Behind the rumors of Light investing in Cat's Eye: Wang Xing wants to enter the game, Wang Changtian does not want to be eliminated

A source close to the transaction between the two parties told reporters that Enlight Media will acquire a 10%-20% stake in Cat's Eye Films, which has an overall valuation of more than 10 billion yuan. Another brokerage official said that Light would exchange 2 billion yuan in cash and shares for a 20% stake in Cat's Eye.

Original title: Behind the rumors of Enlight Investment Cat's Eye: Wang Xing wants to join the game, Wang Changtian doesn't want to be eliminated.

On April 11 this year, Enlight Media issued a suspension notice for major matters, saying that it is planning major foreign investment projects, involving areas such as the Internet and cultural industries, and the investment amount is estimated to be between RMB 1 billion and RMB 2 billion.

On May 23, 42 days after Light's suspension was suspended, this "major foreign investment project" began to surface. According to multiple media reports, Enlight Media will strategically invest in Cat's Eye films. The specific investment amount and proportion have not been disclosed yet. On the evening of the 23rd, Enlight Media issued an announcement on the progress of the suspension, saying that the company and relevant parties were "still negotiating the transaction plan," but "there is still uncertainty."

Reporters called Cat's Eye Films and Enlight Media, but neither party had comment.

One is one of the largest film investment and distribution companies in China, and the other is the largest online film ticketing platform. If these two important players in China's film market today reach capital cooperation, it will bring important changes to the overall film industry in the short and long term.

For both parties, this deal is more like the rapidly changing market landscape forcing them to make the best choice under existing conditions. Unexpectedly, but within reason.

Cat's Eye, a star company, has encountered "growing pains." Cat's

Eye Film was founded three years ago. In January 2013, one month after "Lost in Thailand" was released, creating a box office miracle at that time, Wang Xing turned Meituan's movie ticket group buying business into an independent sub-brand.

Perhaps even Wang Xing himself didn't expect that online ticket purchasing for movies would become a market with a scale of tens of billions in three years.

In 2013, the box office in the mainland reached 21.6 billion yuan, and the proportion of online ticket purchases was less than 20%, which was the initial period of the market. A year later, the mainland box office soared to 29.6 billion yuan, and the proportion of online ticket purchases exceeded 30%, which is close to 10 billion yuan.

By the time BAT fully entered the market and the ticket compensation war was fully upgraded in 2015, the annual mainland box office reached 44 billion yuan. According to data from the National Film Specialized Office, this year, the proportion of online ticket purchases exceeded 50% for the first time, reaching 54.8%. In other words, 24 billion yuan in box office was generated through online ticket purchases (including group purchases).

We will not discuss how Cat's Eye films seized the opportunity here. However, the actual situation is that when this market took shape, Cat's Eye Films became the leader in this market with the successful operation of projects such as "Heart Flowers on the Road" and "Lost in Hong Kong".

But this "lead" did not stop Wang Xing, and Cat's ambition was not limited to this. In July 2015, Meituan established "Cat's Eye Culture", and Cat's Eye became an independent subsidiary. On the same day that Enlight Media announced its suspension, Wang Xing, CEO of Meituan Dazhong Dianping, announced through an internal email that it would officially spin off the Cat's Eye film business.

Through this so-called internal email, we can see that Wang Xing's positioning of Cat's Eye is to become an "influential comprehensive film company." "Since last year, the Cat's Eye team has actively communicated with potential strategic partners to have an in-depth understanding of the cultural and entertainment industry, and have figured out the direction for Cat's next development direction: relying on its leading movie ticketing platform and user community, it has become the most influential one in China." One of the comprehensive film companies." Wang Xing said in an internal email.

Why can't we just build an online ticketing platform? Because it doesn't make money. Although the transaction flow of Cat's Eye movies has reached billions or even tens of billions, according to Wang Xing, Cat's Eye has just achieved "BG level profit."

Moreover, this kind of profit may only be temporary and necessary for external financing. Once competitors such as Taobao Tickets (former Taobao Movie Tickets) and WeChat Movie Tickets begin to increase ticket supplements to seize the market, Cat's Eye can only follow up without choice. The model of charging theaters for service fees has proven to fail, and Wang Xing needs to find a new model for Cat's Eye.

"Focus on strengthening the development of upstream film business and building a Cat's Eye entertainment media platform." This is the answer given by Wang Xing through internal email. Moving to the high-profit part of the industrial value chain seems logical. The "upstream business" referred to here refers to the investment, promotion and distribution of films.

If you have been to the cinema and watched movies such as "Saving My Mr.","Detective Chinatown", and "Lost in Hong Kong" in the past year, you may notice that among the producers or co-producers of the opening title, there is "Tianjin Cat Eye Cultural Media Co., Ltd.", which is exactly what Cat Eye is doing. It participates in specific film projects through resource swaps or direct participation in investment to share the box office revenue of the movie.

