The dispute over Wanda Huayi's film choreography sparks attention in the future, theater mergers and acquisitions will be the world of big capital

the number of screens in China has not yet reached the ceiling, and in the next few years, all kinds of capital is bound to start the final battle for offline cinemas.

original title: the competition for Wanda Huayi film arrangement has become the biggest "mouth" of the industry of the year. In the future, cinema mergers and acquisitions will be dominated by big capital

the Lunar New year holiday in 2016 is not over. The box office of two hot blockbusters has been polarized, as of December 31, 2016. Legendary Pictures' Great Wall has crushed the Huayi Brothers blockbuster Romance, which grossed more than 1 billion yuan and just over 100m yuan. It is common for the blockbusters of the two major film and television companies to seize the Lunar New year, but outsiders regard it as the second season of "powerful feud" between Wanda and Huayi Brothers.

Why? All because of Feng Xiaogang's open letter to Wang Jianlin in mid-November 2016. On the same day, the film "I am not Pan Jinlian", which Feng Xiaogang collaborated with Huayi, premiered. Feng Xiaogang criticized Wanda cinema for giving the film unfair treatment. "the average arrangement rate of the film is more than 40% in other cinema chains in the country, and only 10.9% in Wanda cinema," Feng said. " Since then, Feng Xiaogang and Wang Zhonglei, CEO of Huayi Brothers, "fought" Wang Sicong, Wang Jianlin's son, on Weibo, which caught the eye.

in fact, Wanda and Huayi have already competed secretly. During the summer of 2016, the Huayi cartoon "Rock and Roll Tibetan Mastiff" accounted for 3.4% of the Wanda cinema, almost only 1max 6 of the light media cartoon "Big Fish and Begonia" in the same period. The Huayi film "Lu Zhi Zhi Ma Li" is twice as much as "Fast Gunners and Fast Gunners" at the box office for the same period, but "Lu Huan Zhi Ma Li" accounts for only 5.24% of the film production in Wanda theaters, while Wanda's self-produced "Fast Gunners and Fast Gunners" is as high as 32.57%.

the feud between the rich and powerful families is mostly due to interests. The wrestling between Wanda and Huayi exposed the increasingly important value of cinemas in the film industry chain. With a keen sense of capital, it is naturally a good opportunity to invest in cinemas to pursue profits. Industry insiders generally believe that the number of screens in China has not yet reached the ceiling, and in the next few years, all kinds of capital is bound to start the final battle for offline cinemas.

strong > companies in the industry lay out cinemas and close the industrial chain / strong >

Huayi Brothers suffered a dumb loss in this "rich-family feud". Huayi has a lot of star resources and was once a company with strong production ability in the industry. it occupied the upper reaches of the industrial chain early and listed six years before Wanda cinema. However, Huayi once proposed "de-cinema", not to mention the early layout of the cinema sector at the end of the industrial chain. On the other hand, Wanda cinema chain, relying on Wanda commercial real estate to build cinemas, unintentionally inserted Liu but unexpectedly reaped the dividend of the rapid development of China's film market.

as of June 30, 2016, Wanda Cinema had 320 cinemas, with a domestic market share of 13.7%, while Huayi Brothers currently has only 19 cinemas. The reduction in the production of Wanda cinema will also have an impact on the final box office of the film to some extent. This means that once we have more cinema resources, we will be able to gain more say in the distribution of interests with the upper reaches of the industry chain. For the film industry chain, due to the greater uncertainty of the film box office, when the upstream is difficult to form an absolute advantage, large film and television companies begin to merge downstream as much as possible to integrate the layout of the whole industry chain.

after pinching the pain point, Huayi announced at the end of 2016 that it would accelerate the layout of cinemas in the next 3-4 years. Wang Zhonglei, CEO of Huayi Brothers, said: "at this time, channel competition seems to be more important, and cinema business will be a particularly important layout for Huayi Brothers." Xu Xiaofeng, general manager of Huayi Brothers Cinema Investment, revealed that he does not rule out participating in mergers and acquisitions of existing cinemas in the market.

in fact, the mergers and acquisitions of cinemas by large companies in the industry in 2016 are already surging.

Wanda Cinema has successively acquired three cinemas (a total of 19 cinemas), including Dalian Hona, Guangdong Houpin and Chifeng Beidou Star. Chinese Film plans to buy a 70% stake in Dalian Huachen for 553 million yuan. Dalian Huachen's 15 cinemas are mainly distributed in the three northeastern provinces. Perfect World acquired 100% stake in Jindian Cinema, Jendan Cinema and Jendan Culture at a premium of more than 16 times. Ali Pictures made its first offline layout, subscribing for 1 billion yuan of convertible bonds in Earth Cinema and investing 100 million yuan in Hangzhou StarCraft.

large companies that are not involved in mergers and acquisitions are also in the cinema business. Bona Pictures had only six cinemas when it listed in the United States in 2010 and operated 40 by early December 2016. Yu Dong, president of Boehner Pictures, told reporters: "in the next five years, additional cinemas will be built to 100." At the same time, bona Pictures also received 150 million yuan of investment from New Hualian Holdings, which will carry out cinema-line cooperation.

