten films reached 15.265 billion yuan in 2015. There were 7 films with box office receipts of more than 1.3 billion yuan in 2015, compared with only 3 in 2016.

It is worth mentioning that the number of imported films reached a record high of 92 in 2016. A total of 84 films with box office exceeding 100 million yuan throughout the year, and 9 films with box office exceeding 1 billion yuan in the mainland.

In 2016, the box office of domestic films basically showed a trend of opening high and going low. In the first quarter, my country's film market developed rapidly, and the Spring Festival period continued to make efforts. Four of the top ten films at the box office of the year are concentrated in the Spring Festival period, namely "Mermaid","Journey to the West: Monkey King Three Beats the White Bone","Macau Wind 3" and "Kung Fu Panda 3", and the box office of these four films exceeded 1 billion yuan.

Among them, Stephen Chow's film "The Mermaid" set multiple records, becoming the champion in the history of Chinese film box office, breaking the previous box office record of "Monster Hunt". Since then, summer holidays, National Day holidays, and even New Year holidays have all encountered Waterloo. Hot movies like 2015's "Charlotte Worry" and "Dragon Seeking Technique" are difficult to reproduce.

In 2016, there were 1612 new cinemas and 9552 new screens nationwide. At present, the total number of screens in China has reached 41179, surpassing the United States to become the country with the largest number of movie screens in the world.

In 2016, my country's film market bid farewell to the era of barbaric growth. On the one hand, the number of ticket compensation wars in previous years decreased. On the other hand, the improvement of audience viewing levels and the decline in film quality are also important reasons.

The net profit of film and television companies rose and the market value fell.

In fact, the A-share film and television sector can be said to be the main line of the bull market in 2015. However, in 2016, the style changed sharply and various expectations fell short.

With the changes in the market environment, film and television stocks have become the hardest hit by the decline in A-shares in 2016. In the first half of 2016, among the 28 Shenwan-level industries, the media industry index ranked last, with a half-year decline of 23.44%, and film and television was the worst-performing sub-industry.

As of December 27, 2016, among the 28 Shenwan-level industries, the media industry index has dropped from 1,637.15 points on January 4 to 1,221.58 points on December 27, with a range of more than 25.38%.

Among the film and television listed companies, the share prices of leading industry segments including Wanda Cinema Line, Enlight Media, and Huayi Brothers all fell one after another.

As of December 28, 2016, Huayi Brothers fell from more than 19 yuan at the beginning of the year to 11 yuan, a drop of 46.86%. Enlight Media fell from 13.6 yuan at the beginning of the year to 9.71 yuan, down 35.7%.

Against the background of weak box office growth, Wanda Theater, which has always relied on box office shares as its main source of income, finally closed at 54.07 yuan on the last trading day of 2016. This is exactly 50% lower than the closing price of 108 yuan on the first trading day at the beginning of the year.

After the listing of China films, they fell from a maximum of 40.28 yuan to 22.99 yuan. In addition, New Culture fell by more than 55.27%, and Huace Film and Television fell by 38.03%.

Behind the decline in stock price and market value, the net profit of listed film and television companies is still rising.

According to Wind data, in the first three quarters of 2016, the overall operating income of the media industry reached 202.546 billion yuan, a year-on-year increase of 22.12%; the net profit attributable to the parent company was 27.015 billion yuan, a year-on-year increase of 22.3%; and the total assets were 406.3 billion yuan, a year-on-year increase of 38.99%.

Among the 85 listed companies in the cultural media industry, 66 companies had a year-on-year increase in net profit, accounting for 77.65%.

Specifically, in terms of listed companies, Shenzhen Chase, Dasheng Culture, and Cultural Investment Holdings became the top three net profit increases in the first three quarters of 2016, with Shenzhen Chase having the highest increase. According to Shenzhen Chase's third quarterly report, the company achieved operating income of 644 million yuan in the first three quarters of 2016, a year-on-year increase of 300.98%; and achieved net profit attributable to shareholders of listed companies of 109 million yuan, a year-on-year increase of 9698.53%.

In terms of net profit income, the net profit of four listed companies, including Focus Media, Oriental Pearl, Zhongnan Media, and Wanda Cinema Line, reached 1 billion yuan in the first three quarters.

Mergers and acquisitions encountered obstacles. Capital hot money withdrew

in 2015. The story of many stars investing in A shares through mergers and acquisitions and getting rich overnight was widely circulated. However, in 2016, the road to star asset securitization was blocked.

However, this does not change the hot situation of mergers and acquisitions in the film and television industry. According to Wind statistics, there were 278 mergers and acquisitions by media listed companies in 2016, with an average of one merger every 32 hours.