When many film company leaders mentioned Cat's Eye movies to me, they almost all mentioned the word "online distribution". They agreed that the popularity of Cat's Eye films (reflected in indicators such as "the number of people wanting to watch") and the pre-sales box office will directly affect the number of screenings given to a film by theaters. This view has also been confirmed by the heads of theaters such as Wanda and Xingmei.

However, this "influence" has also encountered challenges from some different views. A producer who has run many major film projects believes that what Cat's Eye is doing at this stage is "more effective in blockbusters," but it does not have convincing strength in the cooperation of more small and medium-sized films.

The action movie "Battle of the New Year Beasts" directed by Zhang Yang and produced by Ning Hao was once expected to become a dark horse in the 2016 Spring Festival season. The successful cooperation in "Heart Flowers on the Road" also allowed Ning Hao to hand over the distribution of the film to Cat's Eye. However, the final box office of this film was only 35 million yuan, far below the film's and market expectations.

"The problem with Cat's Eye is that it can use data to influence movie scheduling in theaters, but it does not establish a real connection with theaters." A person in charge of film distribution for many years told reporters,"Whether your position materials are in place, and what specific games are assigned to you, the cat's eye may not have mastered these more sophisticated things in traditional distribution. Of course, it's also possible that they don't pay much attention to this."

The same problem arises in the movie Dream Partner. Although it gathered stars such as Yao Chen, Hao Lei, Tang Yan, and Li Chen and was jointly released by Fujian Hengye, Cat's Eye and Microfilm Times, its final box office was only 80 million yuan.

"The failure of these two films may make more people become more rational when viewing the publicity capabilities of these box office platforms." The person in charge of the aforementioned issuance said.

Light's troubles are much greater. Wang Changtian has been forced to a corner.

Compared with the "troubles" of Cat's Eye, which is in a leading position in the market, Light Media, the other party in the transaction, has to solve the problem of the birth and death of a company.

While CEO Wang Changtian talked about entertainment layout and VR investment, few people noticed that this company, which mainly invests and distributes movies, had not achieved its own box office goals for two consecutive years.

In 2014, Enlight's goal was 4 billion yuan in box office, and the final goal was 3.1 billion yuan; in 2015, Enlight's goal was 5 billion yuan, and the final box office was confusing: according to Enlight Media's own account, the total box office reached 5.5 billion yuan, but it included "joint distribution" projects such as "The Quest for the Dragon". Another data may be more telling: According to statistics from market research firm Art Consulting, the box office of domestic films mainly distributed by Light in 2015 was 3.79 billion yuan, nearly 2 billion yuan less than the No. 1 Wuzhou distribution, and much lower than the company's expectations.

In August last year, in response to the embarrassing total box office of only 12.87 in the first half of 2015, Wang Changtian explained at an investor exchange conference that the main reason was that "the box office of some films did not meet expectations, but the costs were too high, resulting in a decrease in profits." At the same time, he also rarely admitted that as an established film and television company, it was not bold enough to try some new theme films and was a little too cautious about controlling risks.

As he himself said, Wang Changtian has always been known for his "cunning" in the industry. He is good at using his market judgment and distribution capabilities to fight against the big ones."Lost in Thailand","The Master of Breakup", and "Left Ear" are all his masterpieces. However, his overly cautious investment style also caused him to miss two high-box office movies,"Monster Hunt" and "Return of the Great Sage" last year.

It can be said that Light's "Lost in Thailand" dividends have been basically exhausted, and in the strongest distribution link of Light, there have never been so many opponents. Alibaba Pictures, LeTV Pictures, Wanda's Wuzhou, as well as companies such as Lianrui and Hengye that have started from market segments, and new entrants such as Huace and Dianguang Media that have turned from other fields to films.

What everyone is fighting for is not the 500 movies that hit theaters a year, but the 50 or even 30 projects that are the most "top". These projects have the potential to become "hot hits", and in today's film market, making a success case is enough to "not worry about food and clothing" in the next year or two.

The entry of a large number of companies with distribution capabilities and the competition for star projects have ultimately resulted in a "buyer's market." The dilemma faced by Wang Changtian and Light is: If they cannot continue to produce Xu Zheng and "Lost in Thailand", they can only comply with the market, sacrifice more benefits and seize the project at higher costs. This practice runs counter to the investment philosophy he has always followed.

Wang Changtian's adjustment, or response, is to acquire a large number of companies. Perhaps after several years of good years and exposed problems, he finally understood that the "issue for investment" model could not produce a wide enough river of protection. Only by mastering the source of the content could he win this protracted battle.

