Shanghai Film Ren Zhonglun: There will be strategic actions in the construction of additional cinemas based on priority distribution

At 9:30 a.m. on August 17, Shanghai Film Co., Ltd. was listed on the Shanghai Stock Exchange. The release price of Shanghai films is 10.19 yuan/share, with a total market value of 5.48 billion yuan.

Original title: "Shanghai Film" realizes its IPO, exclusive interview with Chairman Ren Zhonglun: Don't be a "silent person" after listing

August 17, 2016, this day belongs to Shanghai Film.

At 9:30 a.m. on August 17, Shanghai Film Co., Ltd. was listed on the Shanghai Stock Exchange. The release price of Shanghai films is 10.19 yuan/share, with a total market value of 5.48 billion yuan.

As a state-owned film group with a high degree of market-oriented reform, Shanghai Film Group has established itself in 2009 to follow the capital market path and submitted an IPO application in November 2012 as the listed entity "Shanghai Film". Subsequently, it went through two IPO lockdowns and finally passed the IPO review of the China Securities Regulatory Commission on December 30, 2015.

"We hope that after listing, we will set our own goals very high. We hope that after listing, it will be a healthy, fast (listed company), and then a listed company with relatively social influence. Don't go up and turn into a silent person after a few twists and turns, and just remain the same development company that neither goes up nor down, neither goes left nor right, neither is fast nor slow." When talking about the goals after listing, Ren Zhonglun, chairman of Shanghai Film Group, is unambiguous.

Ren Zhonglun said frankly that at present, his most concerned concern is how to win better performance in the market.

Recently, we had the honor to have an exclusive interview with Ren Zhonglun, Chairman of Shanghai Film Group. In this three-and-a-half-hour conversation, the head of a veteran film state-owned enterprise said emotionally: "I have always emphasized the 'power of being on the movie'. When we show ourselves on the film, we don't hesitate to show our own power."

At the just-past Shanghai International Film Festival,"Shanghai Film Night" was named after "Shanghai Film Power". With the launch of the capital market this time, Shanghai Films will also open a new chapter. The head of Shanghai Films revealed to reporters that there are already some strategic arrangements in operation, and some will even make the market "earth-shattering", but this is not surprising, because the IPO has been in the pipeline for too long, and Shanghai Film has been "out of position for too long to engage in political planning."

1 The lost decade of state-owned films: "The most difficult time for China films is when state-owned film companies are persisting."

In 2009, Huayi Brothers launched the listing of private film and television companies, which deeply touched Ren Zhonglun's nerves. Huayi's listing provided a case of relying on the rapid growth of the capital market. Ren Zhonglun immediately realized that film companies could take this path and strengthen themselves.

In fact, as early as 2003, when Ren Zhonglun took office as the new Shanghai Film Group, Shanghai Film Group clarified the development ideas for building the entire film industry chain. Internal and external factors such as the capital need to build the entire film industry chain prompted Shanghai Film Group to clarify its goal of going public and making use of the capital market to expand in 2009.

Ren Zhonglun once talked about the fact that state-owned film companies fell behind twice. "The first time was in the 1990s. The overall crisis of China's films lasted for more than ten years, making state-owned film companies continue to make things worse and operate miserably. The second time was during the listing boom. Some private film companies took the lead and used their capital to work well. State-owned film companies were still struggling to solve their historical difficulties and were unable to meet the 'physical examination standards' for listing for a while."

Ren Zhonglun emphasized that we should not forget this history when talking about state-owned capital and private capital. In the process of falling behind for the first time,"In the most difficult time for China's films, state-owned film companies persisted. This persistence meant sacrifice and commitment. In fact, the country did not give us much policy support and compensation at that time."

In 2003, Ren Zhonglun took up the new position of Shanghai Film Group, which was an impressive year. 2003 was the lowest point in the development of China's films. In 2003, the national box office was 900 million yuan. In fact, the domestic box office was about 550 million yuan. At that time, it was claimed that there were 500,000 film employees, and the per capita annual income was about 1100 yuan, which was only equivalent to the annual income of farmers in the central and western regions. You can imagine the miserable business of China films at that time.

At the 2003 Workers 'Congress, Ren Zhonglun likened the competition between private capital and state-owned capital to a "race between turtles and rabbits", with one relaxed and lively, while the other chasing with heavy burdens. The solution to these problems can only depend on time to repair them. From its lowest point in 2003 to the submission of an IPO application in November 2012, it took 10 years for the film to appear.

In July 2012, Shanghai Film Co., Ltd. was formally established. Shanghai Film Group and Jingwen Investment, wholly owned by Shanghai City State-owned Assets Supervision and Administration Commission, held 95.52% and 4.48% respectively. At that time, industry rumors said that Shanghai Film would become "the first state-owned film stock in China."