A senior figure in the cinema industry said in an interview with this reporter that it will be a future trend for large companies to compete for the right to speak in production with their terminals in the upstream IP resources. "in the future, China's big film and television companies, production and cinema lines will all be strong. After so many years in the Paramount case, big studios and cinemas are merging again. In the future, these big companies in China's film industry all hope to integrate the whole industry chain of production, distribution and projection. "

because upstream enterprises can not make up for the terminal layout in a short time, and because cinema construction has a cycle, large-scale mergers and acquisitions have become one of the means. As for companies such as Light Media and Letv, which do not have offline terminals, the cinema veteran said: "these companies are specialized in intensive content, but (personally) they are not optimistic about their long-term capacity, unless they can merge large cinema investment companies. If we want to form a Hollywood-style big six (companies) in the future, we will be more optimistic about Wanda, China Film, Boehner and so on. "

strong > Cross-border capital comes with its own desire for profit / strong >

apart from movies, "there is almost no industry that has been growing at an annual rate of 30 per cent in the past two years." Industry insiders say that the popularity of the film box office has attracted more and more capital.

the pursuit of profit is the nature of capital, and the cinema at the end of the industrial chain has now become the object of capital pursuit. Fu Yalong, director of art research, said: "Cinema revenue is relatively stable, although the profit margin is not particularly high, but it is also a good asset."

Wu Hehu, deputy general manager of the Jindian cinema line of the times, has devoted himself to the industry for many years. In his impression, since the opening of the policy, all kinds of capital have poured in. "in recent years, there has been a lot of cross-border capital entering the film industry."

before the transformation of the contemporary oriental film and television industry, the main business is the production and sales of Portland cement and clinker. In 2016, Contemporary Oriental acquired Huacai World, began to have double licenses of cinema, and planned to set up a "Cinema Industry M & A Development Fund (multi-phase)" with Cathay Pacific Yuanxin with a capital scale of no more than 1 billion yuan. In view of the fact that the company acquired Dongyang Mengwei Film and Television Culture Co., Ltd in 2014, the merger and acquisition of Contemporary Oriental in 2016 can be seen as following the example of a big film and television company, hoping to touch on all aspects of the industrial chain.

some cross-border capital, especially those from commercial real estate, prefer the standard Wanda model. According to Yien data monitoring, from January to September 2016, the national real estate sales performance of the top 100, in addition to Wanda Group, Evergrande, Poly, Hongxing and other five real estate enterprises have been involved in investing in cinemas, cinema penetration rate reached 7%.

A veteran in the cinema industry said that many commercial plazas are also laying out cinemas, "such as SUNING and Hualian. In this regard, Wanda Commercial Plaza is the benchmark. " "Cinema + Real Estate" is standard and has a natural connection advantage. Fu Yalong analyzed in an interview with every film and television reporter: "the rental cost is the biggest cost of cinemas, commercial real estate own property, the rent is relatively low, leading decision-making is flexible. Cinemas undertake offline recreation entrances, which play a role in promoting other forms of business. "

of course, in the eyes of pure capital players, even if they do not get involved in the upstream production in the future, regardless of the cinema's support for production, the cinema itself is still a good investment. Wang Yizhi, founder of Fanying, a data consulting company, once made a simple calculation: "at present, the average number of seats in cinema halls across the country is 130, and 1000 screens are equal to about 130000 seats. it is the subject of a transaction worth 6.5 billion yuan, but its actual investment cost is no more than 3 billion. When the stock market is so weak, many media-related listed companies need topics and projects to stimulate the market's attention. As a result, cinemas, like Pu'er tea and Maotai at that time, have the attribute of investment products in addition to the value of fixed assets. "

in fact, there is a lot of capital to build cinemas for purely financial investment purposes. Most of them are concentrated in third-and fourth-tier cities, mainly local tycoons, who generally own several single cinemas. In their view, cinemas have a large cash flow and seem to be making money all the time, while selling cinemas at high prices at the top of the industry can make a higher profit.