In other words, light is also approaching the core link of the industrial chain. At a media communication meeting in March this year, Wang Changtian revealed that Enlight Media has currently invested in 50 companies, and this number is likely to expand to 80 companies within the year, or at least 70 companies. Basically, they all focus on companies in content production and related technology fields, such as October Culture, the producer of "The Return of the Great Sage", Tieyue Technology, which develops military themes, and Xitian Film and Television, which is mainly engaged in brokerage business ("people" are also part of the content).

But Wang Changtian still had another problem that had not been solved, the problem that forced him step by step into a corner.

Alliance with your own enemies against your common old friend

Tyrion "the little devil" Lannister's latest episode of "Game of Thrones" says: "It is much better to ally with your own enemies than to have friends." This sentence is most appropriate for the cooperation between light and cat's eyes.

In fact, the model represented by Cat's Eye, which relies on data to influence the integration of movie scheduling and publicity and ticket purchase in theaters, is itself an alternative to the online distribution model represented by light. Therefore, as the Cat Eye platform gradually grows, it also means that the original Internet Network distribution model is gradually declining. It can even be said that the cat's eye is the enemy with the strongest light.

Another thing that has rarely been reported by the media is that Light has been quietly reducing the scale of Internet Network's distribution in recent years. 50% of ticket purchases have already occurred online (this proportion may reach more than 75% this year), which has transferred a large amount of marketing and publicity activities to online, and these online data has become a reference for the number of movie schedules. The end result is that local theater managers have less control over film scheduling, and the value of ground network personnel also shrinks.

As troublesome as the gradual transfer of ticket purchase online is the huge threat posed by issuing companies that rely on the rise of theater resources. Wuzhou Publishing, which was established two years ago, relies on the resources of Wanda Group and Wanzai Cinema, surpassing Guangguang to become the box office leader among private distribution companies last year. And light without a courtyard layout will not take advantage of its new rival Wuzhou.

Like light, the "enemy" of the cat's eye is also fierce. After eating Guevara, Microfilm Era completed a new round of financing of 3 billion yuan at the beginning of this month, and Taobao Movie Tickets also completed A round of A financing of 1.7 billion yuan a week ago. There are many investors such as Bona Films and Huace Films.

Although several online ticketing platforms have emphasized their value in addition to ticket compensation, the subsidy amount (price) is still the most important determinant in choosing a platform for both filmmakers and consumers. With the opening of the summer season, a new round of subsidy wars may be inevitable.

Cat's Eye needs more money, and it also needs more industry resources and projects. Wang Xing also saw this. In his internal letter, he said: "In order to achieve this strategic goal, Cat Eye needs to fully embrace the upstream and downstream of the cultural and entertainment industry and deeply connect with industry resources."

When talking about online ticketing platforms in March this year, Wang Changtian's statement was more like the words he used when persuading Wang Xing to accept investment. He believes that "one of the main development directions of (online ticketing platforms) in the future is to become a distribution company. To become a good publishing company, you must invest in the project early, otherwise you may not have the opportunity to publish."

It is conceivable that after Light shares the stake, the two sides will engage in more combinations in the distribution field, and at the same time use this "alliance" as a greater bargaining chip to win more high-quality film projects. In the short term, both companies can benefit from it.

However, accepting Light's investment means "taking sides", which will inevitably affect Cat's cooperation with other film companies. Because as a distribution company, it needs to get involved in the project very early, and these "secrets" are things that no company wants to be known to competitors like Light. This is also a problem that Cat's Eye may encounter in future film cooperation.

For Wang Changtian, this investment also avoided the worst situation. Because Meituan and lithography era both have common shareholders behind it, there is the possibility of integrating the businesses of both parties in the future. If this kind of integration really happens, the one who will suffer the biggest impact will be Light Media, which is what Wang Changtian does not want to see the most.

There is another circulated version of the deal between the two parties: Light Holdings even wholly acquired Cat Eye.

This is a deal that Wang Changtian will not refuse. On the one hand, Cat's Eye can allow Light to obtain the strongest online distribution channel in the country, combine with the original distribution business, and gain new competitive advantages in the distribution market. On the other hand, Cat's Eye's cash flow can also make the financial report of a listed company look better, and even use this concept of industrial chain integration to push up the stock price another wave, just as Wanda and LeTV did.

But this also means that Wang Xing relinquished control of Cat's Eye Films (joining the board of directors will not help anything). Maybe he can make a lot of money by holding the shares in Enlight Media in exchange, but this may not be his first consideration. factor. He has worked hard for three years to make Cat's Eye movie the largest in the industry, but it is still far from the point of selling it for cash in one go. It is also inconsistent with the picture he painted in his internal emails.

Whether it is investment or holding shares, we will soon see what effect the cooperation between these two "enemies" can have. Whether it is for cat's eyes or light, this is just one part of their respective layout of the film and television industry. One wants to enter the game, the other does not want to be eliminated, and the cards in their respective hands are far from finished.

Bigger deals are in the pipeline and may come sooner than we think.

Editor: Nancy