Amid the fierce competition that surrounds the land, theater mergers and acquisitions are even more eye-catching. In the first six months of 2016, Ali invested approximately 2.1 billion yuan in Dadi Cinema and Bona Films, and spent another 100 million yuan in August to acquire an 80% stake in Hangzhou Star Studios. In September, Perfect World acquired Jindian Group for a transaction price of 1.353 billion yuan, taking into account its 217 theaters. In October, China Film's first investment after its IPO was to acquire a 70% stake in Dalian Huachen at a purchase price of 553 million yuan.

Among the acquisitions in the film and television industry in 2016, there were 18 failed cases, including industry giants such as Le.com and Wanda Cinema Line. It is generally believed in the industry that the main reason for the failure was the tightening of regulatory policies.

On May 11, 2016, Caixin reported that the China Securities Regulatory Commission would suspend the cross-border fixed growth of listed companies, covering areas including Internet finance, games, film and television, and VR. Although the China Securities Regulatory Commission clarified the rumors, the ensuing market behavior confirmed the regulatory authorities '"discussion on one issue" attitude.

On July 14, 2016, the Shenzhen Stock Exchange issued the "Revised Guidelines for Information Disclosure in the Radio, Film and Television Industry and Strengthen Supervision in Response to Market Hotspots", proposing to focus on supervising information disclosure by GEM film and television companies and strictly control celebrity securitization.

Subsequently, in the second half of 2016, mergers and acquisitions in the film and television industry were successively vetoed by the regulatory authorities. On August 1, Wanda Cinema issued an announcement that it planned to suspend the major asset reorganization injected into Wanda Film and Television.

Higher valuations and high performance commitments may be the reason for the suspension of Wanda Theater's reorganization. It is understood that Wanda Film and Television once promised in the reorganization announcement that the committed net profit in the next three years will not be less than 1.3 billion yuan, 1.66 billion yuan, and 2.138 billion yuan respectively.

In addition, Tangde Film and Television encountered obstacles in its attempt to restructure and acquire Fan Bingbing's new company; Stormwind Technology gave up 1.08 billion yuan to acquire a 60% stake in Caocao Bear Pictures; a total of 4.12 billion yuan to acquire 100% of Spring Fusion and Lehua Culture; Beijing Culture gave up 500 million yuan to acquire Juhe Film Alliance.

Behind these aborted mergers and acquisitions, the shadow of the regulatory authorities can be seen. For example, as shown in the Gongda Electro-Acoustic Announcement, when the company acquired Lehua Entertainment, the China Securities Regulatory Commission raised 44 questions, most of which were related to the company's cross-border acquisition targets and trading parties.

After Sanqi Mutual Entertainment's acquisition of Zhonghui Film and Television and its reorganization plan was released, the China Securities Regulatory Commission also issued an inquiry letter, raising 15 questions about its 2.5 billion yuan acquisition of three companies, including requiring Sanqi Mutual Entertainment to explain the rationality of part of its fundraising investment in Zhonghui Film and Television IP resource library expansion and film and television drama production projects.

Behind the successive failures of mergers and acquisitions in the film and television cultural industry is the withdrawal of hot capital. "Investing in the film and television industry requires being particularly familiar with the operation of the industry. In the hottest year of 2015, many private placements suffered losses in the investment process of the film and television industry. In 2016, as the regulatory authorities strictly supervised the film and television industry, many funds were Not willing to invest in film and television. In addition, the industry bubble is too big, and the regulatory authorities are also controlling it." A private equity researcher analyzed the analysis to a reporter from Times Weekly.

Only two successful cases of guaranteed distribution failed.

In 2016, among the 11 publicly guaranteed theatrical films, only two films,"Mermaid" and "Hot Pot Hero", had a large proportion of box office exceeding the guaranteed amount; the rest of the projects ended in failure.

Among them,"Mermaid" was the box office champion in 2016, with a box office score of 3.3 billion yuan, which made the guaranteed issuer of 1.8 billion yuan profitable, making it an overwhelming guarantee distribution case in history. Those participating in the guaranteed release of "Mermaid" include Hehe Pictures, New Culture, etc.

Specific to the split ratio, although every movie is different, the split ratio received by publishers generally declined in 2016. For example, in the 500 million yuan guaranteed guarantee agreement for "I am Not Pan Jinlian", the box office of 500 million to 800 million yuan will be exclusive to Yaolai, with some producers and distributors accounting for 50% exceeding 800 million yuan each; while in films such as "Escape from the Jedi" with a guaranteed guarantee of 1 billion yuan, the party that exceeds the guaranteed guarantee of 1 billion to 1.2 billion yuan can only get 70%, and the part that exceeds 1.2 billion yuan will be equally divided between the parties.

"Tomb Robber Notes" and "I am Not Pan Jinlian" barely reached the guaranteed amount before going offline.

The most failed guaranteed release in 2016 was "The Legend of the Gods". This film, which was guaranteed by Bona Pictures of 1 billion yuan, ended up at the box office of only 280 million yuan. The film also scored low on Douban, and the guarantee party Bona Pictures almost lost money.