Wu he has seen a lot of such things in Shanghai. He told the reporter: "many people who play with capital do not intend to dig deep into the operation of cinemas, build one or even several cinemas, build one or even several cinemas, build them for 10 million yuan, and sell them for 30 million yuan when they make a profit." and then do something else, just like building and selling houses. "

strong > the final battle dividend weakens speculators or is out / strong >

in the past few years, the rapid development of China's film market has attracted all kinds of capital to invest in cinemas, and China's screen growth has maintained a high level. In 2010, there were 6000 screens in the country, and as of December 20, 2016, the number of screens in the country had reached 40917, surpassing the United States to become the first in the world.

for the future, the annual increase of more than 8000 yuan of screens may remain stable, but the growth rate of the box office is slowing. single-screen output dropped to 1.23 million yuan in 2016 from 1.39 million yuan in 2015, of which the single-screen output of the new cinema was only 840000 yuan. According to Chinese box office CBO data, China's box office rose 21.4% in the first half of 2016 compared with the same period last year, while the number of cinemas increased by 30.4%, which means that the growth rate of film box office can no longer keep up with the number of new cinemas. "many cinemas are facing operational pressure in 2016," senior figures in the cinema industry told reporters.

A project team led by Chen Qin, a researcher at the School of Economics of Fudan University, conducted a survey of more than 7000 cinemas nationwide in 2015 and found that cinemas built before 2011 earned an average of 7.9 million yuan in 2015, while those built in 2014 grossed only 5.28 million yuan on average. The reason is not that audiences recognize the old place. "the last two years have been the craziest time for capital. Cinemas built for those who pay high rent will be built for them. Cinemas built under a two-year contract must be very tiring."

Wu Siyuan, chairman of UME Cinema Management Group, told reporters, "Cinema is a long-term investment and requires efforts in operation and management. But after a large amount of capital came in, the industry was very chaotic. At present, it costs at least NT $30 million to invest in a cinema, with about 10 halls, but many cinemas talk about rents of NT $7 million to NT $8 million or even NT $10 million, plus labor, water and electricity, publicity fees, and other costs, such cinemas will certainly lose money. "

third-and fourth-tier cities were once regarded as value depressions for cinema investment. Dadi Cinema, which ranks second at the national box office, said in its 2016 semi-annual report that box office in first-and second-tier cities increased by 14% and 16% respectively in the first half of 2016, while box office in third-tier cities increased by 22.8%. Box office growth in both fourth-and fifth-tier cities exceeded 40%. "Young people in small towns" is a potential consumer force that can not be ignored in the domestic film market.

Wu Hehu said that capital has a good sense of smell, and small cities have also seen what once happened in big cities. "A few years ago, a county in Wenzhou opened a cinema with an annual box office of 40 million yuan, which was regarded as a big store with high box office in the country. It soon attracted capital, and now there are three stores built around it. It turns out that the profits of that cinema have been greatly diluted. "

the number of moviegoers cannot increase indefinitely, and as the screen grows, the demographic dividend will weaken, and cinemas in small cities and counties will be the first to encounter survival crisis. Wu Hehu said that the box office receipts of cinemas in third-and fourth-tier cities are unstable and there is an obvious "tidal phenomenon". "the National Day and Spring Festival are overcrowded. As soon as the long holiday is over, the number of people becomes smaller when the migrant workers leave. Many cinemas have no audience at all during the day, and some show two movies at night to attract audiences around them. We have made statistics that during the National Day and Spring Festival, the box office of first-tier cities such as Shanghai and Beijing has increased to a certain extent compared with normal times, but the average growth rate is lower than that of small and medium-sized cities, which has increased several times. "

both Wu Siyuan and Wu Hehu mentioned in interviews that although the profit and loss line cannot be set on the basis of box office figures, many cinemas in China are currently operating at a loss. "it opens every day, and it is related to doors every day, just like advertising companies and restaurants." Wu Hehu described it.

although the competition is fierce, people in the industry generally believe that the number of screens in China has not yet reached the ceiling. Zeng Maojun, president of Wanda Cinema, also said on public occasions that the number of screens in China will not go downhill until the number of screens reaches 70,000 yuan. On this basis, it is estimated that there is still 4-5 years of room for cinema development.

if it is predicted at this time, the merger and acquisition of cinemas is still reasonable this year, and the capital sides will continue to compete for cinemas and knockout stages. So, who will be the final winner? According to Fu Yalong, "the future competition for cinemas will continue to focus on economies of scale." Compared with speculators and small investors, large listed companies have more financing tools, and mergers and acquisitions of high-quality cinema assets will further push up M & A prices. In this way, it is very likely that future cinema mergers and acquisitions will be dominated by big capital. Industry veterans said: "the top four cinema chains in North American mature markets account for 60% of the box office. In the future, China may also form a box office pattern of several major cinema chains or major film casting companies with a box office of more than 50%."

Edit: yvette