Reveal the "history of entertainment supervision" of the China Securities Regulatory Commission: The more naked a listed company, the more transparent the entertainment industry is

Last weekend, a letter and approval guideline issued by the Shenzhen Stock Exchange required listed film and television companies to announce the actual revenue data behind the box office while announcing the box office. This exposed key questions that could only be asked by guessing or establishing relationships with listed companies in the past, to the sun.

Seven years ago, when Wang Zhongjun, Wang Zhonglei and Feng Xiaogang jointly rang the clock on the Shenzhen Stock Exchange, Huayi Brothers, China's first listed film company, entered the A-share market; now seven years have passed, the capitalization of the entertainment industry has become rampant, and even the capitalization of stars has become a surging heat flow.

However, the process of entertainment capitalization has always been shrouded in fog-how much can Light Media get for the 3.3 billion yuan box office of "Mermaid"? If a listed company wants to acquire Fan Bingbing Studio, how should it value it?

Last weekend, a letter and approval guideline issued by the Shenzhen Stock Exchange required listed film and television companies to announce the actual revenue data behind the box office while announcing the box office. This exposed key questions that could only be asked by guessing or establishing relationships with listed companies in the past, to the sun.

The author's interviews with many parties found that this is just a microcosm of the CSRC's increased supervision of film and television listed companies.

Since 2009, the China Securities Regulatory Commission has issued many rules for listed companies in the entertainment industry, which have been detailed: Should movie theater rent, utilities and electricity be counted as costs or expenses? When can TV dramas recognize revenue during the long accounting period?

In 2014, the China Securities Regulatory Commission even held a closed-door meeting with several theater giants rushing for IPOs to discuss whether the operating income of theater companies should be based on the box office (full amount method) or the box office share received by theaters (net amount method), and finally adopted the net amount method as a unified industry norm.

In response to last weekend's new rules, some people said that it was the Shenzhen Stock Exchange that ripped off the underpants of film and television companies. Some people said that it pierced the myth of box office worship. Some people said that it was the regulatory authorities 'deliberate suppression of celebrity securitization. But in my opinion, the clarity of the rules will eventually make high-quality targets surface and gain value return in the impetuous market.

The three major points of the amendment to the first "Guidelines" in history deserve attention.

"In the past, we were very troubled when making performance forecasts for film and television companies because there were too many uncertainties and too little public disclosure of information. We can't do revenue models, which will affect both buyers and sellers." A senior secondary market analyst admitted to reporters: "When a film and television company releases a series of film lists, but we have no idea what the proportion of investment will be, we cannot predict revenue, let alone net profit."

Against this background, capital can only follow the box office. In 2012, the popularity of "Lost in Thailand" caused the stock price of Enlight Media to soar continuously. Feng Xiaogang's inadvertent tiredness on Weibo also caused Huayi Brothers 'share price to plummet.

As early as 2012, the GEM issued the "Industry Information Disclosure Guidelines No. 1-Listed Companies Engaging in Radio, Film and Television Business". It can be seen from the number "No. 1" that this is actually the first time that the China Securities Regulatory Commission has provided specific guidance on information disclosure in a single industry.

Regulations at that time required that when the box office revenue of a film and television project invested by a listed company exceeded 50% of its annual revenue, an announcement must be issued to disclose it.

The new rules released last weekend are an "upgraded version" of the 2012 Information Disclosure Guidelines-requiring listed film and television companies not only to announce real-time box office revenue when announcing that the box office revenue of a single work exceeds 50% of annual revenue, but also announce details such as investment share and income.

"In fact, this is not a temporary policy. It is an amendment. The Shenzhen Stock Exchange also has its own research institute. New amendments appear every year based on new situations. Some hot topics added this year will attract such great attention." Industry veterans interpret this.

The reporter had an in-depth understanding of the amendment to the "Guidelines" and found that in addition to the above core points, there are three more interesting details:

1. What kind of company needs to disclose information related to box office revenue?

The amendment to the "Guidelines" clearly states that the company's film and television business income accounts for more than 30% of operating income or net profit during a reporting period, or box office will have a significant impact on related businesses.

This also explains why the box office of the movie "Mermaid" is so high. Participating companies Light and New Culture have successively issued announcements to release relevant information, but Aofei Entertainment has not released relevant information. In Aofei Entertainment's 2015 annual report, its animation, film and television revenue accounted for 16.3%, which did not reach the release red line of 30%.

2. What information needs to be disclosed on the top five works in the company's main business income?

According to the amendment to the Guidelines, not only the names of the top five works, the total income amount and their proportion in the company's main business income for the same period must be announced. It is also necessary to announce more detailed revenue such as box office revenue, distribution revenue, online broadcasting rights license revenue, copyright sales revenue, and related derivative income in the total revenue.