Bona was once the first China film and television company to be listed on NASDAQ in the United States. However, the company's share price has been sluggish for a long time, and its listing in the United States has only raised less than US$100 million. The lack of capital has helped him become Chairman Yu Dong. A hidden pain that cannot be erased in the heart of Bona's chairman. During the five years when Bona was absent from the domestic capital market, Huayi, Light, etc. have gone public one after another, leaving Bona far behind in terms of market value and financing capabilities.

The foundation of guaranteed issuance is to bet on box office performance. Under the pressure of guaranteed issuance, box office fraud incidents have also occurred. Last year,"Ip Man 3" experienced scandals such as large-scale crowdfunding, 1 billion yuan box office estimates, and ghost theaters from promotion to release, and was named and criticized by the State Administration of Radio, Film and Television.

As an important pioneer in guaranteed issuance, Beijing Culture has once again innovated this model. In August 2016, before the filming of "Wolf Warrior 2" directed by Wu Jing had yet to begin, Beijing Culture announced a minimum of 800 million yuan.

In addition, the film "A Generation of Goblins" also received a guaranteed box office agreement of 500 million yuan from Beijing Culture before it was filmed. Neither of these two films is currently available.

Regarding guaranteed distribution, Rays President Wang Changtian once said in public: "I don't think guaranteed guarantees will become the mainstream of the film market. This is a practice that violates economic laws. It transfers too much risks to a certain link or a certain company. The final benefits and risks are difficult to match, resulting in most guaranteed guarantees ending in failure."

"Guaranteed distribution is a product of the introduction of the domestic film market from the West, and to a certain extent, it has also created a bubble, but it may not hinder the development of the industry. The domestic film market is still in the process of crossing the river by feeling the stones." Analyst Huang Guofeng told reporters,"This approach will not disappear immediately, but some aggressive companies will adopt more aggressive strategies."

Channel content game Internet companies are competing to enter the game.

In 2016, scandals in the film market continued and sparked conflicts. From the financial fraud and box office theft scandal in "Ip Man 3" at the beginning of the year to Feng Xiaogang's public "criticism" of Wang Jianlin triggered by "I am Not Pan Jinlian", the bottom-keeping behavior has involved the deep interests of the film and television company and also caused controversy in public opinion.

In November 2016, Feng Xiaogang criticized Wanda for suppressing the filming of "I am Not Pan Jinlian" because of his own personal grievances. At that time, Huayi Brothers 'film "I am Not Pan Jinlian" encountered cold screening in Wanda Cinema. Director Feng Xiaogang denounced Wanda Cinema's monopoly on filming and put the two companies on the table.

At the end of the year,"The Death of Romantic" once again repeated Wanda's mistake of suppressing film arrangements. At that time, Wanda opened up its publicity and theater resources to vigorously promote "The Great Wall", which it participated in producing. Even though "The Death of Romantico", which Huayi Brothers controlled, scored more than 7 points on Douban, the box office was comparable to "The Great Wall".

In the process of suppressing Huayi Brothers by Wanda Cinema, the industry has also aroused concerns about oligopoly, and calls for the introduction of the "Film Anti-Monopoly Law" are endless. Behind this, what is reflected is the game between the channel side and the content side.

Compared with the separation of Hollywood movie theaters, theaters, and production companies, Wanda spans the entire industry chain of production, distribution, and screening, controlling screening terminals that account for more than 17% of the national box office. At the same time, it has a strong voice in distribution channels. The right to speak is basically in a monopoly position.

In addition to Wanda, which occupies channels in downstream cinemas, Alibaba Pictures, an Internet platform participating in midstream publicity, has also begun to seize advantageous channel resources in the industry by virtue of its own traffic advantages.

Ali Pictures even acquired a theater in Hangzhou in the middle of the year and took a stake in He Pictures. Ali Pictures, which already has a ticket, has a strong strength in Internet publicity, and after teaming up with the guaranteed distribution of "professional households" and films, it is bound to expand its voice in the field of publicity.

Internet enterprises seize publicity resources, in addition to the publicity field is relatively easy to cut into, the channel side to the box office promotion role is more and more obvious.

"In the domestic film market, the role played by channels is quite important, and the films screened nationwide in the whole region are basically channel selection content, so theaters almost determine the box office." However, the content cannot be underestimated. The proportion of content promoting the success of the entire film project is increasing. As the audience's requirements for viewing movies increase, content creation will become the most important thing." Huang Guofeng analyzed to reporters.

In 2016, with ticket compensation shrinking and film quality uneven, the strength of publicity and distribution capabilities had an important impact on the box office of the film.

In this context, Internet companies with big data gain unique advantages in distribution. In addition, as online seat selection has become the mainstream of ticket purchase, Internet trading platforms have taken a certain initiative in ticket replacement, which gives the lithography era and Alibaba Pictures, which hold entertainment tickets and ticketing tickets, obvious advantages.

Editor: Nancy