Ren Zhonglun still clearly remembers that on December 30, 2015, Shanghai Films 'IPO application was reviewed and approved by the China Securities Regulatory Commission. This moment can be described as "wonderful","Of course, a special situation (IPO shutdown) occurred at that time, and I was quite conflicted. But overall, it suddenly feels wonderful."

2 Priority listing of distribution and screening assets: "Shanghai Film is still in the first square of the entire China film industry."

As Ren Zhonglun said at the listing ceremony today,"In the development of China film industry, the film market is uniquely developed. In the development of the film market, Shanghai films have unique advantages." This time, Shanghai Film Group has provided the most market-oriented high-quality assets.

Shanghai Film's main business includes film distribution, theater lines, theater investment and operation, electronic ticketing and film and television technology services. It is currently one of the largest integrated operators in the country integrating film distribution and movie theaters. It covers the complete film distribution and screening industry chain in addition to production, and is also known as the "most profitable sector" in the film industry.

Ren Zhonglun said that the entire film industry in China actually still has the production risks, and they have not been alleviated from 900 million to 44 billion yuan. It is precisely during this period that the biggest absorber of the industry dividend was the market sector, theaters, distribution, and theater lines. Therefore, Shanghai Film Group took out these assets with the most stable docking dividends, the most growth first, and the most stable operations.

(The 2015 National Theater Rankings, taken from the Shanghai Film Prospectus)

The prospectus shows that the main business of Shanghai Films is film distribution and screening business, which specifically includes film distribution and copyright sales, theater operations, and theater investment, development and operation business. The net profit attributable to shareholders of the parent company in 2015, 2014 and 2013 was 190 million yuan, 160 million yuan and 140 million yuan respectively.

As the first state-owned film company to propose the construction of the entire industry chain, Shanghai Film is currently one of the high-quality companies in China's film market with the most complete industrial chain, the most direct absorption of industry dividends, and the most outstanding profitability. Its distribution company is one of the earliest distribution companies established in China, and the Sihai Distribution Alliance it led to establish (accounting for 20% of the shares) have become one of the largest professional distribution forces in the country; its Lianhe Theater Line is one of the earliest theater companies in China, and its box office and performance have always ranked among the best in the industry. Lianhe Cinema Line has more than 300 cinemas in 109 cities across the country. Its affiliated cinemas such as Yonghua Studios and Shanghai Studios have become iconic cinemas in China. The ticketing website "Tianxia Ticket Warehouse" established in the past two years quickly occupied a large market share and formed a rare profit model.

Ren Zhonglun said,"Shanghai Film Group is still in the first square. In our view today, this first phalanx means that not only state-owned enterprises we are in the first phalanx, but also among all film companies we are in the first phalanx. This kind of first square means that compared with the more active companies such as China Film Corporation, Shanghai Film Corporation, Wanda, Inlight, Poly Bona, and LeTV, we are also in the first square of the entire China. In terms of assets, net assets, profit, net profit and other indicators, we basically rank fourth and fifth."

"We hope that with the help of capital and the understanding and support of shareholders, we can have a relatively rapid development. We believe that this rapid development already has a very mature plan in our hearts, which includes not only our industry, but also the operation of our capital. Now we feel quite confident. We are particularly confident in this company." Ren Zhonglun said.

3. Behind the construction of cinemas: "There will be some strategic actions in prioritizing distribution."

Shanghai Film's IPO plan will raise 908 million yuan, mainly for the construction and upgrading of cinemas, the construction of information systems and network platforms, and the replenishment of the company's working capital, etc., 80% of which will be used for theater construction.

Ren Zhonglun said that Shanghai films are good at fine operations. Although the scale is not the largest, the single-seat output of theaters has always been among the top in the country. In its view, the entire theater industry still has dividends in terms of passengers and ticket prices, coupled with issuance priority and technology-driven strategic arrangements, and there is still a lot of room for growth.

It is undeniable that theaters have entered an era of integration. Shanghai Film also clearly stated in its prospectus that the company will strengthen the cross-regional development of cinemas and strengthen the nationwide operation layout of cinemas through cooperation, mergers and acquisitions and other means.

Since last year, Shanghai Film Co., Ltd. has also proposed a "distribution priority" strategy. In June last year, it announced that it would join forces with Zhejiang Times Film World Co., Ltd., Jiangsu Xingfu Blue Ocean Theater Line, Henan Oscar Theater Line, and Sichuan Province Film Company to form the "Four Seas Film Distribution Alliance", of which Shanghai films account for 20%.

Ren Zhonglun said that in fact, one of the strongest core competencies of the six major companies in the United States is their global distribution power. If the distribution is strong, the production will be strong. If the distribution is weak, the production will not be strong, or it will not last long. Therefore, Shanghai Films clearly proposed to give priority to distribution.

"We want to slowly migrate from national distribution to such a power with global distribution capabilities. The first one is the best of both worlds, going from the country to the world; the second one is full sales on the board. Now, the main distribution capabilities, distribution revenue, and distribution profits of our past distribution companies, including all current distribution companies, come from theater distribution. What our distribution company has to do is sell all copyrights. This is because in addition to selling films in theaters, copyright sales are also becoming more and more active."