Take Huayi as an example, the 2015 annual report disclosed that the top five films,"Old Gunner,""Tianjiang Xiongshi,""Former 2 Spare Parts Counterattack,""Dragon Seeking Formula" and "Lost Orphan," realized a total revenue of 546 million yuan, accounting for 14.11% of the operating revenue; if according to this new policy standard, box office revenue, distribution revenue, network broadcast right license revenue, copyright sales revenue, relevant derivative income and other more subdivided income shall be further announced.

3. How to deal with the merger and acquisition of star companies?

In case of merger and acquisition of star company, in addition to the general information such as valuation basis, performance commitment and compensation method, the basis of capital contribution pricing, whether there is any difference with other investors in pricing, and whether there is cooperation arrangement between the cast personnel and the listed company mentioned in Paragraph 1 above.

This item is essentially a blow to the capitalization of stars. The reporter has published articles pointing to this new phenomenon in the industry many times before. Please see the link for details.

Such policies in the game industry have come to an end without success. Can the theater approach be worth learning from?

It is understood that cases like this have occurred many times in the entertainment industry, but most of them are carried out through closed-door meetings and industry exchanges, and have not been officially issued as industry guidelines like this time.

A few years ago, the game field was mainly due to the rise of many game mergers and acquisitions. The regulatory authorities did not know much about the game industry and were worried that some companies would falsely report, falsely report, and divert cash flow during mergers and acquisitions. They required the acquired companies to provide real game user data, cash recharge and other figures, but the submitted data was too large and complex, and it was finally settled.

The theater line was more realistic and useful. In 2014, when domestic theater giants such as China Film Corporation, Shanghai Film Corporation, Happy Blue Ocean, and Wanda concentrated on the IPO phase, the China Securities Regulatory Commission held a closed-door meeting to discuss whether the operating income of the theater line should be calculated based on the theater line box office or the actual income received by the theater line. The former is called the full amount method, and the latter is called the net amount method.

In the end, the China Securities Regulatory Commission required all major theaters to use the net method to calculate the revenue situation of the year.

"The same is true for the new policy this time. The core is not to crack down on anything. The key point is to make information disclosure and transparency of listed companies." A senior analyst who once won the first place in "New Fortune" said.

When the amendment to the Guidelines is announced, it will not only know real data such as box office revenue and investment share in the previous reporting period, but also comprehensively infer the investment and income of future works photographed through data such as inventory and work completion, which is equivalent to information. More transparent, listed companies are almost "naked" to be tested by the market.

Priority dividends, issuance agency fees, publicity fees, etc., who will become the next regulatory target?

"I think we are quite embarrassed. If this amendment to the Guidelines came out earlier and information was disclosed in accordance with this law, we would not have been criticized so much." A person in charge of the celebrity acquisition case said that all information disclosures they made in the acquisition case were legal and compliant, but public opinion and supervision have heated the topic of celebrity shareholders, and many things have become uncontrollable.

As an unquantifiable resource, how much are stars worth? How to price? Become an industry-wide problem.

"It cannot be ruled out that some companies will use this area to reverse water or other behaviors. After all, the film and television industry is asset-light and involves many interest chains. The above-mentioned person said that in this case, the regulatory authorities will study some countermeasures.

"As we get to know more and more about this industry, many people are going to further standardize information disclosure. For example, box office is not equal to distributable box office revenue.""There are too many names in the film and television industry that are not particularly clear to everyone." A board secretary of a listed company expressed the same meaning to reporters. It is precisely because of these unfamiliar names that aroused the interest of regulatory authorities.

"Priority dividends, distribution agency fees, publicity fees, copyright operation rebates, advertising shares, business implant agency fees, business implant execution fees, etc. may all be subject to supervision in the next step." The director secretary of the film and television company has long been on the front line of film and television., I know that these all have suspicious points that cause supervision.

Taking distribution agency fees as an example, the two operating methods for TV and movies are slightly different. For TV series distribution, it is an excess reward for the distribution team. For example, when a TV series originally scheduled for 2 million yuan/episode is released to 3 million yuan/episode, a certain excess reward will be given. The proportion can be high or low, but it is generally 8%-10% of sales, so it has a certain amount of flexibility.

For movies, the distribution team extracts a certain proportion based on the publisher's net income. This proportion is case-by-case. There is a certain flexibility that causes some companies to tamper with these data, so it is very likely to become the next place for supervision.

Editor: yvette