(Film copyright management has gradually become the third largest income channel in addition to theater box office revenue and advertising revenue. Excerpts from the Shanghai Film Prospectus)

Shanghai Films has set a distribution market target for the next three years: it will strive to achieve the domestic market for film distribution. The market share has reached more than 10%, and the market share of copyright sales has reached the top three in the country.

Talking about the expectations of the capital market, Ren Zhonglun emphasized that issuance priority is not a slogan, but a practical action. In terms of the overall strategy, there will be some strategic actions in prioritizing issuance. Whether it is the best of both worlds, or some issuance alliances, issuance capital alliances, and equity alliances, there will be some action arrangements. This may include domestic and overseas sources. This is such an expectation.

"Of course, we may also strive for some good policies that are conducive to the development of our company if we are in the whole, that is, a big policy pattern. If we do it, it will be earth-shattering." Ren Zhonglun revealed, but he immediately said that this was not surprising,"In fact, we have been planning for such a long time. The 18-month suspension of review is actually when we are not in position. We have been planning for politics."

4 The revival of Shanghai films: "Los Angeles belongs to Beijing, and New York belongs to Shanghai."

As the controlling shareholder of Shanghai Films, Shanghai Film Group has inherited the glory of Shanghai film industry.

Shanghai Film Group was born out of Shanghai Film Studio, which was founded in November 1949 and was once one of the three major film bases in China. After decades of development, Shanghai Film Group has a production system for multiple films such as feature films, translated films, documentaries, art films, and TV series. The industrial chain involves film production, distribution, theaters, technology, and shooting bases., marketing, media communication and other links, the group also has hotels, real estate and other industries.

Even in the most difficult moments of Shanghai Film Industry, Ren Zhonglun insisted that Shanghai has a historical tradition, and other places can not do movies. If Shanghai does not have a main force doing movies, it will be a problem, because historically, you are the birthplace.

Ren Zhonglun said that people often talk about the status of Shanghai films in the 1930s and 1940s. No matter whether this question is right or wrong, reasonable or unreasonable, this question often rings in our ears. Under such circumstances, we also have a sense of consciousness. To promote Shanghai Film Group, what is to be brilliant again and leading again. This has always been our dream.

Ren Zhonglun also admitted that Shanghai films from the 1930s to the 1940s cannot be reproduced. If we want to return to the state of lying down in the 1930s and 1940s, it is impossible.

The city of Shanghai has continued the glory of China films for 30 years, reaching a climax in the 50s and 60s, because the 1930s and 1940s brought together the best directors and actors in China. After the reform and opening up, Beijing rose.

Ren Zhonglun predicted that in the future, the relationship between Beijing and Shanghai will be similar to Los Angeles and New York."Los Angeles belongs to Beijing, and New York will belong to Shanghai."

"In the next three to five years, I will feel that Beijing and Shanghai will form a confrontation between two male leaders. But it will be structurally different." Ren Zhonglun believes that Beijing is still dominated by its production companies, moderate production companies, and active independent production companies, including a high degree of accumulation of actors and stars; it will be different from Shanghai, such as Disney and Vancouver Film Academy. These world-class film institutions and film companies have settled in Shanghai one after another, and will gradually form two levels.

Ren Zhonglun said that the areas where Shanghai may rise in the future include three parts. The first is technology. Now there are many, many post-production things around us. I think this technology will rise first; the second may be education, the education system, Shanghai's film education system, Vancouver, the Southern California Film Academy, etc., will gather together; the third is cooperation with international countries.

This international cooperation is particularly evident in Shanghai Film Group: the first joint-venture movie theater was established by Shanghai Film Group and Warner, the first to introduce IMAX screens, the first to invest in foreign films, such as Mummy III, and the first company to cooperate with major American technology companies. At least ten things happened in Shanghai.

During the three-and-a-half-hour interview, he mentioned many times that in Hollywood reports, they believed that among China film companies, when dealing with overseas, especially Hollywood, they had two companies that made them the most worthy of attention, each with its own characteristics. First, Wanda has money, and he continues to acquire; second, Shanghai Film Group, Professional and Confident, positions you as a professional company with a history, which is much longer than Wanda's history.

"In our report to the Workers 'Congress in 2003, we proposed a development strategy at that time to build a large-scale film group with a complete industrial chain, multi-film development, leading creative content, leading market competition, and leading international influence. Now we basically just changed it from large-scale to modern, and the basic definitions in the front have not changed. When we were poorest, we thought about leading in influence. More than ten years ago, we mentioned leading in international influence, because from my own understanding of the film industry, film is essentially a global industry, not a regional industry,"Ren Zhonglun said, which is still the goal of Shanghai Film Corporation's efforts.

Editor: yvette